Wednesday, June 11, 2008

Responsible Credit Card Use

I just read the most thought-provoking post by Mike at Living the Cheap Life. In it, he makes the case for responsible credit card use as a way to earn rewards and take advantage of "float". He says that Dave Ramsey is wrong when he says there is no such thing as responsible credit card use. Well, I left an earful for Mike in his comments!

I want to share here what I wrote:

My two cents: Yes, Dave Ramsey’s solutions can sound very “one size fits all”, when of course, there are responsible credit card users. My argument against credit card use is a societal argument. Mike, you and the other credit card users who are getting rewards back, are not going to like what I have to say. While I don’t know the exact numbers and I don’t have the research to back up this up, I believe it is common knowledge that more people struggle with credit cards then master them. Given this fundamental truth, I believe that “responsible” users help the credit card companies perpetuate the myth that consumer credit can be a good thing. I am going to arbitrarily use the 80/20 rule here and make up an analogy to go with it! If heroin pushers offered “rewards” for using their drug, 20% of people would use heroin, reap rewards and suffer no ill effects. 80% of people would use heroin and become addicted and suffer all the horrible repercussions thereof. And the heroin pushers would laugh all the way to the bank. As a society, we have decided that a population of heroin addicts is not a good thing and we have outlawed heroin. I think consumer credit is exactly the same thing. I will go even further and say that the 20% who are being “rewarded” under this system are as responsible as the pushers are for the degradation of the 80%. There is personal choice and then there is social responsibility. I truly believe that consumer credit is a societal issue that this nation needs to address. Yes, fat chance, I know, especially as I seem to be the only person in the universe to hold this opinion!

I know this probably sounds crazy to most people, but nonetheless, this is my blog and this is where I get to express my opinion! I want to go one step further and ask you to substitute the word "heroin" for the word "credit card" everytime you see this phrase: "responsible credit card use". Hmmm, "responsible heroin use". If there is such a thing, I am pretty sure that it is pretty rare.

Anyway, tell me what you think!


Mike said...

I'm a big proponent of disagreeing with others when they are wrong. Of course, now I'm going to have to disagree back with you. :)

I don't think there's anything wrong with swearing off credit cards if you know you simply can't use them responsibly. But many people can use them responsibly, and therefore it is simply inaccurate to state that "responsible use of a credit card does not exist" (these are Dave Ramsey's exact words).

I'd also like to mention here that although both credit cards and drugs can be addictive, the comparison has its limits because I feel there really is no responsible way to use heroin. Heroin might make you feel good, but it doesn't offer any long-term benefits. Credit cards can be dangerous, but if you master them, it's totally possibly to use them in a healthy and beneficial way!

Another reader just disagreed with you over at the comment section on my blog and that person had some interesting comments as well.

Thanks for offering your contrasting view, by the way, and there are no hard feelings despite the fact that I totally disagree with you on this issue. :)

Bettsi McComb said...

Mike, I am in a very poor position to argue. Mainly because you are living the life I would like to- thumbing your nose at dreary employment and collecting wealth towards freedom while I am a slave to debt! So, while I still believe, in my heart of hearts, that consumer credit is more evil then good, I have no authority to stand on. Awfully nice to meet you, btw. I will be a regular reader at your blog.

Mike said...

Hey Bettsi - well, everybody just does what they can! I believe that every person should take a critical view on any personal finance advice from any source - including Dave Ramsey and including my blog. It’s all about digging in and crunching numbers on your own and putting your ideals into practice. Sometimes you’re wrong, but when you are, you pick up and try and do better next time. Thanks so much for your comments and I hope we can establish a pattern of these kinds of exchanges. :)

Megan said...

You make such valid points. I hate credit cards. I used to be in over $30,000 in debt from them. It's the stuff of nightmares. Things are finally all paid off after living on a strict budget and being very careful. I now have one credit card and it has the advantage of "miles." We had transferred all our debt over to it since it had a low APR (same as our home equity) and offered the miles. Now that the debt is gone, we have both agreed to NO CREDIT SPENDING beyond our budget. We put many of the things we pay for on the credit card now and pay it off at the end of the month (and we have the money since it's groceries, gas, etc.) This way, we get the miles to one day take a nice trip. I figure, with gas prices so high I might as well take advantage and get something in return. But, I also understand this is risky behavior and I have to be very disciplined about sticking to the budget. So far so good. But I guess that's from the fear of debt. I will never get into debt again; I've certainly learned my lesson. I understand the "addictive" nature of credit cards as they can be such a helpful "crutch" in life. In the end, like alcohol, not everyone can partake in them and be ok at the end of the party. Some people have to avoid it at all costs and that's what is right for them. For us, it meant canceling all our cards but the one and we've been debt-free for a year. My advice to anyone is just to avoid credit cards altogether unless you live by a disciplined budget you are used to adhering to.
On another note, best of luck with widdling down your debt! It's a marathon, I know. But keep visualizing how great it will feel when it's gone and it will go away one bite at time!

Anonymous said...

you have got to be kidding me, right? heroin come on you could have at least compared it to something else but i get where you were coming from but can't support it. maybe if you substituted with cigarettes but not even then. the problem is most people don't know any better for what ever reason that may be ie what they were taught, but there are some that just choose to be ignorant but it is very attainable by all so lets either educate or let them be as has been going on. only then can we beat these games being played. well that and to have those ears full attention on making a full proof plan that works and sticking to it. its just all too freaking easy if you get it and there is no excuse not to

Free 3 Credit Reports said...

Well I've learned my lesson on that thing. The proper way to use credit card is to budget first your earnings and to see if all of your purchase first on you wage. I hate the idea of having all of my salary for my credit card bill. I should have excess money for myself.