Late last month I posted about my new favorite radio show. The Dave Ramsey show is about managing personal finances and getting out of debt. His debt-free living message has really struck a nerve with me. Judging by the responses to the last post, many of you are fans as well.
I discovered through his show that carrying debt is the norm. Being without a credit rating (i.e. paying cash for everything) is odd… Some might call paying cash for everything crazy. Who ever heard of not having a credit rating?
As someone who got his first credit card at 18, I figured taking some debt was natural. Never take on too much. Trade in a car you own with a couple thousand and finance the rest. Use credit to pay for a water heater that goes out. Christmas you can do a little debt as long as it’s not so much you can’t pay it all in January…and so on.
And it’s almost ingrained in some of us that we ‘need’ a great credit rating. Otherwise how would we ever get more credit?
The more I listen to Ramsey’s show the more I hear how debt has all but ruined some people’s lives. To think a caller who is making $150,000 per year is considering bankruptcy really shows how bad it can get.
What bothers me the most about credit is the normality of it all. You’d think we were brought up drinking it in the tap water. I personally get at least 3 credit card apps a day in the mail that go directly to the shredder. I know I’m not alone. Every store takes credit or something like it. In fact, I worked for a restaurant once where their main complaint was they refused to take credit cards. Eventually, the owners buckled under pressure from the customers and installed terminals. Profits soared.
This mindset is so ingrained, there’s even a commercial on TV where there’s a restaraunt operating at the peak of productivity when suddenly a guy tries to pay with cash. What happens? The restaurant grinds to a halt. Nobody can eat, nobody can walk the line. The servers can’t serve and the cooks can’t cook. Why? Because cash is too slow and inefficient for these fast credit days.
But the good news is the guy never had to pay interest on that hamburger…
P.S. I paid off my car today.
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Our son is a college senior and so far has avoided getting a credit card (AFAIK), but he’s under pressure to “get credit”.
He moved to another apartment and had a devil of a time getting his utilities turned on because he had no credit. The utility company told him he needed to get a credit card.
I am right with you, and have been a big Dave Ramsey fan for a couple years. This is a bit tangential, but you you mentioned getting a lot of credit card offers in the mail. Did you know that the credit agencies offer a toll free number that allows one to “Opt Out” of their mailings? (I think congress made them do it.) It makes it so they can no longer sell your credit info to insurance agencies and credit card companies. I did this about 6 months ago, and it’s amazing how much my junk mail is cut down. The phone number is 1-888-5-OPT-OUT, and you can read more about it here:
http://www.experian.com/preapproved_credit/opting_out.html
Oh, and it’s free too, and there’s an option to opt-out for life. It’s a great way to help avoid identity theft too.
John, now I’m wondering…how do cash only families get power?
Patrick, thanks for the information. I need to cut down on all this junk mail for sure.
I enjoy reading about credit and the urge to “have a good credit”, mainly because it is absolutely uncommon in my country. 17 years ago the communist regime was overthrown and only a few years ago it was nearly impossible to get credit card, only debit cards were offered. Now credit cards are having a big boom here, but even less people know how to use them – most don’t know when they should just pay with the money and not borrow them. I think one should avoid borrowing money for consumption, only borrow money for something that will bring you some real value. Mortgage on house is OK. loan on a car is semi-ok (it may help you make money). As Brad said, to pay interest on some hamburger is silly. Using credit cards as charge cards (always paying everything at the end of the month) is acceptable – you don’t have to carry cash if you don’t want to and still have the money with you. All just IMHO.
Premek, hopefully people in your country will take their time learning how to use them and will avoid them altogether. Seems like about everyone here in the US takes them – even for “destructive” purchases. For instance you can pay for gambling with a credit card. Imagine! Gambling money you don’t even have. grrrr..
Yes I think it is hypnosis, because many companies make more from credit charges than they do from markup on their stock items. Especially true for department stores. So they’ve cleverly trained us to use credit cards for ‘convenience.’
Geoff, it’s like the ebayers who charge more for shipping than the item itself. Item cost $1.99 + shipping $4.99 for a collector card.
It is very unforntunate that a person with over a six figure income can end up claiming BK. However it is happening more now than ever, with that income level you have more money to end up charging credit card debt to an amount that literally sucks you dry. Completely killing your ability to take such a nice income and create wealth. Due to the high credit card bills you won’t be able to actively invest and capitalize off of your nice income.
Credit is way overused in this country, people spending what they don’t have – I think that the credit card boom is one reason that we’re in this recession right now. It would be nice if people would start putting money into savings like the people in Japan do.
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