A credit card can be a very powerful tool. Most people enjoy using credit cards because it allows you to build your credit and spend money you technically don’t have.
Growing up, most people in my family told me to avoid credit cards like the plague. When I turned 18, I thought credit cards were bad news and caused people to get into debt and ruin their credit scores.
Little did I know, it was the other way around. After researching about credit and learning more about personal finance, I realized that people’s spending habits lead them to get into debt and credit cards themselves are not evil.
Credit cards can actually be helpful tools to allow you to increase your credit score and receive a lower interest rate on your mortgage. I’ve taken quite a few trips for cheap thanks for credit card rewards. It just requires some skill and discipline to use them wisely.
However, I’ve decided to take a break from using credit cards for now and I think it will help improve my household’s finances. Here are a few reasons why.
1. It’s Hard to Have Self Control
I’ll be the first one to say that it’s hard to have self-control when you’re using credit cards. Research shows that consumers will spend more money with a credit card than with cash and I couldn’t agree more.
When you swipe your credit card, you don’t have to worry about the bill until later. Unfortunately, all of those swipes can add up and you’ll be faced with a huge bill that you can’t afford to pay.
Impulse purchases can be expensive and only make you feel like crap afterward. If you struggle with controlling your spending, I’d highly recommend giving credit cards a break or refraining from using them altogether.
When you choose to pay for things in cash, you are immediately hit with the consequences of your purchases so it motivates you to have better self-control and spend wisely.
2. Credit Card Interest Rates Are Expensive
Credit card interest rates tend to range anywhere from 10% – 20%+ which is what makes it so difficult for people to pay off their credit card debt and keep it paid off.
If you happen to miss a monthly payment, the interest you’ll pay for your balance will cause you to pay even more money for that new pair of shoes making it not worth it in the end.
To make matter worse, credit card interest rates can fluctuate so your rate might increase without notice. Just as credit cards can help increase your credit score, they can also drive your score down if you don’t pay your bill on time and keep the utilization low (preferably below 30%).
3. The Rewards Are Not Always So Great
I’ll admit, earning credit card rewards feels great. It’s a perk that I’ve been tempted to indulge and it’s been difficult to give up. Being able to earn cash back and points to redeem for travel is always nice, but you must think about the cost.
If you are struggling to spend $3,000 on your credit card in 3 months, just so you can earn $500 in travel credits, perhaps the bonus rewards won’t really be worth it if it will take several months for you to pay off the bill.
When you think about it 1% or even 5% cash back is not all that great and it’s definitely not worth getting into debt over.
4. Credit Card Usage Doesn’t Align With a Debt Free Life
When I think about it, using credit cards all the time doesn’t align with my goal of living a debt free life. I’d like to be completely debt free pretty soon excluding our mortgage.
Using credit cards promote a lifestyle where you spend more than you earn in hopes of paying the bill off later. I don’t want to live like that. I don’t want to rely on credit cards and I don’t want to have them in the back of my mind as an option if things go south. That’s what an emergency fund is for.
By using credit cards excessively, I also felt like I was having a harder time sticking to my budget. Again, it was tempting to grab something extra that I didn’t plan to spend money on.
When my husband and I got married, he had credit card debt and I saw what a huge burden it was. Credit card debt is sneaky and it’s easy to get right back into the hole once you’ve dug yourself out.
If you currently have credit card debt or any other type of debt you’re working to get rid of, it’s probably a good idea to stop using credit cards for the time being at least so you can focus on paying off what you owe.
I still get tempted to overspend almost daily so not having that option to use credit will be helpful.
My family and I also want to live a simpler life and only spend money on what we can afford. For our new home, we’re cash flowing some updates and even though it’s costly, it’s not as stressful since we’re not having to think about paying an extra bill later.
If you’ve noticed some similarities between your own situation and mine, ditching credit cards for the time being may be a good idea. Yet and still, I know some people who feel very financially secure and swear by using credit cards and that’s okay too.
Ultimately, this is just my decision to stop using credit cards for now and I can’t speak for anyone else. Credit cards can be useful under certain circumstances, but they can also cause a lot of harm.
I’m interested to hear your thoughts on credit cards. Share them in the comments below!