Credit cards can be one of the most divisive topics among adults. Some people on one side of the camp swear by using them for everything because of the reward points, cash back, airline miles, etc. And on the other side of the camp we have the avid Dave Ramsey followers who do not want them in their lives for any reason. But like most things in life, the answer for most people and credit cards is somewhere in the middle. So let me go over the dangers of using credit cards so that you can have a better idea of how to properly use them if you choose to.
High Interest
This is the first danger of using credit cards that most people think about. The high interest rates that they have.
As a matter of fact, the average interest rate for credit cards is more than 23% (as of January 2023). That is CRAZY!
If you want to have credit cards, that is totally cool. I have a few. But you HAVE to pay them off every month.
You will never be able to get ahead putting money into your retirement, savings account, or other savings vehicle while paying 23% interest. It’s mathematically impossible.
I’m not trying to beat you up here. Just know that. I have had credit card debt multiple times throughout my adulthood. If you have credit card debt right now, drop what you are doing and do whatever you can to pay that off ASAP.
It might take you a little bit of time, but pay off your credit cards. No amount of reward points, airline miles, or cash back will make up for the interest that you are charged.
Overspending
The second of the dangers of credit cards is overspending. When you purchase items with credit cards as opposed to cash or debit cards, most consumers tend to spend more money.
In fact, when you use a credit card rather than cash, you will tend to spend 12-18% more.
I’m not suggesting that you necessarily stop using your credit cards and switch to an envelope system Dave Ramsey style or anything. But if you find yourself consistently overspending, you might want to think about it.
Overspending with credit cards can be a real problem for a lot of people. Be careful to not fall into this trap.
Chasing the Points
The last of the dangers of using credit cards is chasing points.
If you find yourself using your credit cards with the primary focus of getting the reward points, airline miles, cash back, etc. you have lost the game. The primary reason that you should be using your credit cards is to build your credit and purchase the items that you would be purchasing even if you didn’t have the credit cards.
I have done it too. I have spent on my Academy Sports credit card because I knew that I was close to the next free gift card. We have probably all done it at one point or another.
But you have to be careful not to spend money on a credit card simply to get the reward points, airline miles, or cash back.
No amount of reward points, gift cards, airline miles, or cash back will outweigh you getting charged interest, fees, or overspending on the card. Only use your credit card for things that you would be buying even if you didn’t have the card in the first place.
Final Thoughts
This article is not made to make you feel bad about your financial state or the amount of credit card debt that you are carrying.
I have been there and I have had credit card debt several times throughout my adult life.
I am here to help you find a way out and give you the knowledge to understand what your decisions that you make today are doing to your future financial lives.
I am here for you!
You can do this!
Until next time!
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