Home » Debt/Credit » Credit Cards: Straight Talk

Most discussions about credit cards start at the wrong spot. People zero in on interest rates, annual fees, and reward points. A look at credit cards should begin with the actual consumer and whether they are equipped emotionally to handle the burden of credit.

Research has shown that people are more likely to spend frivolously when wielding these weapons of mass destruction relative to cash, so you need to employ caution while out and about with one. If your intention is to Get Rich, carrying a balance on a credit card will increasingly make it likely for you to never reach that lofty, yet realistic, aspiration.

Main Benefits of Credit Card Use:

  • Convenience
  • Purchasing power without carrying large sums of cash / theft protection
  • Expense Tracking
  • Building Credit History
  • Grace Period

Below are a few common sense tips from a Get Rich mindset:

Interest Rates

The interest rate terms for not paying the credit card on time are of little importance since you absolutely should never carry a balance on the card in the first place! If you commit to that one very simple notion, you will never have to worry about numbers like 19.99%, 25%, and so on.

People often say retail store credit cards are a rip-off due to the fact that the interest rates are so high, but again, if you’re not paying the interest then it doesn’t enter the discussion.

Annual Fees

The two main instances in which an annual fee makes sense are:

a) For people who run large amounts of purchases through their credit cards and the reward points/cash-back is going to be significant, or

b) For people who require the travel insurance or other such benefits due to their lifestyles taking them out of country regularly.

The average person should not carry a credit card with an annual fee. The rewards simply do not stack up to being worth it for the average user to pay a fee.

Rewards

Our favourite reward cards are the simple cash-back offerings that most banks provide. They typically offer one with a fee that offers more cash-back and a simpler version with less cash-back and no fee. We like the no-fee option which provides a simple reward structure and there’s no downside on your end.

Running the majority of your purchases throughout the year on a no-fee cash-back card can actually lead to a nice bonus for you when you get your reward. Spending this way actually makes more sense than using cash in most instances.

Credit Cards are great for building a credit history!

They can be, sure. However, this line is mostly used to manipulate and seduce young or naive consumers. The key benefits with credit cards have been listed above and this line about building a credit history is a secondary consideration and more of a side-benefit if anything. We advise you to lead a responsible life while avoiding the use of credit. Running around making purchases to “build a credit history” is more likely to see you filing bankruptcy.

The irony of credit rating agencies is that their formula makes it possible for someone who regularly carries a balance to have a higher credit score than someone who has a credit card and line of credit but never uses them. The regular payment of debt somehow earns someone a higher credit score (thus making them appear less of a credit risk to a lender) than someone who never carries debt. What a paradox! In a system where you can be rewarded for doing the wrong thing, you need to think for yourself. Carrying debt to build a score is poor money management and won’t improve your chances to Get Rich.

I get to borrow money at no-interest using the credit card grace period!

Tread carefully here. The grace period for credit cards is typically 21 days* which means you essentially get an “interest-free loan” from the issuer for that period of time. We don’t advise using this grace period to run things too close to the wire. There’s something to be said for just paying for the things you’ve purchased without flying too close to the sun.

What if I’m already in debt?

We’ll cover existing debt in a separate post but suffice it to say that common sense rules the day here as well: The highest interest rate gets attacked first and on down the line until it’s all completely gone. Sounds simple and actually is if you’re willing to shift your thinking from the one that got you into debt in the first place.

Living in this materialistic world presents us with constant pitfalls to avoid. Credit cards are among the most dangerous objects in existence for the modern person. In our life-philosophy, credit cards only fit in as a matter of convenience and are not Get Rich instruments. You can still live a full and happy life without a credit card if you choose to go that route.

– ­The Get Rich Brothers

Have you ever been indebted to your credit card issuer? What changes did you make to kill the debt and improve your life?

* Consult your credit card issuer for exact details related to your credit card. You are responsible for paying your credit card as per the terms set out in your agreement.

Pictures courtesy of pixabay.com 

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