Credit Cards: Evil vs Great

[marla]

I know that this is one of the areas that splits this forum the most - whether credit cards are evil and should never be used or whether they are advantageous to those who use them correctly. Please give me your best arguments (the more reasoning and detail the better - references appreciated if you are throwing out numbers) on whatever side you happen to be on so I can get a better idea of the arguments.

[PauletteGoddard]

Marla I don't know if you're setting up your argument correctly. Credit cards are advantageous to those who use them correctly because they're a brief interest-free loan with minute rewards. Credit cards themselves are not evil. BANKS that issue credit cards are evil. What makes a 20-day grace period better than a 25-day grace period for the consumer? Are banks switching to a 20-day grace period hoping to catch credit card users accustomed to 25-day grace periods? Why won't the bank that offered me my first two credit cards when I was starting my credit history not upgrade the terms and conditions to reflect my financial responsibility and the lengthy history of on-time payments I've made? Why do the terms have to worsen even though my FICO gets stronger and my credit history gets longer? Why does the 2005 Bankruptcy Act exist?

Why do terms and conditions for cards grow increasingly oppressive? Why is binding arbitration a feature of terms and conditions? Why are credit unions more likely to offer lower APRs and longer grace periods for their cards than banks? Why did the bank change from a 0% promotion to a 2.99% promotion to try to get me to use the card? Does it think I might find 2.99% more palatable?

Having to spend time being crafty, learning legalese to comprehend the terms and conditions, so I can rake in a meagre 1% or 2% cash back on a 20-day grace period card isn't worth it to me. Not being able to negotiate the terms of a loan doesn't strike my fancy. I'd rather pay with cash, debit card or check or use a credit union-issued credit card. I use a credit card for convenience and for emergencies, not to give banks money with fees and charges galore.

I don't know what it says about me or the bank that issued my credit card that for all the millions of dollars it spends on marketing and promotions and consumer research it can't or won't offer me what it would take for me to use its card again.

[MonkeyMama]

I think Paulette said it well. I love my cash back and the fact I will make $1200 off my cards this year (interest from 0% balance transfers, cash back, gift cards, etc.). But if I had to sum up how I Felt about credit cards it would be something like, "If you can't beat them, join them." I would be thrilled if FICO did not exist and the credit card companies were not so predatory. But since things are not how I prefer I just try to use them to my advantage. I would say the companies are evil, yes. But I Am happy to use the cards, and proud not to have ever given the credit card companies one stinking dime.

I think it depends on the person too. For those with the willpower not to do debt, the cards aren't much of a biggie. For others a credit card could be devastating.

We try to reconcile the fact that the credit cards make money off every purchase we make (percentage wise). But the fact is since we don't borrow money we need them for our FICO. (For lower rates on mortgages and insurance, jobs and everything). So yeah, can't beat them, so joined them. But we try to kick them where it hurts by being "Deadbeats" who pay our card every month.

[kimiko]

Credit Card = free money for me. I just make sure to choose the CC companies that don't cut back on their grace period and have decent reward.

[jodi]

CC - good for me too. I can count on one hand the number of times I have carried a balance (with fingers left over) - that was back in my tighter college days, and only for a month or two at most. Now I use them for big expenses to get cash back ($20-40 several times a year) or when I don't want to transfer money from EF into checking when I know I'm getting paid in a week or two and can pay the cc bill then. I probably wouldn't use them at all if I didn't have an adequate emergency fund to pay them off if I needed to.
Oh, here's a concrete example: DH and I redid our bathroom over the summer. We opened a Lowe's card and got 10% off with no payments or interest for one year. So that was about $200 off the top or a $2k bill, plus a year to pay it off if I want (so I can have $1800 sitting in my high-interest savings account). I don't like to let debt linger, though, so I'm paying it off here and there ($1100 so far with 9 more months before I start accruing interest - it will be paid easily by then). Plus, we put our new grill on the card as well, so that's $250 we didn't have to come up with right away, but could pay over time. That was nice at the time as DH did not have steady employment yet (keep in mind we have enough in EF to cover this many times over if we needed to).
Another example: we put $5k of D's tuition on a Amex card we opened solely for that purpose. We received $100 in rewards plus a year with no interest. We paid it off in 10 months. Our other alternatives were to use the EF (would have left us with only $2k at a time when DH was not working at all) or to get a student loan (he already had $15k in loans, plus we would have paid interest on that $5k over 10 years).

[Ima saver]

I too pay mine off monthly and enjoy getting the cash back a few times a year. I save it and add it to my $20 challenge.

[sweeps]

Credit cards are a wonderful thing if you have the discipline to not spend more than you would otherwise and you pay them off every month. If you don't have the discipline, stick to Ramseyism.

[simpleyme]

I choose not use credit just because I do not Like their policies and practices and when ever I get one of those stupid booklets that says default rates are 32 percent it pisses me off
I do not have to worry about paying that but it irritates me that they make that off of anyone

I am always tempted by rewards cards and may someday give in and use them but other than utilities I have no bills at all and I really like it
I do owe abut 4 years left on my mortgage

[Snodog]

For me credit cards are the best thing since sliced bread.

[txex86]

When credit cards are paid off in full monthly and cash/other incentives offered by cc companies are taken advantage of, then CC's are a plus.

[InDebtInDC]

Credit cards are just another class of financial instrument. All financial instruments have pros and cons associated with them. Whether the particular instrument is appropriate depends on the context in which it is used and the terms in the contract.

Is that a cop out answer or what?


Personally, I think CC companies tend to be more predatory than regular lenders. They're a quick way to get credit, but should be used with caution.

As with all personal debt, you shouldn't take out debt haphazardly. Don't be fooled with rewards and zero interest. It's easy to miss a payment and find yourself facing interest rate hikes.

[Broken Arrow]

Interestingly enough, I think most regulars here pretty much agree on this issue. Credit cards can be a great tool for personal finances. Of course, it is not without its dangers for those who don't have the ability to control it yet. In which case, I like sweeps' advice to stick with "Ramseyism".

[LivingAlmostLarge]

You'd have to pry my CC from my cold dead fingers. I've had one since 13. I left home for college at 16 by the way over 6k miles. My mom thought I should be financially responsible early.

[FrugalFish]

Credit card companies are evil, credit cards are only as good as what the consumer does with them...

[disneysteve]

Credit cards are great. The problem is people who misuse them and then blame the card issuer. I've had a credit card since 1982. I've never paid a penny in interest. I've never paid a late fee. I don't even know what the interest rates are on my cards because I pay the bills in full each month so it doesn't matter to me.

You can't pay the bill late and then complain about the fee. You can't carry a balance and then complain about the interest rate. It isn't the company's fault if you pay late or charge things you can't afford. It's your fault (general "you").

Our credit card charges last year totaled about $32,000 if I remember correctly. Figure we earned rewards equal to about 2% of that, or $640. That is $640 that we wouldn't have had if we had paid cash for all of our purchases. Why would I want to pass up that much free money?

Using credit cards also allows us to very closely track our spending. Cash doesn't. So for budgeting purposes, credit cards are a much better tool. Every month, I get a printed statement showing all purchases. And at the end of the year, I can order/download an annual summary of charges broken down by category - dining, travel, auto, etc.