Don’t use credit cards when you don’t have to

I never really wanted a credit card growing up, but I suppose I took them for granted, and got my first one when I was around the age of eighteen. It was almost like you had to have one as an adult – it was easy to charge your credit card for small purchases and pay them off as the money came in. Many of them offered cool rewards, like flight miles or money back on purchases. The idea is simple: pay more for the convenience of plastic. Just swipe and you’re done, and don’t forget to pay at the end of the month.

But eventually, like everyone did, everyone learns the downside of leaning on your credit card. The interest rate on credit cards is astonishingly large – consumers with bad credit can pay as much as a 35% APR, while even those with good credit often stick to an interest rate of upwards of 18% for far longer than they need to. Compare that to a used car loan, the other form of loan most often considered a terrible investment – the average APR is about 5%. Very often its more cost effective to get a payday loan than to use a credit card.

Businesses also rely heavily on credit cards that can get them into financial trouble when they’re not careful. A small business with good credit and a bit of savings can quickly go into the red from a financial mis-step, lawsuit or other financial issue if they put big expenses on their credit card. Its better to pre-spend on things like insurance from a place like and to take out bank loans at reasonable interest rates for expenses that you can predict in advance.

Lets not miss the point here, ladies and gentlemen – credit cards are a raw deal. A free flight once every six months almost never pays for itself, and if it did, would the credit card companies offer it to you? No. If you’re using credit, you should be taking advantage of lower interest rates offered by banks and other programs for your finances – not using credit cards and wasting your money.

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