Warning: This is a rant.
I have resisted writing this post for a while but can’t hold back any longer. I have seen, and continue to hear, my so-called “colleagues” in the financial coaching/counseling spotlight contradict themselves over and over – specifically on the topic of credit cards. They are hypocrites – telling us to pay credit card debt off but to keep them around for various reasons.
Who is a hypocrite:
This guy is amazingly smart, and very cheap (which is why I like him). He teaches how to pinch pennies and make each Lincoln-head scream. He also tells his listeners to pay down credit card debt but keep them around for safety and convenience. Convenience? Should an alcoholic keep an empty liqueur bottle by their bed for convenience? I love you Clark, but this doesn’t make sense. You are being a hypocrite.
Another smart financial dude with some good lessons about saving money and working on your finances with your spouse. But his most recent “thing” is to have you pay off a bunch of your lowest balance credit cards, close them, but leave others open so you have a better “Utilization Rate”. Also, in a recent interview with CreditCard.com he talks about how “There’s always going to be a credit card industry, and candidly, we can’t live without a credit card industry. Everything that we do today revolves around credit cards“. I haven’t used a credit card in over 3 years, don’t own one. I get along just fine with my debit card. Close your lowest balance cards but keep other ones open for “Utilization”? He’s being a hypocrite.
She makes a lot of sense but so much of her popularity was, and in my opinion still is, based upon her teachings of maintaining a good credit rating. She even has a book about it called the “FICO Kit”. She recommends you pay down your credit card debt but use them in all the complex and complicated ways to keep your FICO score in the 700′s. “Make a late payment and you ‘DING’ your credit“. So she tells us to pay down on credit cards but keep them around and use them this specific way. She’s a hypocrite.
Teaching you that credit card debt is bad but credit cards are good is hypocritical
It’s no wonder so many of my clients come to the first meeting expecting me to recommend a good way to use credit cards, HELOCs, or consolidation to “pay off” their debts. They have never been taught to completely stop trying to borrow their way out of debt, even from the experts on the radio. I see it this way whether you have a credit card or not: A financial coach who tells you that credit cards are bad for you and you should pay them off but turns around and shows you how to use them “to your advantage” is a hypocrite.
Note: If you haven’t realized this yet – a credit score is based on variables only associated with debt and has nothing to do with wealth. I suggest you read a post from a few weeks ago that included a breakdown of how FICO works.