If Credit Cards Went the Way of the Dinosaur…
Friday afternoon I received a comment on my post about saving a cash reserve to kiss credit cards good-bye by Jason Dean of Smart Money Daily. Basically, Jason takes me to task for my views of credit cards as evil, saying:
The idea that an individual, such as yourself, should not use credit cards is fine (though a depressing way to go through life, in my opinion), but the notion that the world would be better off without credit cards is downright perverse.
Jason then launches into a macro-economical argument that if everyone stopped using credit cards, the economy would come crashing down around us. He says:
what Ana is encouraging people to do is to stop spending — the economic effects of which are pretty obvious. If people stop spending, then businesses stop producing and servicing.
OK, I have rolled this in my mind all weekend, trying to organize my thoughts before I replied. First of all, I don’t remember EVER saying “stop spending.” What I do remember saying many times is “Stop spending more than you earn!” Or, as Dave Ramsey wittily puts it, “Act Your Wage.” Seriously…that is what debt is about. Spending more than you can make.
Second point is that both Dave Ramsey and I say to get the $1000 baby emergency fund saved up FIRST…before you actually cut up, pay off, and close those credit card accounts. Get that money in the bank (or money market) so you no longer need a credit card. Then, once you have that little bit of financial security, go kill your debt using the debt snowball method.
Another point I wish to address is Jason’s comment “If everyone…” I’ll be the first to admit the only thing that will ever stop my mother from having and using credit cards would the total destruction of the credit card industry…and then she’d probably try to swipe one or two at least once a week to see if they’ve come back. I don’t think we have to worry about EVERYONE suddenly deciding to spend only what they earn as long as my mother has breath. I’ll bet you can think of at least one person in your family who is the same way.
So Jason, rest assured this won’t be an adbrupt shock to the economy. However, if everyone in America gradually worked their way over to the system of budgeting their money, planning and saving up for their purchases, and becoming debt free I think we would have a stronger economy. Especially without credit cards, which are actually a very recent invention (the first being Diners Club in 1956…so credit cards as a product are younger than my parents!).
Now, for the one little phrase in Jason’s comment that bothered me the most: “though a depressing way to go through life, in my opinion.” Dude, there is absolutely nothing depressing about getting rid of my credit cards! Instead it is liberating! I don’t have to worry about credit limits, due dates, did the mailman bring the statement in time, did the payment get lost in the mail, will there be a database breach and my info get plastered all over the web, is everything secure, and best of all I don’t have to worry about how I will pay a bill if some bad thing happens with my money. Right now, the only worry I have related to a credit card is how to get that $11.46 credit from American Express that they claim is a “reward” for putting up with their 18.84% interest as long as we did.