I recently read an Article at Time.com about Credit Cards vs. Debit cards. The original Article can be viewed HERE. While the article is targeted towards Millennials the author Taylor Tepper gives general advice that could be used by many people, Millennial or not. So let’s consider the authors advice.
Credit and Debit Cards make life significantly easier. Reduce the amount of time we spend at the bank and eliminate the possibility of loss or theft. Fraud is still a huge problem as it has become a business albeit an illegal one here in the United States and Europe and American’s are quite often the target. This is the one piece of advice I will admit Taylor Tepper nailed on the head. It is true that the fraud protection of a credit card is better than that of a debit card. Although many banks have raised the standard and covered fraud at an increased level similar to credit card standards there are still many smaller banks that are living in the past. If you want to protect yourself more often than not a credit card is a better product to protect against fraud. Having been a victim of fraud on both types I can admit that there was no difference in coverage and I paid nothing out of pocket.
On to the next piece of advice that I really don’t agree with. Taylor says that credit history is important. In extension I believe Taylor is also stating that credit score is important since one has a direct impact on the other. Here is the thing. This could be important unless you have decided to live your life without credit cards and without credit history. Truth is, it is possible and more and more American’s are attempting this new lifestyle. Living on cash is slowly becoming a new standard and I am proud to be an educator leading the way and teaching our youth the possibilities. They still have to make the decision for themselves. Some would argue, how would you get a mortgage? Okay, well if you create a habit of saving, and investing; over the long term those investments could help a person buy a car, a house or a boat. A $250,000 mortgage at 4% interest will accrue nearly $180,000 in interest over 30 years. You end up paying nearly $430,000 for a house that is only worth $250,000. If you can teach yourself to behave and save, and invest your money from 18 – 33, there are some cases where you may be able to pay for an entire house, and some cases where you could significantly reduce the impact of a mortgage on your life, and your family or future families life. We are too stuck in this thought process that we don’t make enough. The truth is that excuse would only be valid if we were doing the right thing with the money that we made. If we manage it better we will be more successful and credit wouldn’t even be needed. This is one of the best ways to get yourself a new car every 5 years or so as well. My suggestion is this. If you are going to live your life with credit I highly suggest you take a financial class and understand the impact of all of your decisions. If you are going to live without credit I also suggest you take a financial class and understand the impact of your decisions as well. We aren’t dumb, or stupid, or making mistakes. We are uneducated, or educated improperly.
Lastly, Taylor talks about Rewards. Rewards are DUMB! I never agreed with them. Sure they can give you a little bit of money. If you can teach yourself to save and invest properly as mentioned above and using the example of a mortgage above by not getting the mortgage you are automatically saving yourself $500.00 average interest for 360 months. Those savings are better than Credit Card Rewards any day.
FINAL Words – Practice this. Repeat it to yourself over and over again until it makes sense. It shouldn’t take long. Stop paying everyone else interest and start paying yourself interest instead. Save and invest your money and stop greasing the wheels of big bank and their .01% savings accounts. PAY YOURSELF FIRST means a lot more than what your parents intended it to mean. Use your head. For financial advice find me on Facebook and i’d be happy to discuss some of the techniques I have learned and taught in recent years.