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Ask Dave

It's Just for the Airline Miles

Jackie agrees with everything Dave says except giving up her credit card. Should she keep the credit cards?

QUESTION: Jackie in Cincinnati just read The Total Money Makeover, and she agrees with everything except giving up her credit card debt—especially since she's never had credit card debt. She uses it for airline miles to give away tickets to family and friends. Should she keep the credit cards?

ANSWER: You're an adult; you can do what you want. If you're asking if any of the things I teach don't apply to you, the answer is no. You can certainly keep your credit card, and it's probably not going to bankrupt you. You are a very conservative person, and you've done a great job with your money.

The debit card will do everything the credit card will do and if you think these airline tickets are changing your net worth, then you're getting caught up in a game. I am very careful in the book to explain why that is a scam. A person can spend up to 60% more using plastic than with cash. The extra you spend to gather up enough brownie points and airline miles is enough to buy the airline tickets.

I've met with thousands of millionaires, and I've never met one who said they made all their money with their airline miles. Your life is what will cause you to win, not a credit card. The credit card company has done a great job of making you think you're actually winning.

I won't argue with you too much since you're obviously not going broke over it. But at the end of the day, if you are not spending more and they are not collecting more fees on you than you cost them in airline tickets, they aren't going to keep you. You are what the credit card industry calls a freeloader.

MIT did a study, an actual MRI, on people's brains as they are spending. They found that when you spend with cash, the pain centers of the brain were activated. When you lay plastic on the table, the pain centers are not activated. With these people, it didn't even create a ripple on the MRI. They tend to spend more because of that.

The credit card company has done such a good job of getting into our psyche that giving up your first credit card is like Linus giving up his blanket. Try this. Cut up your credit card, close the account, get a debit card and live for six months. If you can't stand it, I'll bet that they'll give you a card back. It's not like it ruins your life if I'm wrong.

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