In America, we love to buy things on credit. Many of us buy everything on credit, including our groceries. Using credit seems easy. In fact it is easy.
Stores make it as easy as possible. When you walk into “Good Buy”, they’d love to approve you a line of credit just by walking in the store. With credit, the sales person can get you to buy that flat screen TV whether or not you can afford it.
But there are problems with using credit all the time. Here are the biggest two problems:
1) You don’t gain money management experience.
You don’t learn how to delay gratification. You get into a continual habit of buying what you want whenever you want it. You learn to justify purchases by saying, “It’s only $20.” So, you buy CD’s, movies, gum, candy, magazines, ice cream, juice drinks, lunch and dinner. By the end of the month, you’ve spent over $1,000 of this stuff.
It’s all on credit, and you have no clue how much you’ve spent until that bill comes. You might have been doing this for a long time, so when your $3,000 – $5,000 credit bill comes in, it doesn’t even phase you.
At this point you would be just like most Americans as you are exercising very poor management over your money. It doesn’t matter if you pay off your credit card every month.
If you don’t know where your money is going, you don’t have control over it. And your credit card use is contributing to this problem.
A credit card statement is not a substitute for a good spending plan and good money management.
2) You put yourself in a weak financial position.
When we talk to people about the dangers of using a credit card, we get lots of excuses and reasons why they need that credit card and why it’s such a good deal. One of the things we get is that they need that card in case there’s an emergency.
So, the typical family already has last month’s spending on the card and no savings. And people are telling me that they need their card in case there’s an emergency. So, you lose your job, and then what? You’ll start racking up credit card charges?
This is weak.
Contrast this with a family that has no credit charges and a 6 month emergency fund. Who is in a better position financially? Who is in a better position emotionally to face the challenge of finding a new job?
Don’t get sucked into credit. Credit card companies offer you credit because they make money from it. Stores and businesses offer you credit because they will bring in more money. It’s a fact that people will spend more money at the store when they have a credit card. These folks aren’t acting altruistic. It’s a good deal for *them*. And they’re not looking out for what’s best for you.
Have you tried to stop using credit, including credit cards? What was your experience?
