Monday, December 21, 2009

BS 1.5 – What’s the Deal with Credit Cards

When I start an FPU class, I make one simple assumption about everyone who is in the class – they are sick and tired of being sick and tired when it comes to money.

I liken it to going to Weight Watchers – you are there to loose Weight! WW has a specific plan that has been successful for many, but, before you can blame WW for not working, you have to do the program.

The assumption for FPU is that if you are in the class, you have some kind of hole that you are standing in a financial hole of some size. It might be big, or small.

When you are standing in a hole, and you want to get out, you have to stop digging. The Credit Card is just one of the many shovels that people use to dig their hole.

I am not mad about people using Credit Cards, and I would certainly not judge you personally for using yours, but I was never able to succeed at the level I am now by using mine. My name is Chuck, and I like stuff (“Hi Chuck!”).

The number one reason for using the credit card is that it now represents a financial “security” blanket. The couples coming through our class have one or more credit cards just in case of an emergency.

And here’s the tie back to Baby Step 1 – If you had $1000 saved up, would that cover most of your average emergencies? Flash forward to Baby Step 3 – If you had 3 – 6 months of expenses saved aside as an Emergency Fund, would that cover your average emergencies as well as some of the more unexpected ones, such as getting laid off?

The Credit Card as an emergency money is, in my opinion, a crutch against doing the hard part – saving money for a rainy day. It allows you to spend more freely, as studies have shown that our brains operate differently when paying with cash than paying with a credit card.

When a class member cuts up a credit card they have just committed to the class in a way that will help them succeed. The admit that, like myself, they like stuff…and the credit card has not helped them get ahead. In fact, like Proverbs 22:7 states, they are actually a servant to the bank that owns the credit card. The collection practices violate federal law on a daily basis and, as you can read right now, the Banks are scrambling to adjust the interest rates on existing clients prior to new laws going into affect next year.

What’s in my wallet? My Visa Debit Card and Money!


Nick Billock said...

Preach it brotha'!!


Alan said...

I so agree, Chuck. My financial advisor speaks of good and bad debt. I'm still trying to figure out that good part. However, no doubt that credit card debt is the worst of the bad.