Today’s topic is why I do NOT recommend credit cards. I’ve noticed a lot of personal finance bloggers touting the benefits to credit cards. Sure — the rewards, status, and perks are all great — but I’ve seen too many people fall into the high interest rate trap.

Back in the day, people used to barter for goods. If you didn’t have goods on you and needed something, it wouldn’t be uncommon for someone to write down an, “I.O.U.” Some of the oldest uncovered writings include many of these types of messages.

Fast forward a few millennia and we now have a new form of money. No longer do we use paper that is backed by gold or goods. We don’t even use physical money anymore. We’re left holding a piece of plastic that interacts with numbers on a screen.

Studies have shown there’s a reason why people who shop only using cash ultimately spend less than those who use credit cards.

There is a physiological reaction when we exchange physical money in receipt of a product or goods.

In other words, avoiding credit cards is super frugal.

So, why are so many personal finance bloggers raving about credit cards?

The one benefit we’ve experienced is the ability to hold a balance at 0% interest for multiple months. I swear, it feels like playing with fire, so I look forward to paying off the last of our recent engagement expenses.

Granted, we could use much of our emergency fund to nearly wipe out the credit card debt, but we still have 0% interest for a while. Our approach is to pay it off piece by piece so we can still shore up cash in case of an emergency.

But, overall, we do not recommend credit cards because sometimes emergencies can stock on top of one another, and before long, you’re holding a balance that’s accruing double digit interest.

If I recommended credit cards, then sure, maybe 95% of people will use them wisely and receive some monetary benefits in the process. But, I wouldn’t feel right knowing 5% of people ended up worse off.

Sometimes, inactivity is the most effective course.

So, unless things drastically change, we expect our use of credit cards to go down in an overall effort to reduce our overall spend. In order for 2017 to top our 2016 results of tripling our savings rate, we’ll need to further optimize our budget. That means honing in on the wealth building strategies that are working, and eliminating bad habits that slow us down on our path to financial independence.

What’s your relationship to credit cards?


P.S. For the audio version of my take on credit cards, check out the credit card episode of Millennial Money Minutes:

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