Mo Money's Building Wealth Blog

My father gave me my first credit card when I was in college. It came with strict rules. It was only to be used in case of an emergency. So, I put it in the back of my wallet, and I never used it. I liked knowing that it was there, as a safety net, but I never used it. For some reason that one little lesson stuck with me. It’s funny how things you learned as a youth can really stick with you throughout life. Had my Dad been a “spender” instead of a “saver” perhaps my comfort with credit card debt would be far different today. If he were still alive, I would thank him for that.

The fact of the matter is that the average interest rate on credit cards today is around 25% (possibly less if you can obtain one from your local credit union). In my opinion, money is just too hard to earn and come by to throw it away on interest. There are too many things that I want and want to do without giving my money away to credit card companies.

Truth be told, and I very well could be in the minority here, I have never once in my lifetime carried a credit card balance for more than the month it was due in. It’s not because I had wealthy parents either. I can attribute it to a few things. Firstly, I typically only purchase what I know that I can afford. And most importantly, I try to live within my financial means. One could say that I tend toward being risk averse as well.

This is not to say that there might never be a valid reason to need to carry a credit card balance. For example, it would make sense if there was a medical emergency or home structural issue. Or, maybe to cover the funeral cost of a family member. Any of these types of things might require a large, unplanned expenditure. However, these can be categorized as needs and not wants. Emergency financing of needs makes sense. Thankfully, I always had a bit of savings for when emergencies happen, but I realize that’s not the case for everyone.

So, now that we have established that I’m a saver who doesn’t ever keep a credit card balance do I ever use credit cards? Absolutely! The wife and I absolutely love to travel, so I charge everything that I possibly can (food, utilities, bills, gas, etc.) on a credit card so that I can get the most reward $’s possible. The difference is that I pay everything off at the end of the month. I must say that it kindof feels good to get all those freebie rewards that credit card companies give away and that are financed by all those balance holders.

In closing, my advice for those looking to build wealth is to use credit cards very judiciously. Get in the habit of only buying what you can afford. And, pay off or aggressively pay down those balances every month .