Should You Stay Away From Credit?

Unpopular Opinion: You Should Stay Away from Personal Credit

We’ve normalized the use of credit so much that living without it seems almost taboo. But before the 1950s, borrowing money was often seen as a sign of financial irresponsibility. There was a strong emphasis on saving up for purchases and avoiding debt whenever possible.

Originally, credit was used mainly for business needs, enabling entrepreneurs to invest in ventures and manage cash flow effectively. This makes perfect sense—businesses borrow money to make more money. But today, many people use credit for clothes, vacations, luxury cars, and expensive dinners—things that won't generate income and will cost more in the long run.

Consumers in the U.S. have racked up over $2 trillion in credit card debt. That’s a clear sign that credit isn’t for the majority of people.

To be clear, I’m not against using credit. But most people should be very cautious, and here’s why:

Risk of Overspending: Credit cards make it easy to overspend because the money isn't immediately deducted from your account. This can lead to debt, increasing your monthly bills and reducing your ability to save and invest. It’s a financial domino effect from hell.

Uncertainty in Repayment: Unlike with debit cards or cash, credit cards allow you to borrow money with the promise of repayment later. Life is unpredictable. Those manageable credit payments can quickly become a nightmare if you lose your income or face a large, unexpected expense.

So, when is it acceptable to use credit in your personal life?

Buying a House: Most people can’t save up enough to buy a house in cash. It’s fine to take out a mortgage, as long as the payments fit within your budget. Ideally, save up the 20% down payment to avoid unnecessary fees and get a better rate.

Paying for Things You Have Cash For: Use your card for monthly bills and expenses just to get the discounts and rewards, but only if you pay off the balance in full each month before interest is charged.

The two scenarios above might seem simple, but if they were easy, U.S. consumers wouldn’t be over $2 trillion in debt. So, who should be using consumer credit?

If you haven't mastered sticking to a budget, spending less than you earn, and saving/investing the rest, you’re not ready for credit cards. Giving someone who can’t manage their tangible cash access to borrowed money is a recipe for disaster.

I understand the appeal of rewards programs and the perks of using credit cards responsibly. However, it’s essential to approach them with a clear understanding of your financial situation and spending habits.