What are some pros and cons of using credit cards?
By: Darrell Castle
Hello this is Darrell Castle. I’m an attorney licensed to practice law in the state of Tennessee and I’ve been making a series of videos on credit and today on this video, we’ll talk about credit cards – are they good or are they bad and then at the end I’ll give you a little bit of free advice that comes just from me.
Number 1 – are they good?
Well, there’s some good things about them. One of the good things is they are good for emergencies. If you have an emergency that you don’t have cash to cover, you can cover it with credit cards; everybody knows that and everybody understands that.
They’re also good for reservations. You need a credit card to make a reservation like on an airplane or at a hotel or something like that. You need some kind of card so they’re good for that.
A credit card is also better for fraud protection than a debit card or even cash. If you order something over the internet and it turns out to be fraudulent or if someone cancels your information, you can cancel it if it’s a credit card, normally. Or you can just refuse to pay.
Those are some good things about credit cards, and the theory goes that if you use them responsibly, they’re very good for your credit score.
People who tell you that credit cards are good will tell you that the debt-to-limit ratio is very important. They encourage you to owe about 30% of what your credit limit is and to always pay on time; that gives you the maximum credit score.
Now, what are some bad things about credit cards?
Well, credit cards are bad for about three reasons that I can think of.
1. You tend to throw down a lot more money on credit cards than you would with cash. There’s something about laying down a few hundred dollars of cash that seems important to you while just using your card you, may do so without thinking so you charge more.
2. Credit cards enslave you gradually. You gradually build up interest and penalties over time so like the character in Ernest Hemingway’s book “The Sun Also Rises,” the character asks, so how did you go bankrupt? The character said “slowly at first and then all at once.” That’s what happens to you with credit cards.
3. Proverbs 22:7 – “The rich rule over the poor and the borrower becomes slave to the lender.” Is that what you want to be folks – slaves to the lender? Because that’s what credit does folks. You pledge your future and your life – the days, hours and minutes – as a credit card holder.
Now, the free advice I was going to tell you about…
It’s a game to credit card companies – it’s their game. Their game is to enslave you with debt so that you are a lifetime customer and you owe them for life. Hopefully you will fall behind on your payments from time to time and you’ll owe them interest on penalties and interest on interest; that’s their game so that you build wealth for them.
But make a plan of your own – this is my advice to you. Pay off your credit cards. Get out of debt completely. Save money. Build wealth for yourself and your family and not for them. That is your game plan and that’s the way I see it, folks.
If you’re in debt or you’re interested in improving your credit, you can speak to one of our experienced Memphis bankruptcy attorneys, free of charge, by calling (901) 327-2100 or by filling out one of the contact forms on this page.