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Could You Break Up With Your Credit Card?
Last night we brought on a fellow by the Steve Stewart from the website Money Plan SOS. He has some unique views when it comes to using credit in life – basically he philosophically doesn’t believe in it.
When asked, “What about credit scores Steve?” His reply was along the lines of, “Hopefully my credit score withers up completely and disappears,” meaning that he would no longer be borrowing money of any kind. He then went on to describe the ways a person can get by without using credit cards or taking out debt.
“Credit Cards Don’t Kill Bank Accounts, People Kill Bank Accounts”
Now, I should be right up front in saying I love my credit card. Every so often a credit card company comes along with an offer so good, I just can’t say no to them giving me free stuff. I got a few chuckles out of the panel when I blatantly ripped a quote out of my own book (you know you’re a little egotistical when…) but I believe the point is a valid one. For me, using credit cards or loans is simply using a tool in my tool belt. Sure, if you don’t know what you’re doing with this particular tool it can really hurt you, but there is nothing inherently evil about it.
Food For Thought
The conversation about debt did raise some interesting broader-perspective thoughts for me though. For example, the fact that I couldn’t even consider going through life without my credit card shows just how large a role credit dependency plays in my life. When we discussed credit scores Steve raised a great point when he pointed out that not having credit cards will sting your credit score a little bit (not the end of the world, but certainly something to be avoided if possible) and that logically this didn’t make any sense. If someone has no debt and a history of not taking spending more than they have, why should they be penalized with a low credit score – something that could impact their ability to rent an apartment or even get a job. This is yet another way credit companies have managed to weave themselves into the tapestry of our lives – likely without us even realizing it.
There is little doubt that we are addicted to debt/credit. In doing some preparation for the discussion I found out that according to the most recent study I could find 91% of Canadians own at least 1 credit card, and only 70% of Canadians pay off the full balance every time. I guess we know where all of those rewards points actually come from now…
Is that addiction a good thing? Obviously not. It gets a lot of people in hot water. The interest rates on consumer credit and credit cards are through the roof and can really hurt people over the long term. That being said, from a practical perspective I don’t know if it is worth the inconvenience to me at this time. I made the point on the show that a no-credit approach might be a really useful tool for people that haven’t mastered personal finance basics – but those are exactly the people that likely wouldn’t consider it. A useful comparison is the fact that whenever they do a survey asking people if they are an above average driver, almost everyone in the room puts up their hands. Similarly, while almost everyone thinks they know enough to handle a high-interest credit card (yay, sign up rewards!) there are probably a fair number that are wrong even if they don’t know it.
Every personal finance expert/guru/writer/wannabe has talked about how vitally important it is not to carry high-interest debt for a reason – because it sucks and destroys budgets! Make sure you use credit properly or it might be time to consider a credit detox like the one Steve proposes.
Check out the show and tell me what you think – even if it’s, “You have the perfect face to be a writer,” 😉