I’m answering another listener question that has come in, and just as a note, this one might be a little controversial. In the personal finance community, there are two sides to the whole credit card debate. You’re either completely for or completely against credit cards.
Because of this back and forth, I get a lot of questions from people asking me if credit cards are bad. Due to big names like Dave Ramsey, so many people are scared to even get a credit card because they think it’s a gateway into massive amounts of debt. So are credit cards always bad?
Are credit cards always bad?
The truth is that it depends. What are you using the credit card debt for? If you’re using it for things that aren’t going to make you money, like buying a bunch of stuff you didn’t need, then yeah, that’s bad.
However, if you’re using your credit cards as leverage, like investing in a program that’s going to teach you how to make money, that’s different. That’s not the same thing at all. Because when you’re investing in personal development or investing in your business, the idea here is that you’d make the money back or at least you’d get the education to make the money back.
And it’s astounding how when you start working on your personal development, or health, or even just your mindset, your energy changes and then suddenly you attract more opportunities for money.
Credit Cards Can Be A Tool
Credit cards can be a bad thing. But if you’re using credit as a tool, there’s really nothing wrong with it. So in total transparency, I don’t have personal credit card debt at all. I do have some business credit card debt because I made some big investments in December though.
For many of us in the personal finance community, we love when we don’t carry a balance on a credit card. I love it too. I would always be like, “Yes, I have a perfect record.” But when it became apparent that at least for my business, I was going to have to pay some interest charges to really pay off the investments that I needed, I was like, “Oh shit.”
And then I made myself feel terrible about it. I felt so guilty. I’d felt like my perfect mark had been stained. I thought Dave Ramsey was going to yell at me. But the reality of the situation is that I may have to pay a few extra bucks in interest. That’s it. And what’s so crazy is I made it out to be so much worse in my head than it actually was.
This happens to a lot of us in personal finance because we’re taught debt is bad. We’re always told, “Don’t use credit, don’t use debt.” And then we make ourselves feel absolutely terrible even when it makes sense to do it.
My Experience Using A Business Credit Card
When I got into business credit card debt in December, I made myself feel so bad for around two or three weeks. I was expecting to be hit with a terrible interest charge. I don’t even know where the hell I got the percentage number from, but clearly, I was wrong.
I’d thought it was going to be so much and I thought it was going to suck. When I finally got the statement and took a look, I saw that the interest charge was only around $150 bucks. And I’m like, “This? This is what I was upset about? The thought of this is what I drove myself insane about for two weeks? This is what I was making myself feel bad about? What a waste of energy.”
I wasted so much energy and treated myself like shit for two weeks over 150 bucks. Really? 150 bucks on business investments? I think part of what happens in the personal finance community is we try to indoctrinate people with all these formulas when the reality of the situation is that there is no one size fits all formula.
How I Feel About Credit Cards
Getting into business debt is not the same thing as overspending every month. It’s not the same thing as not being able to handle credit. It’s not the same thing as not using credit responsibly. And I think we just have a tendency of saying all or nothing sometimes in the personal finance space.
Listen, when you’re starting a business, especially in the very, very, very beginning, you have two options — cash, or a credit card. You don’t really have any other option. There’s a huge difference between using credit cards to make investments in your business or in your own personal development.
Now, this doesn’t mean go get $100,000 in debt right now. There’s a big difference between manageable business debt and just mindlessly spending money on stupid stuff that isn’t to give you any sort of a return on your investment. There is a difference between being wasteful and using credit as a tool to get you and your business to where you want it to be.
Where are you in this debate? Are you like, “I’m never taking on debt. Cash is king. I’m always going to use cash.” Or are you credit is okay depending on the situation and if you know how to use it as a tool.
Where are you? Where do you stand in terms of this debate? I would love to know!