Are You Being Irresponsible to Your Children if You Carry Credit Card Debt?

PD*18739912When I was in my twenties I used credit cards to pay for almost everything. The convenience! No jangling change in your pocket! No waiting to save before you buy!

In those days with only one mouth to feed (I was skinnier back then) and a job in corporate philanthropy, I almost always managed to pay off the balance in full each month.

Now that we’re a family of six, when I use our credit card we struggle (and usually fail) to pay it off.

Though I’m sincerely grateful to Mr. Visa for financing our recent escape to rainy California, I no longer see this rectangle of plastic as my friend.

Credit cards are bad for businesses

I found out when our customer-owned food co-op did a campaign to encourage shoppers to use cash, that credit cards charge businesses 2 to 3 percent with some kind of minimum on each purchase. Many small businesses operate on a very small profit margin (for instance, in an effort to make organic food available to everyone, the Ashland Food Co-op offers “basic pricing” where we barely charge above cost on popular items like organic bananas and organic flour) and the percentage they must pay to the credit card companies can make small businesses actually lose money on transactions. This is why many local businesses only accept cash or checks.

I don’t think most people realize–I know I didn’t–that if you use your credit card, the profitability of small businesses is diverted to the credit card company. A multi-billion dollar business like Walmart is barely affected by these fees but credit cards can really hurt the non-mega stores that actually have a conscience.

Credit cards are bad for consumers

Studies have shown that people who carry cash spend less money than those who use credit cards.

Credit cards foster the mentality that has gotten our country into so much financial difficulty in the past few years: BUY NOW! BUY MORE! BUY BIGGER!

You wouldn’t go to the bank and take out a loan for a few thousand dollars for some extra spending money, but that is what the credit card company gets you to do every time you carry a balance. When you add up the astronomical interest most credit card companies charge (usually between 17 and 25 percent), to say nothing of the $25 to $35 late fees if you misplace or forget to pay a bill, you’ll realize that romantic dinner for two that you thought you spent a hundred bucks on back in 2001 actually ended up costing several thousand dollars.

The credit card companies make their money on the merchants up front, then make more off you in interest and fees, a win-win business model for the card companies and a lose-lose situation for our family.

I feel guilty about carrying a balance and I do think getting into credit card debt is not a financially responsible or smart choice. What do you think? What percentage of your purchases do you make on credit? Are you able to pay off the card at the end of the month?


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on Thursday, March 31st, 2011 at 6:15 am and is filed under family finances.
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