6 Minute Read
It’s the cold, hard truth: Credit cards enable people to go into debt faster than ever before.
That’s partly because it’s never been easier to get a credit card. In fact, 70% of American adults have at least one card, and the average credit card holder in America has 3.7 in their wallet. One report tells the story of a man who has nearly 1,500 valid credit cards and a line of credit that reaches $1.7 million!
A few decades ago, we didn’t have this problem. Before the 1950s, when modern credit cards were introduced, people pretty much bought just what they could pay for in cash. Fast-forward to today: Americans are facing more than $900 billion in credit card debt, and the average U.S. household with debt owes $15,355 on credit cards alone. Yikes!
While lots of people are determined to take control of their money in every other way, they can’t seem to quit their credit cards. For those folks, credit cards are the last thing to go.
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Here are some reasons behind the credit card obsession, and our proof that no reason is good enough to keep that plastic around.
1. "They’re so easy to use compared to cash."
That’s true! They don’t require as much space in our wallets, and we don’t have to think about actual dollars in our account when we swipe. Unfortunately, that also means it’s easier to overspend.
A study by Carnegie Mellon, Stanford and MIT even showed a difference in brain activity when we use credit cards instead of cash. Using cash activates pain receptors in our brains, creating an emotional response that keeps us from making the purchase. Credit cards don’t do that, so we don’t feel the pain of spending.
Suddenly, that $2 coffee turns into a $10 mid-morning meal.
Related: Hear Dave Ramsey talk about how debit cards are just as convenient as credit cards when cash isn’t an option.
2. "They’re great in case of an emergency."
Lots of people say they keep a credit card around "in case of an emergency." It’s a simple fix to a stressful situation, right? But then Christmas becomes an emergency. And your takeout. And that new smartphone. Before you know it, your "emergencies" become debt.
Don’t tempt yourself. Instead of using a credit card, build up an emergency fund of 3–6 months of living expenses and rely on that the next time a true emergency happens. Then it becomes just a minor inconvenience. Crisis averted.
3. "They give us rewards, points, miles, or cash back!"
Credit card companies are marketing geniuses. With rewards systems that appeal to just about anyone, they know exactly how to tempt you to sign up. But no one ever got rich off a rewards program.
You also have to use the card a lot to earn the perks. And that just equals more spending you might otherwise have avoided if you weren’t trying to reach the next reward level. Your risk of debt has just increased. Stick to cash and spend only what you have. Eventually, you’ll see the rewards that come with building real wealth.
4. "They’re easy to pay off every month."
Maybe. But we’ve heard more than a few stories of people who planned to pay off their balances each month but fell into a trap along the way. Little by little their spending increased until those minimum payments didn’t seem so bad. From there, their debt swelled faster than Violet Beauregarde after she chomped Willy Wonka’s chewing gum. Don’t let your debt turn into a larger-than-life blueberry.
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5. "They’re necessary to build a credit score."
A high credit score means just one thing: You’ve interacted with debt a lot. It does not mean that you’re winning with money. In fact, it measures nothing about your relationship with money other than how much you like to borrow. So why would you want a high credit score? Because it allows you to take on even more debt in the future? No way, José!
You can qualify for a mortgage and rent an apartment with zero credit (which will happen eventually if you stop borrowing altogether). And for everything else—even cars—pay cash. No credit score needed. Then you can focus on building wealth instead of worshiping your FICO score. The Bible says, "The borrower is slave to the lender" (Proverbs 22:7 NIV). Don’t let your credit cards enslave you.
6. "They make our dreams reality."
Credit cards give us opportunities that we otherwise would never have. Instant gratification, right? If our only way to those opportunities is going into debt, we might need to reexamine our hearts. That’s because overspending often signals a deeper problem. When we constantly hunger for stuff, we’re suffering from discontentment and materialism. We compare ourselves to the Joneses (who are probably in debt themselves!), and we feel shame and inadequacy when we don’t measure up.
We use credit cards to satisfy that endless desire for more, bigger, newer and nicer stuff. The problem is, as soon as the newness wears off, we’re on to the next best thing. Nothing ever satisfies.
A credit card can’t fill the emptiness in our hearts. True joy comes from a sense of contentment. A heart full of gratitude for everything we already have leaves no room for discontentment, and it leaves no place for credit cards in our lives. Our best plan is to be content in every situation.
Sometimes we don’t realize how easily credit cards can harm our finances and our hearts until we step back and really look at the root cause of our addiction to them. When we understand how dangerous they are—and the lies that we’ve been told about them—we can break up with these pesky pieces of plastic more easily.