In the early ’80s I was convinced I didn’t need any credit cards. I paid cash for everything. However, I would come to realize I needed credit. These are my pros and cons for credit cards.
The Cons: Cash Is Always King
90 Days Same as Cash:
When you want a deal, it’s best to negotiate with cash. For example: I arrived in Los Angeles with only two suitcases and no transportation. I wanted to purchase a motorcycle, but I had no credit, so I went to a local dealer, told him I would pay cash for a new motorcycle in 90 days. Some dealers consider 90 days as a cash payment.
Each week I went to the dealer and paid on the bike. The bike never left his shop. The dealer assumed no risk. In 90 days I had purchased a new motorcycle without paying interest and getting a lower price.
No Monthly Bills
I saved money to purchase furniture, appliances and clothes. I found discount shops and negotiated bargains by paying cash. I never had monthly bills. I wasn’t paying any interest on the items I purchased.
If I needed extra cash, I could always find an extra part-time job. I worked at a newsstand to earn enough money for several vacations. Once I had the funds saved for the trip, I quit the part-time job. When I returned from my vacation I didn’t owe anything.
The Pros: Increased Buying Power
Having credit increases your buying and lending power. Just renting a movie from the local video stores without a credit card became a challenge. Our society operates on credit. Doing anything in this society without having a credit history creates a problem. We are defined by our credit scores.
School Loan, My First Credit History
My first credit began with a student loan for my Masters. It was a ten year loan that I paid off in seven and established an excellence credit rating.
My First Credit Card
Soon I was approved for a credit card. I could rent movies, cars, charge vacations and make a small monthly payment manageable within my budget. My buying power had increased.
Buying My First Car Without Saving Up for Several Years
It would have taken me years to save up $12,000 for a new Ford Escort in the ’90s but because I had excellence credit, stable employment and kept my debt ratio low, I was able to purchase a new car for a great price. I was able to secure car loan for $125 a month.
Caution With Credit Cards
Though credit cards give you great buying flexibility abuse can cause extreme debt issues. Best policy payoff your debt quickly. Don’t just pay the minimum. Add a little extra on each payment. Currently, my wife and I pay off our credit card balances every month.