The reason for this post is because I came across an article by Michelle Singletary of the Washington Post titled, “Like it or not, it’s unwise to use credit.” In her article she claims that, “we are all suckers“ that is, losers, when we use credit to pay for services and goods. She has a point if she is referring to those that run up large credit card balances and pay the minimums each month. People who exhibit that behavior are hurt because they end up paying a lot more for the products or services than the list price due to accrued interest and various finance charges from credit card issuer. However, she was referring to everybody that uses a credit card, even the responsible ones.
The basis for her argument is the conclusion from two studies by researchers at the Massachusetts Institute of Technology and the University of Warwick. The results from the MIT study say that people paid more when using a credit card than with cash. The University of Warwick study also concluded that in similar purchasing situations, people spent more using credit cards than cash or checks. While these studies definitely describe a certain segment of consumers, it is still wrong for the author to make the blanket statement that all people who use credit to pay for services and goods are “suckers.”
While credit card issuers often face criticism for some of their unscrupulous practices, they do offer consumers many benefits. The first being is that if your card is lost or stolen, you can call the credit card company immediately and not be responsible for any charges an unauthorized user might have put on your card. This is my favorite benefit that cards offer that has led me to rarely carry more than $20 in my wallet at any given time. I sleep well at night knowing that if someone steals my wallet, I’ll only be out $20 in cash and the frustration of having to go to the department of motor vehicles to get a new license.
Another major benefit that many credit cards offer are rewards for using them. I prefer cash back, American Express Blue Cash to be more specific. I use this card for everything, saving money every time I use it. Once I reach the second tier of rewards, I save 5% on gas. My gas tank remains the same size, so it’s irrelevant whether I pay with cash or credit.
Credit cards also offer consumer protection. If a credit card user purchased a good or service from a merchant that did not fulfill expectations, the user can contact the card company. The company will then take up the battle with the merchant on your behalf. One example of when using a credit card came in handy was when I purchased a text book online and was shipped the wrong one. After contacting the seller numerous times to no avail, I was able to call my credit card company who then credited my account for the cost of the book. If I had not used a credit card, I would have been out of luck.
While credit cards have a bad rap among many people, not all people that use them are “suckers.” It is true that some people purchase more when using a credit card than when they use cash. However, it is completely unfair to paint all card users with a broad brush and say they are fiscally irresponsible. Credit cards are practical in many cases and if a person has enough self-control to use them properly, the benefits are enormous. If you are a person that exhibits self-control, think about whether or not you would make a purchase if you were using cash, but continue to use credit cards and enjoy the immense benefits they offer.
Matt / Google+