A recent article in Money magazine highlighted a group of families that had recently given up credit cards. The slideshow is titled “They cut up their credit cards.”
Let me reiterate what JD Roth at Get Rich Slowly says a lot — do what works for you. Make progress, make good decisions, but do what works for you. If credit cards work for you (as they do for me), then use them. If you fear credit cards or know you can’t handle them then by all means eliminate them from your life.
But I’ve got to protest something mentioned in the 2nd family’s profile in Money magazine. Matt and Gina Hutter. They completely removed credit cards from their lives, relying instead on cash and debit cards. Okay, no problems thus far. Then this gem pops up:
The Glitches: When Matt tried to buy a $5,700 PC online with a debit card, he ran into his $2,000-a-day spending limit. Because he has good credit, his bank lifted it.
Come again? W-w-what?
A $5,700 PC? Are – you – out – of – your – mind? Thats 5 to 10 times greater cost than your average computer. I did a quick search of Alienware.com (they make ultra highend gaming PCs). Most of them ranged from $999 to $2,000. They did have one model, the Area-51 ALX Extreme Gaming Desktop, that starts at $4,599; more than double any of the other computers offered. And Alienware computers are what I would regard the most expensive PCs on the market! Add $1,200 to that high starting cost to get what this guy paid for a computer.
Maybe he got an Apple? The Mac Pro starts at $2,799 and can easily be configured to go much higher — into the $5000-6,000 range. But you’d better be doing quantum physics modeling or full on professional video editing that requires that kind of power or you’re just wasting money.
A $5,700 computer? Are you kidding me? Granted, Money does not mention how much the Hutters earn each year. But I think we can all agree that unless you are pulling in the salary of CEO at a large firm (that is, the point where money isn’t a concern ever again), then a $5,700 PC is a bit much. Yes, that’s an understatement.
Credit Cards Are NOT the Problem!
This goes back to some main points I’ve made on here in the past. Credit cards are not evil. They are a tool. You can misuse the tool, or use it wisely.
The issue is how to control your spending. It doesn’t matter if you pay by cash, check, credit card, debit card, pesos, dollars, or euros. If you’re spending money foolishly — on a $5,700 computer, a Gucci handbag, or a Ferrari — you’re spending it foolishly. It’s not the method of spending that matters. It’s the spending.
(Yes, I will reiterate this point on this blog until the end of time if I have to.)
I know, I know. “Credit cards encourage you to spend.” I’ve heard it all and I don’t buy it. Get some self control, sit down and think before making a purchase. They can encourage me all they want. Good for them.
Look at your credit card like a debit card and see if anything changes. Honestly folks, if your credit card was really just a debit card, would you run out of money very quickly? The type of card you hold in your hand shouldn’t really matter. Just because it says American Express or Visa on the side doesn’t make it any more special than a debit card.
Still having problems? Maybe your spending habits are to blame rather than the credit card company.
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