Thank You For Irresponsible Credit Card Usage

By: Jeremy Biberdorf

April 23, 2012

Thank You For Irresponsible Credit Card Usage

 

There are many personal finance blogs that tell you to cut up your credit cards or exercise greater willpower with credit cards. While that may be good advice depending on your situation, I want to personally thank the countless people who are irresponsible with their credit card usage.

 

Without the huge profits that these people are generating for credit card issuers, we would all be paying annual fees and higher interest rates. Cash back rebates or airline miles would be virtually nonexistent. So from the bottom of my heart wallet, thank you!

 

Charging What You Cannot Afford

 

Amazingly many people treat their credit cards as an extended bank account. No money in the bank for those new shoes or dinner out with friends? No problem! Just charge it to your credit card!

 

The problem is that you can get carried away with this thinking. Suddenly you are financing the lifestyle you dream of. Then once you are used to that lifestyle, you want to maintain it even if it means racking up your credit card.

 

Before you know it, you have a credit card balance that you cannot pay off. With the high interest rates of credit cards, this can be disastrous.

 

Always Making The Minimum Payment

 

For some reason people seem to think that paying the minimum payment on a credit card is perfectly fine. Somehow they are able to ignore how much interest they will have to pay by only making the minimum payment.

 

The minimum payment isn’t designed to help you pay off your credit card balance though. It is set so low to encourage people to maintain a balance owed. The longer you take to pay off that balance, the more interest you are paying. You are essentially willingly paying a higher and higher price for whatever you charged to your credit card.

 

Making Late Payments

 

This is the irresponsible move that can really hurt you. Most credit card issuers will ding you with a hefty late payment fee if you can’t pay your dues for the month. Just by putting off that payment, you could be forced to pay a fee that is even higher than the monthly interest.

 

The potentially more damaging way it hurts you is by affecting your credit score. Each time you miss making a credit card payment on time, that gets reported to credit agencies, dropping your credit score. If you make a habit of this, it could really hurt, especially if you later try to get a loan or mortgage.

 

Getting Cash Advances

 

Some people may have thought they discovered a convenient feature of credit cards – the ability to get cash advances. This is just another trap setup by the card issuers though.

 

For this convenience, they usually charge a cash advance fee. Then on top of this, they charge a much higher interest on this credit card debt. There is almost always a better option than taking a cash loan out on your credit card.

 

Conclusion

 

When people make these kinds of mistakes they are basically paying for other cardholders’ cash back rebates and other rewards. So the responsible cardholders should really be thanking those people for these kinds of perks.

 

It is up to you whether you want to be paid to use a credit card or if you want to be one of the countless people who are paying for that privilege. I know what choice I’m making.

 

Have you personally made any of these credit card mistakes? Have you now harnessed the power of credit cards to use them to your advantage? Do you believe that responsible credit card usage will truly help your financial life?

 

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About the Author:

Jeremy Biberdorf is the founder of Modest Money. After working many years in the website marketing industry, he decided to take on blogging full time and also get his finances headed in the right direction. Also check out his contributions to Equities.com and Benzinga.

92 thoughts on “Thank You For Irresponsible Credit Card Usage”

  1. Christine @ ThePursuitofGreen

    I never thought of credit cards this way! I’ve always used them responsibly and love getting the cashback. In a way its sad that this system exists. A lot more people probably are hurt by credit card usage than benefit from it.

  2. Ironically, at the higher end of the credit scores, the credit scouring INCOURAGES irresponsible self-indulgence. My wife and I have ALWAYS paid all our bills on time and own our house in CASH and paid off our only mortgage about 33 years ago. Thus we should have a perfect credit score. But BECAUSE of our frugality, our score was LOWERED by about 100 points!

  3. Maggie@SquarePennies

    We have been collecting 1% back on our card for years and years! We always pay in full each month. The card (not naming names) is basically losing money on us. They have even harassed us a bit by denying the card when we travel. This is for travel in the US! Also we travel to those same places a lot to visit family there, so it’s not anything unusual. We talked to them about it & they said we should notify them anytime we take a road trip around the country. Can you believe that?! We don’t and they have gotten better about it, but we still they they are trying to aggravate us enough so we’ll quit using the card. No chance!

  4. If it weren’t for irresponsible credit card holders (I have to admit I was one too), these credit card companies would be out of business. The fact is banking/financing companies make tons of money from fees and interest. To the bank/financing companies people who use the cards responsibly is a cost thus implementation of annual fees and reduction in perks/points is okay. Working in financial services industry I know analyst try to predict how many fees can be assessed, how much more can be made by slight changes to the programs and how can the cost to provide perks to responsible card holders be mitigated.

  5. Thomas @ i need money ASAP!

    LOL. Thats a very unique way to look at it. It’s definitely the reason they’re willing (and able) to give such huge signup bonuses. That being said, credit card debt sucks, trust me. Sometimes minimum payments are a struggle.

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