Do We Love or Hate Credit Cards?

[arve url="https://www.youtube.com/watch?v=pnM7YvcG7oE" mode="lazyload" align="center" /] Credit cards are everywhere and most people have one. Do we love or hate credit cards and why? We reveal our opinions in this episode. Transcription: Credit Card, some people love them, some people who absolutely hate them. In this episode we want to talk about our beliefs and our stances on credit cards, whether we have them, whether we like them, whether we think people should use them and all that sorta good stuff. So what's your stance on credit cards? Do you have any give out them. You know what my stance is probably like I'm not a credit card guy, I'm the reason I'm not a credit card guys because when I was 19 years of age I saved some money and went to Europe for three months with my mates and the bank before I went gave me this magic card which I didn't understand and I ended up spending $12,000 on it. I've a chance and came back in at that time. This was before like get on the zero percent interest for two years or whatever rollover that they're doing now. And it was Kinda like 20 percent interest I think, or 22 percent interest. It took me six full months of working after I came back at that time because I was working at a shitty librarian job to pay the bloody thing off. Yeah. And it kind of, I think that that sort of experience scars you for life. That's why I had a similar experience to that as well as always working as a casual, a news agency slash pharmacy and I had these two weeks where I worked like excessive amounts, like 60 hour weeks, two weeks in a row. Okay. So I just took in those payslips and they gave me a five grade even though generally out in the work, like two days a week. And so I ended up putting my honeymoon on that credit card as well as some other things combined with my wife's 10 grand car loan plus her. So we started out marriage at I was 20, she was 22 and we were 20, 40 grand at 20 grand, so 10 grand of credit card debt, 10 grand of personal loan and yeah, that took us years to pay off and like we got a bit of help from my mom as well in order to get out of that. So it was so easy to get into the debt and it was so difficult to get out of it that it kind of scarred me. And then I think the next time we got a credit card we got a $1,000 credit card. We just had a $1,000 limit which got up to two grand, you know, a few years later. And it's kind of stayed there. I had a $1,000 credit card actually after when I bought my first property, they threw one in because obviously they want to get everyone's spending and it had a $1,000 limit. They told me that if I increase the limit to 20 grand, I get three points for every dollar that I spent. And at that time I thought points for a cool thing, so I increased the limit to 20 k, I never actually spent much money on it and ended up getting enough points every couple of years to get afraid, Gopro. And then I can the credit card, like it was a silly thing of all. I probably spent like alternate 100 grand over two years and all sorts of expenses and now that's untrue. I don't know what I spent. That sounds like a lot funny. I'll tell you 1:50 grand a year. That time I was spending $100 on my credit card. But was it like. It seemed like I'd spent a lot of money to get a full $100. Toilet Gopro now probably getting wholesale for 200 bucks a pop. And that's the thing I think credit cards if used correctly. There's some people out there who are amazing with credit cards. I have this friend who now lives overseas, but he was a treasurer and so he just lived in excel like he loves excel spreadsheets, managing money, moving money around. That was his vibe. That was his job and how he loved to live and Hae used credit cards to the Max. He got the best out of them. He got the zero percent transfers, which you would then take that money and earn interest on it. He would get all the. He would get all the points and everything as well. Probably never paid a dime in interest ever. And got all these benefits from it. He knew how to do that. It was his passion to work with money and to move money around and stuff like that. I feel like he's the minority and he's the exception to the rule and credit cards can be used really well and some people do them really well. But I think the problem is the majority of us, myself included, don't use them that way. They don't take full advantage of the interest free period. All the points scheme. People use credit cards in a really positive way where they keep their wages in an offset account against their property. And then, um, you know, obviously spent everything on the credit card over that 60 day interest period. And then just have a walk back to zero thing just before the interest kicks in and you know, logically if you're, you know, you've got an extra $20,000 off your timeline over 12 month period at five percent is a pretty significant financial benefit for someone to do that. And I completely understand that. Wanting to save a thousand bucks in interest over a year or whatever, but it just requires diligence and while I am extremely diligent and disciplined with debt or just just I needed in my life like I've just got this theory from my dad, which is if you can't afford it with cash to pay for it all outside of obviously assets. Yup. And I think I think the same thing, like I'm trying to get rid of the credit card and I actually got paid off and I was ready to burn it basically down and a safety net. I didn't want to close mine for years because I'm like, what if I lose my job and I need that $5,000 radar? At some point it's in your head. It's a story you're telling yourself. Most of the time, but I think the thing is you can create that safety net elsewhere and this is something that I got from the barefoot investor, which is you get rid of your credit cards and then you build up savings and your focus shifts from trying to pay off a credit card to building wealth in your life and it's like a very small change. By not having a credit card, you're then forced to build wealth and you're forced to build up savings so that you have that buffer. Whereas when you have the credit card to fall back on, you don't have to do that. Yeah, not incentivized to do that and getting in that habit and we've talked about it heaps. The pay yourself first mentality. You build that up and wants your savings account goes past 10 grand or 20 grand. Then it's like you don't want to touch it. This shift happens in your mindset. Whereas if you have a thousand dollars saved, it's really easy to go and burn that on a quick holiday. I can spend a thousand bucks on a night out with the boys. I can watch the guy down the drain like that, you know what I mean? I'm not saying that happens. If you get drunk then it's. I forget what you're spending. Unlike buying all my friends shots like express. I martinis like oh he's a hotel room for the night. Like just it can easily go or a surfboard or some cool stuff for the kids. Like there is a tipping point with saving and investing where it becomes more of a priority than the small discretionary items that most of the timeline ended up regretting to be honest with Ya. Yup. And something else that I found interesting when I did a video on credit cards was analyzing how much money I would have to have saved in an investment in order to pay for my credit card. Wow. So if you think about, so you've got the annual fee for the credit card, which varies from like 80 bucks up to maybe $200 depending on the credit card. And then if you credit cards maxed out, then you go to the interest that you have to pay as well. And interests can be anywhere from what, like 13 percent up to like 22, 23 percent. It varies by credit card, by credit card, and thinking about just that annual fee, plus my credit card was two grand so you're not even looking at it that much, but then the amount of the amount of money you'd have to have any investments in shares or in savings or whatever, maybe earning five percent, but then you've got to pay tax on that five percent as well. And so you just have to have this huge lump sum of money in order to passively pay for two grandkids credit card. It was just seemed excessive to have it because you've got this expense that you've created in your life that's not really adding any value. Whereas getting it's easy to get rid of a two grand credit card than it is to build up a. can't remember it was like 10 grand or 20 grand in savings to pay for the credit card. It's kind of just easier to get rid of it. I would actually need about $9,423 in investments in order to make enough to pay for that $2,000 credit card, so I would need nine and a half grand in investments to pay the costs of having a $2,000 credit card. Interesting concept because I just sensory experiences. You said it scarred me. It sounds like you got hit pretty hard as well. I just, I'm, my personality type is pretty binary, like it's a one or a zero with everything as you know. And credit cards are just in the zero category, so I haven't thought about them since. Like every time I get a home line, the bloody bank sends me a credit card. I chop it up straight away and get them to cancel the account because I just don't need that temptation. Yeah. Well my brother walks in. Simon, as you guys know, a couple of days ago when we were in America a few years ago, we met this guy, hey was a lifetime member at the seahawks, one of the NFL teams, the American football teams and Simon setting contact in about six weeks ago. We're having beers and we're like, how cool would it be to go to the superbowl next year? And then I'm like, heat up Steve From America and he hits him up and six weeks goes by, we haven't heard from him and then on the weekend he's like, I've got you boys superbowl tickets if you want to, you know, this is how much they are.