How can the guy teaching us about travel hacking using credit cards tell us to never get a credit card?
Haha - great question!
Here’s the reason.
A great case can be made for never getting a credit card.
In fact, if you get a credit card or multiple credit cards, you should know you’re taking a risk.
Period. End of story.
Having credit cards is like playing with fire. Generally speaking, it’s a bad idea, but some people, through years of financial wisdom, have learned to “play” with fire in a way where the likelihood of getting burned is very low. They may choose to take the risk with significant guardrails in place to keep them from getting hurt.
They are the exceptions to the rule.
Perhaps that’s you and me.
I don’t think the “rule” is that people should have credit cards. I think it’s the exception to the rule.
I think the best general wisdom is that people should not get credit cards. Which is why I understand Dave Ramsey’s crusade against credit cards. He’s helped save many from financial ruin by urging them to cut up their cards. I just think he doesn’t allow for some “exceptions” to the rule — like you and me.
Ok, here’s why someone should never get a credit card:
- It gives you the ability to go into credit card debt.
Guess what? If you don’t have credit cards, you can’t go into credit card debt! Duh! And I think most forms of debt are awful and destructive to your financial health. Credit card debt is one of the worst. People should avoid it like the plague — literally! It’s ruined so many people’s lives, let’s be honest.
- It creates greater temptation to go into credit card debt.
If you come into a season of financial difficulty, it will likely at least cross your mind that you could leave a little bit of a balance on that credit card to help you through the storm. People do this every day. If you have no credit cards, there’s no temptation to carry a balance. If you do have a credit card, they make it super easy for you to just make the minimum payment. Do this and it could crush you!
- You’ll likely spend more money than you would’ve spent with cash
Studies show, and Dave Ramsey loves to cite them, that you spend more with credit than with cash. When you’re keeping cash with you & buying things with cash, it “hurts” more when you spend it. There’s something emotional about it. But just swiping a card is easy. No pain at all and you can swipe even if you don’t have the money in your bank account. Not great!
- Credit card interest rates are incredibly high
As I’m writing this, I just looked up the interest rate on my Chase Sapphire Preferred card that I carry. Guess what it is? 23.24%! Whoa! If you carry a balance, they are going to charge you ridiculously for doing so. Why even have this temptation in your life? Why would you ever want to borrow money from someone at 0% interest much less 23.24% interest?
- It can encourage greed
We live in a society where when we want something, we want it now. That’s something to be resisted, not indulged in. Credit allows you to have it now even if you don’t have the money to pay for it now. It lets you act on the greed. Why have anything in your life that would indulge your greed? Why not create guardrails to protect yourself from that behavior we’re all tempted by?
- The bonus points aren’t worth the risk
You may say, “Yeah, I’m not great with money, but I’m earning bonus points!” Trust me, if you’re carrying a balance on a credit card, your points are worth nothing. You’re essentially paying for them with the 23.24% interest they’re charging you. They’ve deceived you into thinking your points are making up for your debt. They’re not. It’s a lie.
- If you have consumer debt now, you’re at even greater risk
Can I say something that may sound harsh? You know I love you, right? If you haven’t had the wisdom to avoid consumer debt, you have no business having a credit card. I’m sorry, but it needs to be said. The likelihood that you’ll abuse a credit card goes WAY up if you’re already carrying other consumer debt.
- If you have a history of credit card abuse, stay away
Many recovering alcoholics swear they’ll never drink again. Why is that? It’s because they want to remove all temptation from their lives in order to stay sober. If you’ve abused credit cards before by carrying balances & paying lots of interest, you should avoid them like the plague. The likelihood that you’ll do it again is high.
I could keep going, but I’ll stop for now.
Let me conclude by saying this:
I fully acknowledge that by having credit cards, I’m playing with fire. I’m taking a risk. I’ve made sure to put guardrails in place where I hopefully won’t suffer the consequences I’ve listed above, but I don’t want to act like I’m not taking a risk.
Acknowledging that, for people who are the exception to the rule, maybe like you and me, credit cards can be a great tool in earning extra income/vacations.
I want to continue to help you get/use credit cards wisely, but only if you’re the exception, acknowledge the risk, and create guardrails to keep you from stumbling.
To everyone else I say, never get a credit card!
