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Have you ever taken a position on credit cards one way or the other? I have, and to only say I was passionate about my position would be an understatement.
I must start out by saying that some of you are going to feel as if I have lost my mind, and the rest of you are just going to be shocked completely about what I am about to say. Not because it doesn't make sense, but because it is coming from ME.
Yes, you read that right! I have softened my position on credit cards completely. I actually figured it out about a month ago, and only a few bloggers have had the opportunity to hear my thoughts on this.
Now I wanted to share my thoughts with YOU, my awesome debt-hating readers.
It's not that I think that credit cards are any less dangerous than I did before; I have just come to the conclusion that credit cards are only that dangerous to a specific group of people. Yep you guessed it-people living beyond their means and swamped with debt. As I have accomplished and evolved more in my financial plan, I have come to realize that there are different levels of control, and financial responsibility. Depending on where you are in the process will determine whether or not you have the ability or the inability to use credit cards responsibly.
Based on my own experience, I believe that your mental state of mind regarding debt and money in general, determines whether or not having a credit card is a good or bad idea.
The Debt Mindset
- This is the person that continuously month after month spends more than they make without ever blinking twice. They live on credit cards and have no idea how close they are to complete financial destruction. There's always a reason that they have to spend more than they make and they pay very little attention to the details of their financial situation. Unfortunately, this is most of America, and it explains why so many people are struggling due to the recession. In this state of mind this person is less likely to admit that they are the reason times are tough. Yeah, you didn't know you were going to lose your job, but that's precisely why you should have prepared yourself for what life throws your way. There is no such thing as complete job security.
The Reality Mindset
- This state of mind comes about because of a life-changing experience, like a job loss, health problems etc. It is also possible to just wake up one day and realize that your reality is not what you thought it to be, and the decision is made to make a real change. I would like to think that most people that are given a taste of reality realize that it is imperative for them to change their ways for good, but history shows us that people have a very short-term memory. They battle through the tough times, and then when things start to get better they go right back to their destructive ways. This state of mind is completely temporary though because when you are faced with reality, you have two choices. Do what you've already been doing with money and the debt mindset sets back in, OR you decide that enough is enough, it's time to transform.
The Transformation Mindset
- This is a person that is truly sick and tired of being sick and tired and they aren't going to take it anymore! Spending more than they make comes to a complete stop and new habits start to emerge. Their attitude is completely different! This is where I would say we were at the end of 2007, right before we made the decision to get out of debt for good. One of the only New Years Resolutions that we have ever made that eventually saw the light of success. A person that is truly in this state of mind has way less chance of ever returning to their old ways, but it doesn't mean they are home free. They have seen the light and their mission is to completely clean things up, but depending on their resolve risk is still in the air. That's why this person is still a risk and not yet ready to handle credit cards either.
The Secure Mindset
- This is the person who has really fought hard to turn things around and the results are beginning to show. This person likely has no debt whatsoever (except for maybe a house), has a growing savings in place and things are really looking up. This is where we are now, and why I have been able to give credit cards a break from the guillotine. We have no debt, $7,100 in savings, and we are truly confident that even if we did have credit cards-which we do not-we have absolute control over our financial behaviors. This person has walked the walk and has developed awareness when it comes to their financial situation. This person is no longer a spend-more-than-they-make risk, and could probably handle having a credit card or two with no problem.
Are My Observations Absolute?
Of course not, because there are always exceptions to the rule, but I think there truly are stages of financial responsibility. This is completely based on how I viewed the credit card issue, and where I felt I was at different stages of the process. Perhaps there are some that should avoid credit cards at all costs no matter how secure they see themselves. Sometimes self-control and discipline cannot be transformed. For everyone else, make sure you handle your credit cards responsibly if you are in a stable situation and feel you can handle them. As for me, we have not run out to apply for credit cards and we probably won't. Where we are right now we just don't see the need to do so. Four plus years without them and we are still alive and kicking, so we are just going to keep doing our thing. To be crystal clear though, I am adamantly against credit cards unless they are paid off each month in full.What stage are you in?
According to where you were, and where you are today, would you say I am on to something or am I completely off my rocker? Let me know by sharing your thoughts in the comment section.
This post was originally published on Enemy of Debt.
Enemy of Debt where he passionately writes about debt freedom and believes more than anything in your ability to eliminate the stress that is debt from your life. He knows that debt stands in between you and your greatest potential which is why he's so dedicated to spreading his message. When he's not trying to rid the world of debt he loves spending time with his family, photography, hiking, and building his debt free business. He also writes for Perkstreet Financial and you can follow him on Twitter at @enemyofdebt.
I've got a big neon sign strapped to my back that says "The Transformation Mindset." No credit cards for me please......even while enrolled in the DMP, I've slipped and used them. Keep them out of my wallet, keep them out of my mail. Don't want to even see them. We'll revisit that question in about 2 years. But my guess is, once that huge chunk of fundage gets to stay in my account instead of going to my debt, I won't have any need or desire for a credit card.
BTW, if I haven't told you lately, I LOVE reading your perspective on all things debt and finance related. It's like going to motivational seminar on finances...or a "Debt church" or something. Every time I get done reading one of your articles, I feel like someone injected me with extra motivation to keep going on this journey to pay off my debt. Thank YOU!
What a great blog! I am also in "The Transformation Mindset." I am sick and tired of being sick and tired of this debt. I have no want or desire for a credit card at this time. I will have to wait and see where I am once I am debt free completely. This includes my car. I don't want to think about credit until I have at least $10,000 in savings. I may revisit the idea then, as I have heard your credit rating goes down if you don't have debt, and I want to be able to purchase another home and be able to get a low interest rate. Thank you very much for this blog!
This is a great blog and something I feel everyone can relate to. It's sort of like growing up - first comes the baby, then childhood, the teen years, the young adult, the mature adult and final the retirement years. In each stage of life, much like the stages of your mindset re credit card use, we are maturing and learning new things. At this stage in my life, I would be terrified to have a credit card put in my hand - it's just too much of a slippery slope. So, for me now, no credit cards is the only way to go.
Again, thanks for the blog!