If you have been following me for any length of time - you know that I am anti-credit card. Not in a - you're 'stupid if you have them' kind of way, but more like 'it's not worth it'. After finishing the research on my college thesis on consumer debt, I remember being blown away at what I'd learned about the history of credit cards. I thought, if most people knew the marketing scheme and government collaboration behind getting consumers to use credit cards, we'd all be up in arms. I know, conspiracy theory sounding, but it is true. At any rate, knowledge is power and that knowledge sealed the deal for me.
Below, I've posted a portion of the transcript from our 8-9p Monday night Twitter chat, #MoneyChat, on the subject. Were you there? If not join us sometime! There was lively conversation and a couple of credit card advocates tweeting as well - no problem, it's healthy to see all sides of a topic... enjoy.
Q1. Do you believe
credit cards lead to spending?
It’s proven that people spend more when they are using
credit cards – *18% in fact. It makes sense - when times get tight, who wouldn’t lean on credit
cards, thus causing more financial strain. We always plan to pay it back right away, but, well...doesn't often happen. Spending cash brings more of a reality to what you
have/don’t have than credit cards.
Q2. Why would I give
up my credit cards when I get so many perks?
By the time you pay the interest on what you spend to get
the perks – you could have bought your own flight, hotel, etc.
Q3. If I dump my
credit card can my debit card really replace it?
Yes, you can do everything with your debit card – as
long as the money is in your account. Remember the key is to get out of debt, you can’t do that by maintaining credit cards. I understand the 'leave it open, just don't use it' theory, but it’s almost like looking at your favorite dessert sitting in front of
you all evening – eventually you are going to take a bite.
I travel, reserve hotels, cars, conferences, etc. with my debit card. I have only encountered 1 or 2 occasions where they wouldn't accept my debit card and I enthusiastically took my business elsewhere!
I travel, reserve hotels, cars, conferences, etc. with my debit card. I have only encountered 1 or 2 occasions where they wouldn't accept my debit card and I enthusiastically took my business elsewhere!
Q4. But are debit cards as safe to use as credit cards?
Yes they are. Otherwise, if anyone would be leery it would be me. Twice, when traveling, my debit cards were stolen. It didn't take long for the thieves to fill up several tanks of gas, hit a couple of restaurants and ice cream shops (yes, ice cream) and order a couple of expensive cell phones - all on me - in under 12 hours!
I reported my debit cards stolen and received all my money back within a week.
Q5. Does closing your
account lower your credit score?
Yes it does – but if you aren’t planning to borrow
anything in the next year you will be fine. If you do expect to make a purchase, pay it off and
keep it open until after you do. Then close it and never look back. You know, that pesky getting out of debt goal... yeah, that one.
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Your Financial Coach!
On Twitter? #Follow: @DorethiaConner & @MoneyChatLive
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-Dorethia
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