Common Money Myths - Myth # 2

Myth: It's bad to use a credit card. You should always use cash or debit.

It’s not so much that having a credit card is inherently “bad”, it’s that it does require discipline to use a credit card responsibly.

If you buy items using your credit card, and don’t have the funds available to pay your credit card bill in full at the end of the month, you’re actually paying more for your purchases over time than if you had initially paid with cash or your debit card.

It’s been said that when you use cash, you’re more in-tune with “seeing” your money disappear with each purchase. Whereas, when you buy something with a credit card, you don’t have the same perception.

In fact, according to researchers at Carnegie Mellon, Stanford and MIT, people spend money “'til it hurts” which may explain why people spend more with credit cards than with cash.

"Credit cards effectively anesthetize the pain of paying," said George Loewenstein, Carnegie Mellon professor of social and decision sciences (SDS) and co-author of the paper. "You swipe the card and it doesn't feel like you're giving anything up to make the purchase, unlike paying cash where you have to hand over bills."

If you’re unable to save enough money to pay your credit card bill off within a short period of time, then it probably is better to use cash or debit to better minimize your spending impulses.

Information about the spending study was taken from Carnegie Mellon University -  https://www.cmu.edu/homepage/practical/2007/winter/spending-til-it-hurts.shtml

      Information taken from a recent survey conducted by LendingTree -https://www.turnto23.com/lifestyle/over-90-of-americans-believe-in-at-least-one-money-myth

 

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