Lies You’ve Been Told About Credit Cards


– All right, now here are some reasons that a lot of people think
that they need a credit card, and what entices them to
sign up for the credit card. But I want to debunk some
of these “perks” for you. All right, travel perks. This is a huge one right now. It’s really popular. Even earlier this year, a particular airline offered free flights for the companion of your choice to accompany you on any
flight that you book if you sign up with your credit card. But listen, the terms were that you had to spend
$4,000 within three months. So by the time everything
was totaled up, processed and added to your account,
your rush to spend $4,000 for half of the year to get a
buy one, get one free flight, but the average price
of a ticket was $151, which means you would’ve
had to take 27 flights by the end of the year to break even. Now if you have the T-I-M-E to do that, I’ll switch with you. Who has time? No one’s got time for that. And in fact, there are 20 trillion unused
airline miles. Now the reward points. “But I get points.” Okay, this is another
one I hear all the time because they think credit
cards are helping them out. But you guys, 31% of people
don’t even use their points, and when you do, you still have to pay taxes
and fees on your purchase, so all of a sudden that “free”
purchase isn’t free anymore. Another one is cash back. All right guys, this is just
not a very smart one. Let’s just look at the math. If you get 1% cash back, which
is what most cards offer, and you spend $300 on your
credit card, you get $3 back. Okay, not a great deal, especially since studies show that people spend up to 100%
more using a card versus cash. So it’s not really cash back because it would be cash
that you wouldn’t be spending if you didn’t have that credit card. We’ve got to think, people. We’ve got to think. All right, fraud protection.
Never understood this one. If you do some research,
then you know a debit card is just as safe as a
credit card, I promise. Also up is the build your credit myth. All right, this is a huge lie that we have believed
for decades and decades. People are worshiping the
idea of their credit score. Okay, your credit score is
not an indicator of wealth. You literally could
inherit a million dollars like right this second
from Aunt Ira in Idaho, and your credit score wouldn’t
change one point, okay. So it’s not an indication that
you’re winning with money. It’s an “I love debt” score. And your FICO score has
absolutely nothing to do, again, with how much money you have. No, so do not open up a credit card to help you build your credit, because the main reason
you have a credit score is to get you into more debt, and we’ve already talked about you can buy a house
without a credit score, the one type of debt that
I’m not mad at you for. Okay but the FICO score, the credit score, could be really complicated, so I put a link in the show notes to tell you more about that
if you want to check it out. Now some of you might be thinking, “But what about renting a
car, renting an apartment, getting a hotel room?” Listen, you can do all of
those things with a debit card. Now, are there some
inconveniences with that? Yes, there will be some
rental car companies you cannot rent from, but there are rental car companies that will rent it for you, okay. So there are some inconveniences, but if you think about
it, conveniences in life, just making it convenient, ends up costing you more in the long run. Like think about fast food. Mmm, love me some
fast food right now. But is it convenient? Yeah it’s really convenient, but it’s not like the
best thing for you, right? Convenience stores, they
always jack up their prices because it’s just easier to run in and out. It’s always more expensive than going to like a bigger store, right? So like conveniences
are going to cost you. So, here’s the deal about
credit cards you guys. Do some people get all the points, and you flew to Europe for free, you pay yours off every month? Are there people like that that do it? Yeah there are, but majority of people, like we just explained in this episode, are not doing it, so it’s not worth it. It’s not worth it. You play with snakes,
you’re going to get bit. I’m telling you, spend your money. Do not depend on the bank.
Don’t play their little games. You need to get out of debt, you need an emergency fund, and you need to start building your retirement and investing. That’s how you’re going to
win in the long run, I’m telling you. (electronic music)

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19 thoughts on “Lies You’ve Been Told About Credit Cards

  1. Here is how you do it, you don't spend the money to get points, you get points or cashback by money you would have spent whether you had a credit card or not. Unfortunately, the "I love debt score" makes things more convenient for us when it comes to renting apartments, hotels in other issues. I agree with this advice if you have no self control.

  2. GREAT VIDEO RACHEL It’s so true that so many people struggle with chasing new credit card points and may tend to spend more money that way. What it TRULY comes down to is #1 Having a budget and #2 The budget ALWAYS needs to win! if that’s the case and your credit card is merely a means to pay for something and you never pay credit card interest, then it doesn’t matter…unfortunately that describes a very small segment of the population. Great job Rachel! 😎👍🏻

  3. I went to the store the other day and they had this thing called “self control”… I picked some up, and while I was walking to the till I noticed they had some displays with shelves filled with “being an adult”. I picked them both up, bought them, and moved on with my life… I appreciate your effort to encourage people to be financially more responsible, but it’s painful to think how clueless people are..

  4. As a credit card churner who has been taking about 6k per year of free flights the last 4 years I think it does take some time to figure things out with credit card churning and using points but I have had some awesome vacations that I couldn't have had otherwise!

  5. I had an argue – I got a credit card to use for a vacation and I charged the entire vacation $5,000 on the card, then paid it off – because I had the cash – then I used my bonus points to get a set of 10 stainless steel pots and pans and a convertible carseat – saving me $1,000 at least! So – you have to play the game to get the prizes.

  6. In Alaska, getting AlaskaAir miles is very handy, just budget to pay it off every month (utilities)

    As for fraud protection for the debit card for online shopping, check out privacy.com.

  7. Half your reasons are because of what other people are doing: ad populum is not an argument. Also; the reason why people use CC for fraud protection isn't because they believe they're less likely to happen to than debit cards, but because the bank is gonna give more of a f— about their money being stolen that I'm not gonna pay for as opposed to my own hard-earned cash on my debit. It's difference in outcome based on what card was stolen from that people focus on, not which is statistically less likely to get stolen from.

  8. Hi Rachel! I agree with a lot of things with what you and Dave teach, but I think you are misunderstanding the math.

    https://youtu.be/aA2Y_kOBQfo

  9. Eh I only use my credit card to pay my utilities and other bills that I pay every month and use the cash back I get to invest in my daughters 529 for college.

  10. Credit cards, when used responsibly, can cover multiple trips a year with their sign-up bonuses! BUT you gotta actually use them!

    But as you said Rachel, unfortunately most people don't use them / spend more than they would with cash.

  11. All those bad offers are fine if you don’t go out and spend unnecessarily to get them. It’s only if you chase the offers in an undisciplined manner that you waste money.

  12. I should really cancel my credit card but never do. I always think; what if i need to book a flight, what about buying stuff online, what about renting a car, what about hotels, what if im travelling and need funds. I almost never travel, especially out of Canada, but still have these questions and fears.

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