Love — Hate — or Indifference to Credit Cards
For some discussions about credit cards can bring up bad feelings and resentment towards them because use led to a negative outcome. Then, for others it can be great feeling as to positive result. As for the rest, they haven’t a clue or just stay away from the fray. For me personally, use of credit card has largely been a positive outcome. For my wife, not so much. There can be a love/hate or indifference relationship towards credit cards due to the results of our use of them or lack thereof. Credit cards are mere tools. It’s the financial literacy of the individual who wields those tools that makes the difference on the what the outcome can be. Psychological and emotional inclinations towards credit cards, or any other debt for that matter, are drawn from what results from that “personal” experience.
My Big Debt Mistake
The biggest mistake I have made, and my first experience, with debt was student loans. I really didn’t understand it and how I was to pay even though someone explained it to me. I still signed on the line. The good/bad of student loan debt is beyond the scope of this post, though I know many face issues with this and I’ll provide more resource on this later.
Being new to debt products you can put on a front like you know, but come to find out, you just don’t know or understand all the intricacies. My opinion is that is how a lot of people are in this world when it comes to debt products, credit cards being one of them. Everything is fine until when the income/savings variable in the equation of take on debt, pay back debt on time and in full, is disrupted by life events when the intricacies of debt take on a whole new light. By then it is too late and then we learn about the not so glamorous side of using credit card and/or other debt products like:
- Creditors (these are the folks you borrowed from that want to be paid back like you promised you would)
- Unrelenting Compounding Interest
- High Interest Rates
- Late Fees
- Credit Score
Hate Credit Cards
My household is not above reproach and carries debt that I wasn’t aware of until one of those uncomfortable moments that a couple might go through of financial infidelity. There is debt outstanding that you become aware of not through transparency, but by accident. This happened with my wife and I. She said, “I did not feel comfortable sharing with you that I wanted to help out a friend…” In trying to help out she now has $10,000 credit card balance in her name; thus, our name. This is disappointing. On my blog, I advocate on sound personal finance and investment, but knowledge and understanding “I” have aren’t just automatically assimilated by those around me, even those closest to me unless it’s internalized.
My wife’s experience is not so good with credit card debt and to be quite frank her and her friend have done a horrible job managing the situation. As is often the case, it gets a whole lot worse faster the less financially literate the person(s) are. My wife knows that I preach to use credit but not carry a balance. Interest accruing on a credit card is the worst interest to have as there are not many rates I know of that are higher. She hates credit cards.
Love Credit Cards
Though I use credit, it is because it benefits me. I have different feeling towards credit card use than my wife, and perhaps her friend. Under my purview, the outcome has been positive. Though she (my wife) and I have experienced, and will experience, some aspirational trips together as a result of us utilizing award travel resulting via using credit cards, our experience has been different. We signed up for lots of credit cards that had desirable bonuses. We met the spend requirements to get the bonus through purchases of normal and necessary goods and services and never carried a balance on which interest accrued. I believe, due my financial habits and literacy, I have had a higher probability of using credit card to work in my favor then the opposite.
My wife and I love and wish to travel a lot in life and that can cost a lot of money. However, how many poor or middle class families you know have money like that for travel that aren’t in credit card debt? How many poor or middle class families you know have money they can put to travel like that given the expenses of everyday life, unexpected emergencies, and further education and retirement planning? Not that many I imagine if the median household income in America is $56,516. However, using credit cards like I advocate on this blog, we have been and will be going to some aspirational places we could not afford otherwise.
Indifferent to Credit Cards
Some people are indifferent to credit cards because they don’t understand ’em or know about them. They just stick to using cash or debit cards to purchase goods and services. It is good advice to have a good degree of caution with credit cards, but to avoid all together may be a grave mistake. I say that because, if you have a good discipline with your money and budget, then you should have no problem using credit and paying balance in full each month. Thus, getting the benefits that advantage you towards travel, experiences, or simply extra saving.
An Example for the Indifferent
Let’s assume you don’t see the use to risk doing other than what you are already doing to use credit cards for travel experiences like me. All Americans are in the camp of having to save for retirement and every little bit helps when we speak of compounding growth over 20-30 years. If you were to signup for some of the bank offers below where you can get 50,000 points, this would be equivalent to $500 (if points worth $0.01 each) cashback. In turn, you could take and invest that money in an Roth IRA using a Motif Investing motif like some I’ve customized for individual stock(Os Own What Your Love) and passive approach(Os ETF 87/13 Allocation), or your own. Another compelling case that credit cards should be on your radar.
Note: A couple can each sign up for the offers above.
Whether you love, hate, or are indifferent to credit cards, those emotions are probably tied to the outcome we experienced in use of credit cards. However, let us not forget that experience is colored delightful or down-right dreary by the financial literacy we had at the time of using this tool. The better we are financially literate ourselves, the more love I think all can have for the beneficial use of credit cards.