Is buying everything with a credit card a good idea?

Financial Advisors Say The Darndest Things

In this episode of Financial Advisors Say The Darndest Things, host A.B. Ridgeway dives into the pros and cons of using credit cards for everyday purchases. With credit card interest rates in the double digits and Americans collectively owing over a trillion dollars in debt, this discussion raises important questions about the financial wisdom of credit card dependency.

Key Takeaways

1. Know Thyself: Credit cards can offer great rewards, but only if you have the money management skills to handle them. Without the ability to pay off balances in full, these cards can quickly turn beneficial rewards into financial pitfalls.
2. Compound Debt Warning: Just like compound growth works in your favor, compound interest on debt can work against you. Paying only the minimum means interest accumulates on interest, creating a “snowball effect” that can lead to overwhelming debt.
3. Credit as a Trust System: Your credit score is essentially a trust score. Building good credit through responsible usage (and timely payments) is essential not only for lower interest rates on loans but also for building trustworthiness with lenders, employers, and landlords.

Memorable Quotes

• "If you don't have the funds to make the rewards worthwhile, credit cards can be very dangerous."
• "Using credit cards and not paying them off is like taking a micro-loan for every small purchase."
• "Your credit score is like walking around with a number on your head that tells people how good you are at paying back money."

This episode encourages listeners to reflect on their financial habits, understand the risks of credit card debt, and prioritize good money management skills to avoid long-term financial strain.

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*Disclaimer: This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy or the completeness of any description of securities, markets or developments mentioned. This is strictly for information purposes. We recommend you speak with a professional financial advisor.