Don’t set your credit cards on fire just yet.
- Mark Cuban has repeatedly expressed a negative view of credit cards.
- He recommends paying them off and getting rid of them.
- Although avoiding credit card debt is good advice, credit cards can be a valuable financial tool, and it’s how you use them that’s important.
It’s safe to say Dallas Mavericks owner Mark Cuban isn’t a fan of credit cards. Way back in 2011, he said on his blog that you should cut them up because “If you use a credit card, you don’t want to be rich.”
He later repeated that advice in an interview with Dave Ramsey, who’s about as anti-credit card as it gets. The only change was a suggestion to burn your credit cards after you pay them off. Apparently, scissors just aren’t good enough anymore. Like vampires, credit cards should be destroyed with fire.
It’s a strong stance from someone with lots of followers, and it gets repeated often. But even though Cuban may know basketball, his thoughts on credit cards leave a lot to be desired.
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What Mark Cuban gets wrong about credit cards
Cuban is against credit cards because of their high interest rates. As he explains it, if you’re paying 15% to 20% in annual interest charges on your credit cards, paying off those card balances is the best investment you can make. By paying off your credit cards, you’re effectively saving 15% to 20% per year.
That part is sound financial advice. Whenever possible, try to avoid carrying a balance on your credit cards. They do have high interest rates, and in fact, credit card interest rates just hit a record high.
However, you can use credit cards without paying interest charges. If you pay your card’s statement balance in full every month, the card issuer won’t charge you interest on your purchases. For consumers who need to carry a balance for any reason, there are also 0% APR credit cards. These have a 0% intro APR, meaning no interest for an introductory period.
Cuban’s argument relies on a huge leap of logic — that using credit cards means a person has credit card debt. This all depends on the cardholder, though. Plenty of consumers pay their credit cards in full every month. Here’s the data on this for the first quarter of 2022, according to a report by the American Bankers Association:
- 40.9% of credit card accounts carried a balance from month to month
- 35.5% of credit card accounts were paid in full each month
- 23.7% of credit card accounts didn’t have any activity
The truth about credit cards
Unfortunately, some financial personalities present a distorted and negative view of credit cards. They make it seem like anyone who uses a credit card is irresponsible with money and won’t ever be rich. That’s why it’s important to clear up these misconceptions.
If you’re able to pay in full every month, you can easily save money by using a rewards credit card. There are lots of cards out there that offer purchase rewards in the form of cash back, rewards points, or travel miles. Here are some popular options to check out:
For example, multiple cash back cards offer a flat rate of 2% back on purchases, with no annual fee. Let’s say you get one of these cards, and you spend $2,500 per month on it. You’d earn $50 per month and $600 per year in cash back. That’s just one example of a way you could save with a rewards card, and it requires very little work on your part.
An extra $500 to $1,000 per year in credit card rewards won’t exactly make you rich, but it certainly helps. That’s more money you can put in your savings account or invest. And it’s effectively free money, as long as you pay in full.
Despite the scare tactics, credit cards aren’t good or bad. They’re a financial tool, just like a bank account or a personal loan. Mark Cuban has said that he had bad experiences with credit cards, and that seems to have colored his view on them. But his advice is off base here, as there are many rich people who use credit cards. It’s not a matter of if you use them, but how.
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