Do you have credit cards? Almost everyone in America does. I read a report recently that the average American now carries at least six different credit cards. This ubiquitous “plastic” has just about made cash obsolete. Sweden has a national effort going on to make the country completely cashless within the next 20 years. And African merchants commonly accept money through mobile phones by having their buyers transmit a specific amount of money to the merchant’s specific number.
It’s happening here, too
We here in the US are also on the way to a cashless economy. Back in the 1970s, less than 20% of us had a credit card. Today something between 70% and 80% of all adults has at least one. If you are in a situation where you are being forced to pay with cash, it can feel like a real anachronism.
Here’s the problem
When we save money, we move today’s earnings to the future. Conversely, when we use a credit card we yank future earnings into now. But most of us don’t save a lot and are terrible at projecting future earnings. This means we end up spending a lot more than we can pay back very quickly. This makes it easy for many of us to get into trouble with debt.
We’re becoming irresponsible
Cash and coins are more difficult to handle and have a certain “reality” about them. They must be counted, organized, and and delivered to complete a transaction. Each of these actions is an inconvenience or a point of friction. In comparison, a card is only a card. All we have to do is pull it out, swipe it and we’re finished. This makes it very easy to spend whatever we want.
Credit cards can make us forgetful
Counting money is memorable because it takes time and effort. On the other hand, swiping a credit card is fast, easy and can make us forget that were actually dealing with money. As a result, we are less likely to remember details about our purchases and often will go on and buy additional stuff.
They can make us fat
When we are forced to pay for something with cash there is a hidden benefit. It makes it more difficult for us to cave into our indulgences. To put this another way, credit cards tend to weaken our impulse control. I recently read one paper where researchers had found that people using a credit card were more likely to buy unhealthy food products than when they paid cash. And unhealthy food products often lead to weight gains.
Credit card debt can easily get out of control
As noted above, credit cards tend to make us forgetful. This makes it easy to end up with big balances without even realizing what’s happening. If you’re not careful, you could run up balances so huge you would not be able to pay them off within 30 days. Once this happens and you began carrying balances forward, it’s easy to fall into debt hell because of the high interest you’ll be charged.
Most credit cards today have interest rates as high as 20% or even higher. As these interest rates are added to your balance month after month, it can get to the point where you will be able to make only the minimum payments and would never be able to get out of debt. There was an example I saw recently where if you owed $10,000 at 18% and made only the minimum payment of $150 each month, you would literally never get out of debt. And if you paid $200 a month, it would take you a bit over seven years to pay off that $10,000.
Are you a bad person?
Have credit cards turned you to a bad person? Have you become irresponsible in your spending habits, forgetful or even fat? If this is the case, you need to change your spending habits, begin saving money and use your credit cards more wisely. That way, you could turn back into a good person and get control of your finances and financial future.
