02/09/2021
Oh, The Benefits of a Credit Card
I remember when I was in college. It was free pizzas, free hats, free t-shirts; just for filling out an application for a credit card. Then the offers came in the mail with 6-months interest free, balance transfers, points, and airline miles. Everyone is pushing credit cards from department stores to hardware stores to panty stores, not to mention all the banks and on-line stores with discounts out your ears.
Let’s look at all the benefits a credit card offers that they do not include in their advertising.
1. Spend more than you make.
2. Reduce your spendable cash flow.
3. The added payment each month.
4. Late fees
5. Interest charges
Spend More Than You Make.
If you want to build wealth, you need to spend less than you make. When you use a credit card, you are spending money you don’t have. You can buy the same tank of gas; the same basket of groceries; the same on-line purchase; the same airline ticket, rental car, or hotel reservation with a debit card as you can buy with a credit card, but the debit card transactions will not put you in debt. A debit card limits your spending to the money you have, giving you discipline to spend less than you make.
Reduce Your Spendable Cash Flow.
When you use a credit card, you are putting off the cost of the transaction, taking money out of next months income for this month’s expenses. If you do not pay the balance in full, you may be paying for the pop and candy bar at the gas station for months on end. Add in a late payment and some interest charges and that is one expensive candy bar. To build your wealth, it is best to reduce monthly expenses, not increase them.
The Added Payment Each Month.
How are your ends meeting now? If it’s easy-peasy, why do you need to defer an expense to next month. If there’s too much money at the end of the money, why add another payment to make, another payment to miss?
Late Fees
Even if you get your payment to the credit card company by the due date, how do you know they process it quick enough before late fees are added to your account?
Interest Charges
They may start you out at 0%, but what happens after that expires? I just looked on the google and found the 10 “best” credit card offers. Yes, they all started at 0%, but that was only for balance transfers on the most of them. Then after 15 to 24 months, the rates jumped up to anywhere between 11% and 25%. And those higher rates, they typically applied to any purchases that are made with the credit card. And here is where they get you. In most cases, your payments are applied toward the balance transfer before any payment is applied to new purchases, so you end up paying interest on all purchases until the transferred debt is paid off.
As you can see, credit cards are NOT the answer to building wealth, they actually work against your wealth building goal. Live on less than you make. Avoid credit cards, the stress, and the debt that comes with them. Build Wealth.
Jackie “JW” Ward
[email protected]
