Why do Americans need credit cards? Most of you may be thinking it is the same as asking another question such as: “Why do we need food?” Of course we need credit cards, that is what our culture has taught us. The use of a credit card is a required item to be carried in your wallet or purse.
Our Need for Credit Cards
Here are five common reasons why we think we need them:
- This is a great way to build credit in a responsible way. You want to start building credit at a young age so you can begin to make big purchases as you get older.
- A credit card is a great thing to have for emergencies. Sure, cash comes in handy, but a credit card is perfect if you need to spend a lot of money in a hurry. For instance, if your car breaks down and you need to have it repaired, a credit card is your best bet.
- With credit cards, you can earn rewards for the money you spend.
- If used properly, your credit card is safe and secure. To go along with this, when you use a credit card you can add an extra layer of protection between you and the seller.
- Most credit cards are accepted worldwide. This means that you don’t have to worry about carrying cash no matter what country you are visiting. Talk about convenience!
Addressing the Question
The reasons listed above for using credit cards sound very reasonable, however, it doesn’t address the question: Why do we need credit cards. If you notice, I have italicized the word need in every mention. The reason for this is that we must first define what a need is before answering the question in this post.
There is a difference between a need and a want. A need something that is a necessity of life. For example, food is a need. Shelter is a need. Clothing is a need.
A want is something that is not used to sustain our well-being such as an HD television, a vacation, tickets to a Chicago Bears or Cubs game, or a brand new car. Notice that I said brand new when mentioning a car.
Breaking Down the Myths
I can easily shoot the reasons listed above (why we need credit cards) full of holes by addressing the core issue; a want versus a need.
- The use of a credit card is a great way to build credit in a responsible way. You want to start building credit at a young age so you can begin to make big purchases as you get older. Building credit is required only if you intend to borrow more money. This would include something such as financing a car. A car is used to get you from one place to another, not to impress your friends. Saving up cash to buy a used car is meeting a need, financing a new car is meeting a want. And please, don’t tell me that financing a new car is the only way to get something safe and reliable. Building credit is not a sign of wealth, it is an indicator of how much you like debt.
- A credit card is a great thing to have for emergencies. Losing a job is an emergency. The last thing you want to be in is debt when you’re in a crisis. If you made saving money a priority (planning), then you would be able to take care of an emergency with an emergency fund (3 to 6 months of savings).
- With credit cards you can earn rewards for the money you spend. This is true, the more you SPEND, the more points you earn. However, how much did you need to spend for that reward? Probably more than if you would have just saved for an item. The average American spends 12-15% more than if they would just use cash.
- If used properly, your credit card is safe and secure. The use of a debit card as a credit card is secure. Most debit cards issued today are either a Master Card or Visa.
- Most credit cards are accepted worldwide. See answer in #4
We use credit cards because of want, not because of need. One of my favorite references about credit cards is used by the personal finance expert Dave Ramsey. He says, “The credit card is the cigarette of the financial world.” This statement is so true because smoking cigarettes is a habit or a want, not a need. To win with money, you have to break the habit of relying on debt.
The use of a credit card is not a sign of wealth, it is just a sign of impatience and wanting something NOW.
Use the Bible for Guidance
The Bible does not say that the use of debt is a sin, but it does warn us of its use.
- Proverbs 22:26-27, “Do not be one who shakes hands in pledge or puts up security for debts; (27) if you lack the means to pay, your very bed will be snatched from under you.”
- Proverbs 22:7, “The rich rules over the poor, and the borrower is slave to the lender.”
- Romans 13:8, “Let no debt remain outstanding, except the continuing debt to love one another, for whoever loves others has fulfilled the law.”
Question(s): Why do you use credit cards? Is it because of a want or a need? How can you break the cycle of debt?