Will That Be Debit Or
Credit?
Recently I
returned from speaking at a conference that was solely filled with college
women. I spoke at 4:45PM which meant
that I had time in the morning to go to a workshop. I chose to go to another financial literacy
workshop just to see what would be covered.
The speaker was doing great, she was talking about saving money, and
doing a budget, but then the workshop took a turn for the worse. She started talking about credit cards and
not just talking about them, but actually being their biggest advocate. I was squirming in my seat fuming over the
advice she was giving these young ladies.
She started off by saying how she has own a credit card since she was
eighteen so she has been using credit cards for twenty years. From there she told them they need a credit
card to book a hotel room, rent a car, and to build credit so later they can
get a mortgage. By this time I had
launched into the orbit of anger because as financial speakers we were here to
show these ladies how to start their lives on a financial strong foot and here
this advice was about to put them in a debt trap! Most of these college students are already in
student loan debt so why tell them to borrow more money by using credit
cards?
To address
the above lie about everyone needs a credit card I will start out by saying any
transaction that a person uses a credit card for a debit card can be used. With the hotel room and rental car booking
you can give your debit card and the only difference is that the hotel or
rental company will put a hold on the card or go ahead and take the amount from
your bank account. Some say to me I can’t
afford to have them put a hold on my card!
My reply to that is “you should not be staying in a hotel or renting a
car if the money is not readily available.”
How about the statement that you need to use a credit card to build
credit so you can get a mortgage? Also a
lie because if you actually go to a company that underwrites mortgages they
will look at more than a credit score and you will get approved. They look at how long you have been at your
current place of employment, do you pay other bills on time, do you have a 20%
down payment, etc. They look at the
whole person instead of at a number and let’s talk about that number. Your FICO score is a ridiculous score to care
about if you are trying to win financially.
Look it up online and see what it represents. 35% represents how long you have been paying
on DEBT, 30% is based on the DEBT you owe, 15% is the length of DEBT history,
10% is based on new DEBT, and 10% is based on types of DEBT used. Why should anybody care about a score that
keeps you from being wealthy because you are always paying YOUR money to
someone else?
Now some
people think they can stump me by saying that they have a credit card that has
no annual fee and that they pay their bill off each month so they never are
penalized with the interest rate or late fee.
What they don’t realize is that it has been proven that people with
credit cards spend 40% more than if they would have used their own cash. So they are still losing with that credit
card. Here is an example in my own
life. I use to work for a company that
gave every employee a credit card for company expenses and so I thought I would
be smart and pay the annual fee and rack up points off their money. I wanted to use my points for a free flight
and so this is how the credit card company gets over. I had to spend $25,000 to get the 25,000
points needed for the free flight not to mention the $80 annual fee that paid
at the beginning of the year. $25,000
for a flight, I don’t think that is a fair trade. Neither you nor I can outsmart the credit
card companies and that is why they are a billion dollar industry. Be smart with your money and next time say
debit please!
Does this
post change your outlook on credit cards?
Very interesting and helpful. Thanks Ja'Net Aunt Vickoie
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