Credit Card Disagreement

Paul uses a credit card, and he disagrees with Dave that no one should use credit cards. He thinks they can be a useful tool in getting your finances in shape. Dave explains to Paul why he's wrong.

QUESTION: Paul in Los Angeles uses a credit card, and he disagrees with Dave that no one should use credit cards. He thinks they can be a useful tool in getting your finances in shape. Dave explains to Paul why he’s wrong.

ANSWER: I’ve met with thousands of millionaires, and I’ve never met a millionaire who said, “I made all of my money from credit cards.” I never met one—until today. Your point is credit cards are like guns. Guns don’t kill people; people do.

I think credit cards are so dangerous and there’s so little upside that you and I are just going to have to disagree because I just don’t meet people prospering because of credit cards. I don’t meet rich people using credit cards to prosper with. Rich people look at me and go, “You do what for a living? You tell people not to use credit cards? Nobody misuses credit cards!” Yeah, they do, honey. There’s a whole industry of this. Most of America is screwed up on these things. They’re the cigarette of today. There is no upside that offsets the tremendous risk. I see what you’re saying, and I get the philosophical idea of where you stand on this, and you’re going to keep using them. You make a lot of money, and you’re a smart guy. It’s not going to bankrupt you. You’re going to be fine. But conceptually, I can do everything with a debit card including get bonus back, kickbacks that you can do with a credit card except I don’t have to worry about one of these banks coming in and taking my life away from me.

If you had lost your job right after you took that $200,000 cash advance, you’d have been a client of mine trying to figure out how to not be bankrupt. That’s the risk you took because you had $200,000 sitting on a credit card. You know what they do with that 0% interest as soon as they find out you lost your job? They jack it to 29.99% at Citibank because your FICO score drops, and they’re going to nail your ears to the wall. The fact that it worked caused you to not perceive the risk.

I still stand on the idea that a credit card doesn’t have an upside use. I’m not saying there should be laws passed to take it away from you.