The issue of credit cards comes up a lot when I teach FPU, and there is always someone who doesn’t see the problem with using them. Personally, I think credit cards are at best dangerous and at worst usurious. There is absolutely no upside to credit card debt, whatsoever.
Here are several reasons why I don’t use credit cards for my finances:
- On average, people spend 12-18% more when they use credit cards vs cash.
- Credit card companies don’t have any loyalty.
- Perks and rewards come at a very high cost.
- Credit Cards make it difficult to track your purchases day-to-day and easy to buy things you can’t afford. I don’t want to use any tool or service that has a vested interest in damaging my long-term future.
Here are some reasons why I don’t do business with these companies:
- Credit card companies force consumers to pay higher prices, even if they pay their balance off every month.
- There are a ton of tricks to force late payments.
- Consumers are regularly charged interest on debt that has already been paid.
- Interest rates can be raised arbitrarily, for something as mundane as applying for a mortgage or for accidentally making a single late payment with a different company.
- Interest rates can be changed retroactively, effectively raising rates for purchases that were made long ago.
- Credit card companies don’t seem to care about my security, and merchants are even worse.
Dabbling with credit cards is like playing with snakes. Don’t be surprised if you get bit!