It seems innocent enough to use credit cards for every day purchases and pay the bill every 30 days. After all, it’s using someone else’s money and you might even earn some rewards by doing so. Many would argue that this is a sound financial practice.
Credit card companies make a profit
Credit card companies don’t build things, they don’t fix things, and they aren’t a non-profit entity. They make money by selling you money and generate income when people don’t pay back their obligations on time or break the Terms in their agreement. Interest charges, over the limit fees, and late payment fees are just a few ways credit cards have become a multi-BILLION dollar industry.
Swipe charges on credit card purchases are more expensive than those for a debit card, usually 2-3% for credit and less than 1% for debit. By choosing credit over debit you are increasing the expenses for the establishment, which results in lower profits for the business owner and eventually will cause them to increase the prices of the items you are buying or go out of business. More than likely they will raise prices, which affects all of us.
The most guilty of all
“They don’t make money from me, I pay mine off every month”
Many people claim that they’ve always paid their balances in full and have never paid a fee. If this were true then they are more guilty of harming American communities than the rest of us. If they aren’t paying any of the fees or interest charges then where does all the money for the cash-back rewards come from? They are getting rich off of your neighbor’s wallets, and your promotion of “being fiscally responsible with credit cards” is like giving an 8-year-old a verbal driving test.
What you can do
When making an electronic payment at the register yourself, use the debit function. This will result in lower charges for the merchant and instant accountability in your budget. Many places also allow you to withdraw cash as if you were using an ATM. This will prevent you from having to pay an ATM fee at the local Quickie-Mart. Lead by example, stop using credit and start focusing on building wealth.
Also, buy local
Has the thought of buying American-made products ever influenced your decisions? Wouldn’t the same concept hold true for buying things locally? Why support a bank in Delaware when you can use a locally owned credit union as your bank?
You may never get a personal thank you from your next door neighbor, but there is a good chance they will be better off if we all just stopped using credit cards.