One of the best things about my generation, the millennials, is their rejection of credits cards. A survey by Bankrate showed that 63% of millennials have rejected credits cards altogether. I personally think this is a great thing and long overdue. But I constantly see articles about the pros of having credits cards, why their needed and why the millennials will pay for not using them. Today I want to explain why credit cards suck and why your better off without them.
First off, lets talk about the biggest issue with credit cards. That is the fees and interest rates they charge. I consider it absolute insanity that someone would willing sign up for a loan that has an interest rate of 15 to 25 percent. What could you possibly want that is worth paying so much extra for? These rates, along with the myriad of fees, can be crippling to someones budget and investment plans. One slip up or a so called “lost” payment by the credit card company could cost you significant amounts of money. I’ve seen these so called lost payments happen even if the payment was made by auto draft.
Next is the issue of overspending. The issue has been looked into several times and the results show one thing in common. People who use credit cards spend more compared to those who use cash. The vendor who installed McDonald’s credit card system stated the company expected bills paid for by credit card would be 40% higher than ones paid for by cash. You’ve probably heard that companies who accept credits cards have to pay a fee in order to accept them. It’s no wonder these companies are willing to pay these fees since studies show spending is higher when you pay by credit card versus cash. There are other examples such as a study that Ron Blue alludes to in Master Your Money. The study found that people spend 34% more when using a credit card versus paying by cash. Dave Ramsey likes to refer to a Dun and Bradstreet study that shows people spend anywhere from 12 to 18 percent more by using credits cards over cash. The truth is clear, when you don’t feel like your actually spending money, you tend to overspend.
But don’t I need a credit card to have a great credit score? I thought credit cards were needed to build a good credit report? I will defiantly have a more in depth blog post about this topic at a latter time but the short answer is no. The costs of using a credit card far out way their usefulness. Also, you don’t need a credit score or report. A high credit score simply shows that you are enslaved to a lender because you trusted a bank to provide what you wanted over waiting for God to provide what you needed. Now I don’t want you to misconstrue what I’m saying, debt is not a sin but the Bible does have strong warnings about the dangers of debt. Once again this a another topic for another day and I will defiantly be delving deeper into it at a later date. But the point I want to make right now is that everyone should do everything they can to avoid debt at all cost.
Lastly, credit cards aren’t needed in order to survive in our modern society. We have so many alternatives these days such as debit cards, checks and good old fashioned cash. You can also tie your debit cards or bank accounts to one company such as Paypal or Google Wallet and pay for all sorts of stuff without having to hand out your debit card or bank account information to every company you do business with. Remember, credit cards are a business tool and not a personal finance tool. There are no benefits to using credit cards that could possibly out way the costs. In the end, it doesn’t matter if your getting 2% cash back nor does it matter how much you believe it is helping your credit score, credit cards are actually killing your budget and your financial goals. I’m proud that my generation has realized this and is turning their back on this destructive industry.