The New York Times had a terrible, front-page article today about young people and credit cards, specifically how they are averse to adding more debt or “spooked by the temptation” of credit cards.
In particular, I loved this bit (bold mine):
Rebecca Liebman, 23, graduated from Clark University in 2015 with a load of student debt. She avoided getting a credit card until earlier this year, and did so then only because she kept hearing about how she would need to build up her credit history if she ever hoped to get a mortgage.
“I don’t want to use a credit card irresponsibly, and because of that, it’s scarier to use,” she said. “I grew up — I saw 2008 — I saw my dad get laid off. I don’t trust the financial market.”
Today Ms. Liebman is a founder of a financial literacy site for millennials, LearnLux, and the reluctant holder of a Discover card. Even after getting the card, it took her five months to overcome her ingrained aversion to debt and make her first purchase — a physical wallet.
First off, ‼️congratulations‼️ to Ms. Liebman for graduating and starting her own business.
However, her attitude toward credit cards is naive at best and foolishly unprofessional at worst, especially if she is billing herself as a financial guru.
There’s only one real rule when it comes to credit cards:
PAY THE BILL IN FULL EVERY MONTH. EVERY MONTH.
If you can’t make the payment, then don’t make the purchase! This mentality literally reduces the fear of irresponsibility and “ingrained aversion to debt” mentioned in the article to zero.
(Now, of course, emergencies – medical bills, car accidents, etc – can and do happen and sometimes the only way to function financially is to carry a balance. But, that’s not everyday life – just like the situation of her dad getting laid off in the biggest financial crisis in eight decades was not normal, either.)
The entire article looked at credit cards in entirely the wrong way – it, and Ms. Liebman, are conflating the “early use of credit cards [that] has, in the past, helped young Americans develop a comfort level with credit that can last a lifetime and lead to a succession of big purchases financed by debt” with personal debt.
These are not the same things.
A house or car payment and a $10k balance from a wild-ass trip to Mexico with ten friends – these are very different expenditures, yet the article is irresponsibly suggesting that young people have zero financial sense yet desire mortgages and other large purchases 24/7.
Obviously, I’m speaking as someone who believes credit, and credit cards, are awesome. My family, friends and customers have accrued over $500,000 in travel value since I found out about the world of earning, churning and burning in 2011, allowing us dream trip after dream trip.
And the dreams keep coming.
Simply – be as responsible with credit as your are with your life.
Don’t get a Discover card (at least until you’ve tried cards with better benefits).