Credit Cards: Use but "know when to say when."

By: Don McNay
By: Don McNay

In my book Wealth Without Wall Street and in my newspaper column, I've had one constant mantra. Credit cards are evil.

Because these things will change,  can you feel it now?


Taylor Swift 

In my book Wealth Without Wall Street and in my  newspaper column,   I've had one constant mantra.


Credit cards are evil.


They are issued predominantly   by "too big to fail" Wall Street banks.  Some cards   charge outrageous rates of interest and seem to have  fees hidden everywhere.


I've watched tons of  people, especially college students and young people, get in serious trouble with them.


I went over a decade without a credit card.    I've proven you can live without them.  I've bought a nice house,  rented cars,  traveled extensively and knocked down every argument about why a credit card is somehow necessary in American life. 


I've made my point.   


Now I am saying that some  people, especially small business owners, might want to think about  getting  a card and using it wisely.


Why the change?  Have I morphed into Mitt Romney and started flip flopping based on opinion polls? 


It's a little more complicated.    


I keep running into people who  handle a credit card responsibly.  They pay them off every month.  They move their money to cards with zero interest rates or do  things that make  cards  financially advantageous.


In the words of the people at Budweiser,  they know when to say when.


If they can handle a card,  maybe some of us can too. 


I remain a staunch advocate of moving your money from a "too big to fail" Wall Street bank to a bank or credit union in your community. 


 It will be a cold day in hell before you see me flashing a Bank of America or Citigroup credit card.   


The companies did a lot of things wrong,  were bailed out  by taxpayers when they should have been allowed to fail, and continue to look for ways to stick it to the consumers.


The recent example of Bank of America trying to charge a five dollar a month fee for using a debit card is an example of why  Wall Street banks are completely out of touch with Main Street.   Don't send them your money or use their products. 


Many  local banks and credit unions offer credit cards with low interest and good terms.    If someone wants a credit card,  those are the places to start.


At one point,   I followed the model of  radio commentator  Dave Ramsey and Larry Burkett (a Christian financial writer who was  a big influence on Ramsey) and  took all debt all out of my life. 


Then I bought a house two years ago.   I planned on buying a  house that I would pay for in cash.


A   friend, who is a financial genius,  explained to me how locking into a long term,  low interest rate mortgage,  made sense.   I made a good down payment and bought a house I could  afford.   I got a good deal on the house  because previous owners  had to sell quickly.


Mortgages aren't bad.   Buying a house you can't afford is the problem.


With rates below four percent,  anyone who can get a long term mortgage ought to be thinking about it.    Also,  it is a great time to refinance your home,  if you qualify. 


 It ought to be a great time for a small business to get a loan.  Banks are flush with deposits. 


Unfortunately, they aren't giving the money to small businesses. 


I hear horror story after horror story about how business that solid businesses, with solid track records, can't get a loan at all   or the terms are absolutely draconian.


I have a friend in the construction business.  No one is throwing money at anyone in construction   but he has survived and doing well.   When contractors are slow in getting him money,  he has turned  to running up  his credit cards to  make payroll.


He doesn't use the cards to go to fancy restaurants or take the family to Disney World.   He uses them to keep the doors open and stay in business for another day.


As soon as he gets paid,  he immediately pays the cards off and they remain his "rainy day fund." 


As I noted in my Wealth Without Wall Street book,  I've been  down on credit cards since  I didn't handle them well in my youth.  I got seriously in debt and took several years to get out.   That experience led me to my hard core stanch against  credit that I've kept for over 20 years.


I've gotten hundreds of people to cut up their cards.  I'm thrilled that they do.  


 For me to "allow" people to use credit, even in a limited manner,  is like when Nixon went to China or when Rod Stewart  started doing disco albums,   it goes against all  my previous history.


On the other hand,  like Nixon made the trip to China,  I see the big picture. The occasional use of credit might be advantageous.


Although I open the door slightly on credit cards,  I caution, again,  with  the words of Spuds MacKenzie,  the Budweiser mascot from the late   1980's.


"Know when to say when."

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