A credit card is a Debt Card*. It gives you debt, it tacks interest on that debt in a self replicating fashion, often it charges service charges creating more debt, there are late charges creating more debt, on top of that it creates more interest debt on all that previous debt. There is no such thing as a credit card there is only a debt card.
I would like every time you hear the words “credit card” replace it with “debt card”. Debt card doesn’t sound sweet but, call a duck a duck. Maybe you don’t want this duck in your house (or in your bathtub).
It amazes me sometimes when people I meet will drive all over town to save 5% here, 10% there, clipping coupons, burning gasoline while using a debt card at 17% to purchase everything.
The down side is the ways the Debt Card Companies can charge you:
- Interest fee
- Late fee
- Currency Exchange fee when traveling abroad
- Cash Advance – increased interest paid
- Phone payment fee
- Bait and switch interest rate; the loss of introductory rate if late – could be applied retroactively
- Ability for Debt Card Company to change interest rate
- Ability to side step each state’s Usury Laws (due to Marquette Nat. Bank of Minneapolis v. First Omaha Service Corp.)
Time should be your friend not a fiend. If you spend money with the Debt Cart (with interest and self replicating charges) you can’t invest the money yourself. You lose twice; the Debt Card compounds against you and you have nothing to invest with compounding for you.
Here is a little challenge:
Leave home without a Debt Card for one day.
Doing this opens up a number of questions. What would you have to do that day to have a successful day? Would you have to get cash out of your savings to pay for gas, lunch, groceries, etc? To get cash out you would have to have savings to begin with. Where does that cash come from? Would you make lunch? Would you postpone buying something?
This may be easier for some people then others. If this is easy challenge yourself for two days; or more days if this is still to easy. The idea is to live with a little more immediate risk and encourage planning a little bit ahead. People lived without Debt Cards for years before they were invented.
The funny thing is your net worth can not go below zero if you have no debt. So someone without a Debt Card is without a potential financial hole in his future, while a person with a Debt Card has a hole predicted in their future.
If you want to build a financial building you need to build a foundation. To build a skyscraper or a one bedroom house you still need the same thing – a solid foundation. Spend the time digging holes you have to fill them before building on them. Xavier Serbia writes about foundations in his book “La Riqueza en Cu4tro Pisos” (Spanish only). Thomas Stanley writes about where those foundations can take you in his book “The Millionaire Next Door”
Time is finite; don’t waste it by paying more and having to work more just to pay down the Debt Card.
*Note- “Debt Card” will be used on this blog instead of “Credit Card”