Friday, May 27, 2011

credit cards are my BFF

I don't know why everyone is always giving credit cards a bad rep these day.  Credit cards a great.  In fact I charge everything I can on a credit card.  I even wish I can pay my mortgage or car payment on it.  Why because I can get cash back.  In fact, I love credit cards so much, I don't even care what the rates they are charging. 

"That's INSANE!!" you say, "What about the interest?"

Well,  I don't worry about the interest.  I never even look at what they are charging for their rate.  Why?  I pay my credit card in full every month.  I never pay any interest on my CC bill.  EVER.

Credit cards did not doom America to have bad finances.  America doomed America to have bad finances.  Most people tend have the thinking of buy it now, pay for it later.  OK LATER is fine, but how much and when? The practice of not thinking about how much you can afford at-the-moment leads to thinking you can afford it in the long term.  If you can't buy it now with cash, why would you buy it at all?  Credit cards get a bad rep because most people do not consider paying for it later in installments means paying more, even if you got it on sale.

I hear people say they have high credit card debt for years.  Why years?  I understand that if you had some really bad situation and had to rack up a lot of debt.  When you can rebuild, pay that debt off should be a priority.  If you think of it as a utility bill, it works the same way.  You make sure that you don't own the utility company money because they will cut off your utilities, so you make sure they get paid.  Put the same reasoning in CC bills and you are sure to not rack up debt waist deep.

In college, I did something stupid.  No, not rack up CC debt.  In fact, it was the opposite.  I called the CC company to lower my limit to the bottom ($200) every time they raised it.  This is to ensured my spending didn't go that high, although it was probably not good for my credit score at the time.  However, over the next 2 years, I have learned to think about what I spend my money on.  Since I didn't like to pay for over charge fees, I was careful about I was buying.  If I didn't have the cash for it, I didn't buy it. 

Now it's the same.  If I can't pay for it, I don't buy it.  I don't charge it.  If I do buy, I better be damn well willing to write that check and pay for it in full when the CC bill came.

3 comments:

  1. I totally agree with this - I paid off my credit cards for good about a year ago, and have been zeroing them out monthly ever since - I've gotten quite a few free airline tickets this way! Credit cards are not the problem, people using them irresponsibly is the problem.

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  2. Great post. Credit cards are not evil. Credit card abuse is evil.

    I use my credit cards every month and pay them off every month. I get rewards from then, which is why I put any expense I can on them to begin with.

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  3. Hi LLF,
    You have iron discipline so you can do this, but most Americans do not have the discipline to buy only if they can pay for it. We also pay off the CC bill in full every month for over 15 years now. However, we found that if we mostly use cash, we spend less overall. For us, it is easier to control our spending if we pay with cash. This is true for most people too. People just do not treat credit card the same as they treat cash. Of course there are exceptions like you. ;)

    http://retireby40.org/2011/05/cash-or-credit/

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