If You're 18, Get A Credit Card

When I turned 18, the one thing I looked forward to wasn't drinking, getting a tattoo, or going to the clubs.

It was actually getting a credit card.

I believe I'm the only person in my friend group who owns one of these bad boys.

(I could be wrong.)

So, what's the big deal with them?

That's what I'm here to explain my experience in my article, and why I got a credit card.

(I'm not a financial expert FYI)

Why Get A Credit Card In The First Place?

When you're taking out a loan from the bank, they look at how likely you will pay back that debt using something called a credit score.

This gets calculated through a credit bureau with any loans, or credit you pay bills for.

The reason why I got a credit card is specifically for having a credit score if I ever need it.

Emphasis on IF.

I think it would be fantastic if I can pay for my next family home in cash.

Rather than taking on debt.

Again, it's better to have it and not need, than need it and not have it.

Because, it becomes rather awkward in a stage of life where you're prepared to buy your first home and start a family.

Only to be told:

"We can't give you a loan, you have no record of a credit history."

Sidenote

I am probably against taking out a car loan to 'build up credit score'.

Take Dave Ramsey's advice of,

"The car you can afford is the one that's in cash."

The thing is meant to take you from point A to point B.

Buying new, the car diminishes in value dramatically.

Also, taking out a loan for a diminishing asset is not smart.

You take out a 20k loan for a car that will be worth 10k.

Again, it's relative to your income.

The Argument Against Taking On Debt

Financial gurus like Dave Ramsay will tell you not to use debt.

I agree with him.

When you take out debt, you will pay more in the long run.

That is, if you're paying the interest on top of the debt.

But also, the danger of debt is it has become the modern form of slavery.

How To End Up Being A Debt Slave

Spend more than you earn.

And, maxing out your credit cards

If you spend pay-check to pay-check, there is the allure of using the bank's money, and seeing your checking account never go down.

There's something satisfying using someone else's money for your own gain.

However, unforeseen financial events can render you a slave to debt.

Losing your job and unexpected costs tend to be the most common ones.

That is why emergency funds exist, something to deploy without stressing.

"When you get in debt, you become a slave. — Andrew Jackson"

The debt becomes an obligation that someone can use against you.

The inherent definition of slavery is being forced to work and obey to another person's command.

Some people are forced to work to pay off debt.

Also, what happens if you do not pay your loans on time?

They take your car, your home and anything of value to pay back the debt.

Essentially, they own you and your property out of the relationship you have with them through this obligation called debt.

People end up working safe, 9-5 jobs with no career growth as they have a debt to repay monthly.

They cannot be on the offensive when it comes to taking risk, as the debt is already a risk on their plate.

Just to divert a bit:

It's interesting the religious view on interest.

Judaism does not allow the charging of interest if both parties are Jewish, but allow it with Gentiles.

Islam outright says charging interest on loans is Haram.

You are becoming rich simply for money that already exists. And, the interest is technically not yours.

Taking on debt with interest means you continue to work to increase others' riches, and not your own.

Or, looking at it from a singular party, you taking debt is taking money from your future self for them to pay off.

So, for someone to reap what you sowed becomes a form of theft.

Nonetheless, debt has become the backbone of our economies, as we borrow money from the future to fuel the growth of today.

Hoping for it to exceed the obligation we have to pay back.

Do This One Thing And The Banks Will Hate You

Treat your credit card like a debit card.

Pay off your credit statement on time.

EVERY TIME.

Yes, you might have that 30 day grace period where you can still use your credit card without paying the bill.

But, I swear, pay it off each and every single time.

And, why will the banks hate you for it?

They cannot earn interest off you.

Credit cards are the most common financial product amongst banks because they can charge high interest rates and make money off of your consumer spending.

(Isn't it ironic they only give you 2% interest when they borrow your money, but 20% when you borrow theirs? There's an argument to be made.)

Another reason why banks offer rewards for the higher tiered credit cards, like travel points or gift vouchers, is because other people who don't pay on time or can't pay the full amount are paying for those rewards.

So, if you end up using these rewards without the baggage of debt, you are taking advantage of people's inability to pay back their debts.

Should Everyone Get A Credit Card?

It seems I have created a negative light on debt and credit cards.

In order to reap its advantages, you must understand the drastic downsides.

Alas, it comes down to the individual whether or not they are financially disciplined.

Or, conscious of their spending and saving habits.

Some people can be downright reckless with their finances and end up slaving away to pay off their debts.

Being responsible is knowing your limit, and not trading tomorrow for today.

Spend less than you earn.

Simple advice, but I guarantee if you follow it, you will be more financially successful than most people.