Monday, January 6, 2025
Credit Cards! The Pro's and Con's Explained
Credit Cards: The Pros and Cons Explained
Howdy, friends and neighbors! Bobby here! Today, I want to talk about credit cards. This topic deserves some attention, so grab a cup of coffee or take a walk with me—literally. I’m at the park, brainstorming ideas, and recording videos while enjoying the outdoors. Let’s dive in.
Credit Cards: A Double-Edged Sword
I’ll be honest—I like credit cards. But let me emphasize this: they must be used with discipline. Credit card companies haven’t made a dime off me in interest for many, many years. Why? Because I’m part of the 10% of people who pay off their credit card balances in full every month.
Did you know that 90% of people carry a balance and pay interest? If you can’t commit to being in that disciplined 10%, my advice is simple: don’t get a credit card. Let’s break this down with an example from my own family.
A Lesson Learned in College
My daughter was in college when I set her up with a student checking account and a debit card. I could monitor her transactions, transfer money if needed, and everything was smooth sailing. Then, during her junior year, her debit card got hacked. She had $30 left in her account when she noticed the fraudulent charges. I told her to withdraw that $30 at an ATM for immediate use.
We canceled the card, reported the fraud, and eventually got a new one. But the process was a hassle, and it left her in a bind for a short time. That’s when I decided to get her a credit card. It was a student credit card with my name on it as well. She used it for small purchases like coffee or fast food, and I paid it off every month. This way, she stopped using her debit card except for ATM withdrawals. If the credit card ever got hacked, her money in the bank would still be safe. Problem solved!
Credit Cards as a Financial Tool
When used correctly, credit cards can be a fantastic tool. I use one myself and pay it off weekly because I don’t like seeing a balance. My card, an M1 credit card, gives cash-back rewards based on stocks I own. For instance, I earn up to 5% cash back when I buy gas from stations I’ve invested in. Over time, this adds up to hundreds of dollars annually—just for buying things I’d buy anyway.
Here’s the catch: I never let a balance carry over 30 days. If you’re disciplined, you can make credit cards work in your favor. But if you’re not, steer clear.
The Perks of Store Financing
Another benefit of credit cards is store financing. For example, I used to have a Best Buy card for large purchases like appliances or computers. They often offered 12 to 18 months of interest-free financing—a great deal if you pay it off on time. However, if you don’t, you’ll owe interest retroactively from the start.
These days, I prefer saving cash for big purchases. Recently, I needed a new washing machine. I didn’t have enough saved, so I used a 12-month, same-as-cash financing option. Next time, I’ll aim to have the full amount saved beforehand. Setting aside even $5 a week can help you prepare for future expenses like tires, appliances, or emergency repairs.
The Bottom Line
Credit cards can be beneficial, but only if you use them responsibly. Here are my top tips:
Pay Off Your Balance in Full: Never carry a balance for more than 30 days.
Don’t Use Credit as an Emergency Fund: This can lead to a financial disaster.
Take Advantage of Rewards: Use cash-back or rewards programs for purchases you’d make anyway.
Be Cautious with Store Financing: Pay off the balance before the promotional period ends to avoid retroactive interest.
If you can’t be disciplined, avoid credit cards altogether. They’re not worth the financial stress.
Final Thoughts
That’s my two cents on credit cards. I hope this advice helps someone out there. Remember, I’m not a financial advisor—just a hillbilly sharing some life lessons. If you found this helpful, don’t forget to like, comment, and subscribe. Maybe one day my grandkids will look back and learn something from Pawpaw’s ramblings.
Alright, y’all take care!
