Trading Your Financial Soul For A T-Shirt

Sydney wants to know what Dave thinks about credit cards pushing the cards for good credit. She’s a college student and wonders if she needs one.

QUESTION: Sydney in Fresno wants to know what Dave thinks about credit cards pushing the cards for good credit. She’s a college student and wonders if she needs one. Dave tells Sydney she doesn’t need a credit card and explains why not.

ANSWER: One of the reasons credit card companies tell college students to get a credit card is so that you can build your credit. That’s an accurate statement, so your question is valid. What I’m challenging is the very premise that you need to build your credit. “Why do you need to build your credit?” is a question you need to ask yourself. You would say, "Because I want to borrow money to buy something later, and I would need the credit to be able to borrow the money."

I’m trying to get folks to quit borrowing money. I want you to do what your great-great-grandmother did, and that’s save up and pay cash for things. If you can’t save up and pay for it, you don’t need to buy it. In other words, if you want to buy a car, you ought to save up and buy the car. That would mean you don’t buy a $30,000 car as your first car, but you probably shouldn’t do that anyway. It might mean that you get a $5,000 car or a $4,000 car at first, and then you save up more money, and if you’re making good money and you don’t have any payments, you’d have more money, wouldn’t you? You would use that money to save up and pay for things with the possible exception of buying a home, which would be an awful lot of money to save up and pay cash, but people do it sometimes. Even then, you can get a mortgage if you don’t have any credit. A lot of people will tell you that you can’t, and that’s just not true.

The logic is supposed to be you need to go into debt, pay it back so that later you have the opportunity to go into debt. That’s what they’re saying. I’m saying that’s flawed logic. Don’t trade your financial soul for a free t-shirt on the college campus. You should also stop and think about what kind of a company it is that hands out credit and the ability to buy stuff to people who don’t have jobs. That’s kind of weird. They must have some other kind of agenda going on here. This is an industry that’s pretty screwed up. It’s a good industry to stay completely away from—the credit card industry.

Learn to live on a written plan. Learn to live on what you have, meaning pay cash for it or don’t buy it. Come out of college without any debt, and you will be light years ahead of your contemporaries, kiddo.