Credit Card Culture

According to the U.S census bureau, there are approximately 249.5 million adults in the U.S, and about 189 million of those adults have at least one credit card. Majority of us increasingly rely on credit cards and loans to fund our lives. According to another study by Experian (in 2017), the average American has a credit debt balance of $5,551. This CNBC article says that consumer debt is set to reach $4 trillion by year’s end, which is absolutely insane. We’re raking up credit debt in astronomical numbers and it is damaging our financial health — to say the least.

Credit card culture, to me, is funding an out of range/means lifestyle through credit cards, and saddling yourself with insurmountable debt in the process. Everyone wants to keep up with the Joneses, but the GAG is, the joneses are living off borrowed money too. It’s a dangerous cycle. Consumerism fuels credit card culture, and weaponizes our inherent materialism against us.

It is important, especially for the younger generation, to break the cycle of relying of credit cards (and piling up debt in the process). Capitalism has made it extremely difficult for the middle and lower class to live relatively comfortable lives, which is part of the reason why credit card debt is such an issue. However, we as consumers, also have to hold ourselves accountable and refrain from fueling careless habits. Once we get into a cycle of borrowing, it is very difficult to break away. We often get comfortable with making payments, paying outrageous fees in interest and growing our inevitable debt bubble. What happens when the bubble bursts?

There’s absolutely nothing wrong with owning nice things, but avoid borrowing money to do so, especially if you don’t desperately need said nice things. Companies are aggressively using influencer marketing, appealing to the social media demographic, to sell us gadgets and gizmos that we don’t need. Companies are also constantly pushing us to get the “upgraded” versions of items that work perfectly fine. Stores continue to reel us in with their deceitful “store credit cards” that encourage us to buy more than we bargained for. All these agents of capitalism continue to con us into spending more of the money we don’t have. Paying $70/month for 36 months for a couch seems fine, until you realize you spent $2570 on a $600 couch. CEO’s are left with piles of cash while we’re left with…debt.

Horrible things to use your credit card for:

• Trips you can’t afford with your regular income/savings
• Electronics that you can’t afford to pay off in 3-4 months
• Rent (there are typically heavy fees associated with paying rent with a credit card)
• A car (obviously)
• Basically any big purchase you can’t afford to pay off in a max 6 months
• Black Friday deals that you normally wouldn’t indulge in if they weren’t on “sale”. You’ve been living life perfectly fine without that robot vacuum, but its 50% off now and you think it’s a steal? Remember, no matter how good a deal is, you’re still spending money at the end of the day. Better debit than credit for these things.
• Designer items above your pay grade. What good is a Gucci purse if it takes you a year to pay off, and when you fully “own” it, its out of season?
• Expensive gifts for other people. It’s lovely to be generous/charitable, but it’s even nicer when you use your own money.
• Rounds of bottles at a club.

Please note that if you can comfortably pay off your balance every month/other month, the above doesn’t apply.

Credit cards are very useful, when you use them responsibly. If you don’t have a credit card and you’re thinking of getting one, here are some things to consider;

Benefits of a credit card:

• Emergencies – Credit cards are great for funding emergencies. If you are low on cash, unprecedented expenses can be taken care of with a credit card.

• Big Purchases – Every once in a while, we make purchases that put a dent in our checking or savings account. Credit cards help you spread payments across a period of time, to ease your immediate financial burden.

• Building Credit – The most important function of a credit card is to build credit. We need credit for things like buying a house, applying for loans, renting apartments, getting a car etc. It is important to maintain a strong credit score to get favorable interest rates on mortgages, loans & car notes.
• Convenience – Having a credit card makes it 10x easier to make purchases without a second thought. Let’s say you get paid Friday, but you really need some groceries on Tuesday, you can easily charge it to your credit card, and pay off the balance when your paycheck arrives. The ease and convenience of a credit card can also be a disadvantage, because people often abuse it and drive up the balance.

Risks of a credit card:

• Over-borrowing – Borrowing more than you can’t afford to repay is an increasingly common problem among credit card users. It starts with one big purchase you intend to pay over a period of months, then it trickles down to smaller purchases here and there that accumulate into a hefty bill — with interest. It’s extremely easy to fall down the rabbit hole of unconsciously charging things to your credit card, without thinking of ever repaying it.

• Late Fees – You don’t go Scott free when you miss payments. There are serious consequences for not paying your credit card bill on time. If your excuse for not paying is your financial situation, the credit card companies don’t care. They will not hesitate to tack on an extra charge, which will put you further in a financial mess. Many people miss their payments because they either; have too many credit accounts to keep up with, over-borrowed, and are overwhelmed by the amount they have to pay back, or just don’t give a damn about the due date.

• Interest Rates – With borrowed money comes interest, and for some people, lots of it. A lot of people don’t read the fine print, and obtain credit cards with a ridiculous APR (annual percentage rate), APY (annual percentage yield) & annual fee rates. Investopedia offers more insight into APR & APY. Interest rate fees hike up your balance and may make it even more difficult to pay it off. No one likes paying more than they have to.

• Living above your means – It is easy to live above your means when you can just pay later. The problem is, what happens when later comes and you can’t foot the bill? It could be really difficult to regress to your old lifestyle when you’ve borrowed your way to a new one. Sometimes we have to really sit down with our money and be true to ourselves. Living within your means is necessary.

• Heavy Debt – This ties into everything I’ve mentioned. The ultimate risk of owning a credit card is unintentionally throwing yourself into the fiery pit of debt. Almost everyone in the United States is in debt. We all want to live comfortably, but we can’t borrow our way to a great life, because we will eventually have to pay it back. Debt can take a huge toll on our financial stability, health and personal life. A credit card can make you start bad habits that are hard to stop. It is imperative that you monitor your spending and don’t go overboard.

 

Don’t mistake credit cards for lifelines, because when we are drowning in the debt that irresponsible use of them brings, there’s rarely ever anything else to hold on to.