There’s no shortage of strong opinions when it comes to credit cards. Some people swear by their rewards and cashback points. Others, like Dave Ramsey, think no one should ever touch a credit card again.
I’m not a credit card abolitionist like Dave. But I do believe most people are using credit cards in ways that are sabotaging their financial progress. Especially if you’re in Baby Steps 1–3 (saving your starter emergency fund, paying off all debt except your mortgage, and building a fully funded emergency fund), you should not be using a credit card at all.
Let’s talk about why.
🔥 The $1 Trillion Trap
Credit card companies aren’t offering you “free money.” They’re offering bait.
As of 2024, U.S. credit card debt has hit over $1.1 trillion, the highest it’s ever been. The average balance is around $6,500, and the average interest rate is over 21% — with some store cards charging more than 30%.
If you only make the minimum payments, it could take you over 25 years to pay off a balance like that, costing over $9,000 in interest alone.
That’s not just expensive — it’s financial slavery.
🧠 Revolvers vs. Transactors: Which One Are You?
When it comes to credit card users, there are two types:
1. Revolvers
- These users carry a balance month-to-month, even if they make minimum or partial payments.
- They pay interest and are the most profitable group for credit card companies.
- Most rewards get canceled out by the cost of interest.
2. Transactors
- These users pay their balances in full every month.
- They avoid interest and might benefit from rewards — if used wisely.
- They’re in the minority — and credit card companies hope you don’t become one.
💥 Over half of cardholders who say they use cards for rewards are actually revolvers — meaning they’re losing money while thinking they’re winning.
(Source: Bankrate)
🤯 How Credit Cards Trick You (Even the Smart Ones)
Credit cards are designed to encourage overspending:
- You’re more likely to spend up to 100% more using a card than cash.
(Source: MIT) - Plastic reduces the “pain of paying,” which leads to impulse buys.
(Source: Journal of Consumer Research)
Even smart, high-earning people fall for these tricks. I’ve worked with clients who thought they were disciplined — until they realized they didn’t know their current balance or couldn’t stop spending during stress or convenience moments.
🌟 Real Benefits of Credit Cards — If You Use Them Right
Let’s be fair — credit cards can offer some real advantages over debit cards or cash, but only if you’re using them wisely. Here’s what they can do well:
1. Better Purchase Protection
Credit cards often come with built-in consumer protections:
- Fraud protection: You’re typically not liable for unauthorized charges.
- Purchase protection: Some cards offer refunds or repairs for damaged items.
- Extended warranties: Some cards double the manufacturer’s warranty on big-ticket items.
2. Rental Car & Travel Perks
Many cards offer:
- Free rental car insurance
- Trip delay or cancellation insurance
- Airport lounge access (on premium cards)
These perks can save you hundreds of dollars if you travel often.
3. Rewards and Cashback
Earn money or points for spending you were already going to do:
- Groceries, gas, or recurring bills
- Flights, hotels, or dining
(But again — only if you’re not carrying a balance!)
4. Credit Building (But Don’t Obsess Over It)
Yes, using a credit card responsibly can help you build a credit history and raise your credit score. That’s a real benefit, especially if you’re planning to get a mortgage or rent an apartment.
But here’s my take: FICO and credit scoring systems are built to reward borrowing — not building wealth. They reward behavior that keeps you in the system. I don’t believe you need to chase a perfect score to win with money.
Instead, focus on:
- Paying your bills on time
- Keeping your debt low or nonexistent
- Living below your means
If you use a credit card, your credit score will naturally improve — but it should never be your motivation.
5. Emergency Leverage
When used strategically, a credit card can be a backstop for emergencies — but this only applies to those who already have an emergency fund and can pay it off right away. It’s not a replacement for actual savings.
🛑 Why You Should Avoid Credit Cards in Baby Steps 1–3
If you’re still building an emergency fund or working your way out of debt, using a credit card is like putting water in a sinking boat.
Here’s why I advise zero card usage until you’re financially stable:
- You’re likely still emotionally and behaviorally vulnerable to spending triggers.
- You don’t need extra temptation when you’re working to rebuild your financial foundation.
- It’s easy to convince yourself “it’s just one month” — but it turns into years.
Let’s make this simple:
👇 Self-Check: Are You Ready for a Credit Card?
Ask yourself:
- Do I carry a balance more than once a year?
- Do I use credit when I don’t have the cash in my account?
- Am I in Baby Steps 1, 2, or 3?
If you answered yes to any of these — it’s not the time to be using a card.
✅ When It’s Okay to Use a Credit Card — With Rules
Once you’re in Baby Step 4 and beyond (fully out of debt, emergency fund in place), a credit card can be used responsibly — if you treat it like a debit card with guardrails.
Here are the 3 Rules for Credit Card Use:
- Pay the balance in full every month. No exceptions.
- Only use the card for purchases you already have the cash to cover.
- Only use it for things you already planned to buy. No “Oh, it’s on sale” rationalizing.
If you can’t follow these rules consistently, then the card isn’t helping — it’s hurting.
⚠️ Reminder: Credit Card Companies Make Billions Off Your Interest
Let’s be real: credit card companies are not your friend. They make money when:
- You pay late.
- You carry a balance.
- You overspend.
They design their systems to trap you in the cycle — and it works. Minimum payment structures, enticing rewards, limited-time offers — they’re engineered for profit, not your progress.
💬 Final Word
I’m not saying everyone must live without credit cards forever. But I am saying that most people shouldn’t be using them right now, especially if they’re still working toward financial stability.
If you’re out of debt and managing your money with clarity, a card might be a useful tool — but only under strict boundaries.
👉 Coming Soon: How to Actually Maximize Credit Card Rewards (Without Losing Money)
In my next post, I’ll show you how to make credit card rewards work only if you’re a disciplined transactor — and why most people chasing rewards are actually losing out.
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