Credit cards are a double-edged sword. People are addicted to crack plastic. They buy things they don’t need to impress people they don’t like. Plastic money has Americans hooked. Card ads are everywhere. How bad is it? According to some statistics, the average American household has more than $15,000 in credit card debt.
I’m not advocating that everyone have a credit card. If you can’t control your cash, you definitely can’t control your plastic spending. I teach at Peace Financial University and we strictly preach freedom from debt and getting rid of your cards. Why? Because most people will spend when they have a credit card. Also, those same people will not pay their current charges and will carry a balance. Thus, putting them back in credit card debt.
There is a myth that you need credit. That is a lie. You don’t need credit to survive. It makes it easy to travel, rent cars and book hotels. But the truth is, you can do it with a debit card. The buy now pay later syndrome is the reason so many people are in debt. This is how people get trapped and are headed for financial disaster.
Only the Responsible and Disciplined
I use my cards every day. But I pay my balance every month. Paying interest is stupid. I still think most people shouldn’t own or use a credit card unless they are responsible and disciplined to pay it off every month. As I mentioned earlier, if you can’t control your cash, you’ll be worse off with credit cards.
Listen to me again. Paying interest on the things you buy is stupid. If you can’t pay the balance, don’t buy the damn thing. Do you really need it anyway? Is that new big screen necessary now? Or is happy hour that important? Think before you take it out. Better leave it at home.
not for emergencies
They should not be used for emergencies. This is an excuse that people use because they are not financially prepared. What are emergencies? The tire’s blown, the air conditioner’s not working, the kids need new shoes, you’re hungry and broke. You take out your plastic to pay for these things and then you start building up that balance. You do not pay the balance and the following month another “emergency” appears. If you don’t have an emergency fund, you’re setting yourself up for failure.
Here are 4.5 ways to really use your credit cards:
1. To make that $$$
Rich people use cards to expand their businesses. They use it to make that $$$. Here is the key! They pay their balances at the end of the month. They generate income with their cards and then pay them out. They hate paying interest. I am an affiliate marketer and use my credit cards for marketing and pay the balance each month.
There is a daily limit on the use of your debit card. But not with credit cards and I don’t need limits on my spending. My credit cards help me earn money. If your plastic can help you increase your income, then use it.
2. Not for personal use
If you can’t pay the balance at the end of the statement, don’t buy it. If you couldn’t buy it with cash then don’t get it. I know you’ll pay for it later. If that were true, there wouldn’t be all this credit card debt going around. Don’t even take it with you. Just having it will make you want to buy things. Things are what kill people economically.
Bankrupt people pay fees and interest rates because they can’t afford to buy with cash. Those are the consequences of not having enough money to buy what you want. Fees and interest add up. You’re simply giving money away when you can’t pay it back before the statement date.
Here is a trick I use. I always have a monthly budget. I know where every dollar goes. I take that quote and put it on my credit card. I actually create a positive balance on my cards. So I stick to my budget and never owe a balance. Why am I doing this? You’ll see when you read #4.
3. Your personal accountant
That’s why I use my credit cards for every purchase. I receive an account statement at the end of the month, quarter and year. I see where my money went and they add graphics too. I download the statements to my Quick Books software and give the year-end statements to my tax collector. Boom accounting is done.
4. Benefits, privileges, rewards and points
The icing on the cake is all the benefits, privileges, rewards and points you get when you use your cards. I’m a cash back guy and I’m going to get a lot of cash back this year (which I keep in my investment accounts). My business credit cards give me all the advantages. I get points, miles, discounted VIP event tickets and I don’t have to pay foreign exchange fees when I travel around the world.
I get travel insurance, rental car insurance that saves me $$$ on rental cars and much more. Plus, all of this is free when you pay off your balance. When you use your credit cards correctly, you can collect the benefits
4.5TB Start your business
I warn you not to use your credit cards to start your business. Especially if you are a newbie with no experience in the field you are about to enter. The risk is too great. Now I used my credit cards to invest in my business. That was around $20k. That was a big bet. But I had 4 years of experience when I took the step.
I also kept my day job to help make the monthly payments. Create multiple streams of income to pay off balances faster. Those balances are at $0 now, but I had to step up, grind and shine. It took some time, but my business is successful. If your business fails, you still have to pay off those credit cards.
bottom line
Most people should stay away from credit cards because they can’t control their cash and credit cards will make things worse. Use it only if you can pay the balance each month. Remember paying interest and fees is stupid. Do not be stupid. It’s a great accounting tool and the benefits are worth the discipline and responsibility.