Woman cutting up a credit card
Credit cards! Should you have them or shouldn’t you? And how many? Should you jump at every offer to open a card just to get 10% off on your purchase?
While it’s nice to have that ability to buy something and delay paying for it, credit can be very anxiety producing. Working at a big bank, I heard a lot of stories about people who got into serious credit card debt and how it ruined their lives. In many cases, they ended up over their heads as a result of something that they couldn’t have possibly foreseen or controlled like the financial markets crash in 2008. The stress and pressure of owing all that money, getting calls from collection agencies and the like, made them literally unable to function and destroyed relationships and careers.
To me, it’s not about the money. It’s about what being a nervous wreck about the money does to you. How are you possibly going to give it your all at work when you’re wondering how you are going to pay off your bills at the end of the month? It’s just another distraction, and if you are like most of us, you have more than enough stress during the day as it is. For that matter, excessive credit could impact your career. If you feel like you don’t need that raise because you are overestimating your spending power, you may be more likely to avoid a difficult conversation with your boss and never ask. If you have already gotten yourself into some credit card trouble, it may be harder to get a new job. Many companies run credit checks and generally have the right not to hire based on the results.
I know I’m not alone in thinking this. Research shows that men and women ages 21-30 are avoiding getting credit cards. Many have said, “Don’t want it. Don’t need it. No thanks!”
Close up of stack of credit cards
What’s the answer?
As in all things, I think this is a place where moderation is the best answer. I’m not a big believer in the word never. For example, if you need to buy a new laptop, you may very well need to use credit and pay off that expense over a few months. Also, if you are looking at a major purchase like buying a home, having a good credit history (meaning paying bills on time), is important. The key is having the discipline to keep those cards on hand for the things you truly need and not for anything and everything that you want.
If your credit cards are resulting in your spending without even thinking, you are probably relying on them too much. You want to be sure you are living your current financial reality (yes, that good old boring “being financially responsible” thing).
Finally, if you do have credit cards, don’t max them out. That’s bad for your credit history and your psyche. Similarly, don’t get yourself to the spot where you are carrying a big balance (that you couldn’t possibly pay off), and you are only paying the minimum every month. Why? Read the disclosure on your next statement on how much you will actually pay over how many gazillion years if you pay off the card paying the monthly minimum!
So, do you really have to cut up those cards? Probably not. Just find the right balance for you – – Credit you can manage while still feeling confident and in control!
photo credits – Getty Images
