The Case Against Credit Cards

credit-card-debt1I am on month 16 of not using a credit card and paying cash only for everything, and it still feels incredible.  I am done with credit cards for life.

Since my wife and I built up an emergency fund, we have overcome a few doozies on our way towards debt freedom.  These included:

  • A tub that leaked into our downstairs ($1800 plumber bill)
  • Car issues (mechanical door fix, new battery, regular maintenance = $1700)
  • Foundation issues in our VT home ($800 band-aid for now…)

These expenses come up whether you have prepared for them or not, so you may as well create a separate savings account for each one to get ready for the inevitable.

I cannot wait to pay off my last balance and be done with credit cards forever.  I have lived with them in my life for the past 22 years, and I want a divorce.  Just a few more months!

Meanwhile, as my balances plummet and my credit score continues to creep up, I am starting to be inundated with several card offers with what seem like pretty cool perks.  These include:

  • Serious cash back on purchases
  • 0% APR for a year (or more)
  • Major frequent flyer miles
  • Other types of rewards

As many blogs that are out there try to promote frugality, there are just as many that try to teach you how to “beat the system” and make credit card rewards work for you.  One short year later, my behavior has been modified enough that I could probably use credit cards responsibly, but I am not going to mess around.

The way I look at it is this:  Credit card companies hire people–very smart people– to figure out ways to lure us into debt.  Do a select few customers “beat the system” and get points, cash back, etc.?  Yes.  Do those same people spend more than they would if they were simply spending cash?  Hmmmm.  I say…probably.

Studies have concluded that when you pay cash for an item, pain centers are activated in your brain; it literally hurts to part with your money.  When you swipe plastic (credit or debit) these pain centers do not activate.  I bet you can identify with that statement in some way.  It is therefore fair to deduce that one could tend to pay more money for things when they use credit as opposed to cash.    This debunks the whole “rewards” system of credit cards;  you most likely are spending more than you usually would since you are paying with credit.  If you paid with cash and put some in a savings account you could accomplish the same thing as rewards, or even better!

I say ditch the cards.  Never owe money to a bank again.  You worked too hard.

There are many arguments for and against credit cards.  Here are some points of view on both sides:

Dave Ramsey: The Truth About Credit Card Debt

Get Rich Slowly

Forget Dave Ramsey: 5 Ways I Use Credit Cards To Better My Financial Health



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