Do you ever watch the show “Fatal Attraction?” I am fascinated by this show! It shows people that have potentialy fatal pets, typically big cats. I love this show because it always begins and ends the same way. They get this adorable tiger cub and bottle feed it until it’s an adult. They play with the tiger, the snuggle the cute little stinkers and they trust these animals.
Then, one day they go out to feed the tiger, slowly opening the gate and dropping off food. They turn around and head out the gate when the tiger suddenly pounces and attacks the person thrashing around and ultimately killing their owner.
It’s a story that is repeated and repeated. Every single owner said the same thing, “it won’t happen to me.”
Where am I going with this story? Well, believe it or not, credit cards remind me of “Fatal Attraction.” Every person who gets one starts with good intentions. They will be careful, they will play it safe, they will only use it for gas purchases. They want to earn “free” airline miles. They need to build their credit. The list goes on…. and the story remains the same. If you play with credit cards, you’re gonna get burned.
How true is this? When the average American household has $15,611 in 2014, I’m led to believe that the good intentions are just that- intentions. They are not reality.
Reality is people are not paying off their credit cards. Reality is people are not living on a budget. Reality is trying to build your credit is often costing you way more than you realize.
Watch the video below and then continue on to read more of our detailed credit card discussion.
Still not convinced? Let’s dig deeper.
Credit cards are designed to keep you in debt.
With interest rates that are as high as 24%, it’s no wonder you feel like you can’t pay off your debt. Especially if you are paying the minimum or barely more than the minimum. Picture yourself on a treadmill. It doesn’t matter if you run 10 mph or 3 mph, at the end of the day, you are still on the treadmill. This is how paying the minimum (or slightly more) feels. You will be stuck on the credit card treadmill. The only way to get off is to pay off the entire balance, stop using the damn card, and get off the treadmill- so to speak.
76% of college students have credit card debt.
Are you kidding me? If you are a college student, you are probably living off barely any income, racking up student loan debt like crazy, not living on a budget, and you are concerned about building your credit? STOP IT! There is a time and place for building credit. While you are scraping by and not in control of your money is the worst time, in the history of the entire world, to build your credit.
But what about the perks?
Consumer Reports found that 78% of people with credit card airline miles did not use them! There is also an interesting discussion of how much does a point = in dollars? The points for each flight can be artificially inflated and the sad thing about this is, you wouldn’t even know! For example, the Chase Sapphire (one of the five best cards) has a deal that if you spend $4,000 in the first 90 days of opening the card, you will receive 40,000 points. 40,000 points = $500. Now, I’m no math major, but I can almost guarantee you that if the average consumer is spending $1,333.33 (4,000/3 months) on eating out, gas, etc. you are having bigger financial problems and should definitely NOT get a credit card. Not to mention the $95 fee you will be paying after your first year. Basically, credit cards go against every financial principle I believe in. (Hold your horses, this will definitely be a detailed topic in the very near future!)
The way to get successful with your money is saving money, not being incentivized to spend extra.
I know that at the end of the day, you can and should make your own financial decisions, but I can promise you that people aren’t getting rich off of their credit card perks. You have to be financially responsible (at a whole other level) for credit cards to be helpful in your life.
And when I’m seeing average student loan debts of $28,000, car loans, and credit cards debt climbing, I’m hesitant to recommend anything other than a budget and second job.