The Era of MCCU: Minimal Credit Card Use

June 24th, 2011  |  Published in General  |  1 Comment

You no doubt have heard the warnings: Do not run up huge balances on a credit card (or cards). The interest charges are unbearable if you get behind in paying off those balances. And they create a false sense of financial well-being: If you earn $5000 a month but consistently spend $5500 per month, that’s not living in the real world.

So by choice or by force (i.e., no credit card is available to you), people are living less and less with credit cards. They might use a bank debit card for necessary plastic transactions, such as when traveling. But living on a pay-as-you-go philosophy actually can be a very smart thing.

What does it boil down to? You might just have to skip making some purchases. Maybe it’s not such a good idea to eat out at pricier restaurants quite so often. And that bachelor/bachelorette trip to Vegas? Well, can you fake a business reason for not going? Only you can decide if it truly would be the trip of a lifetime – or just six guys trying to be the script for Hangover IV.

But emergencies happen, true emergencies such as car repairs and a need for medications not covered by health insurance. Some people take care of extended family members and their problems. How do you do that without a credit card and when those expenses are beyond your current savings and income?

If you have a job, you are eligible for a payday loan. These are cash advance services for emergencies. If you need money in a hurry, an online payday loan can get you cash (as little as $100 and as much as $1500 in some places, depending on your income).

Are payday loans better than credit cards? How docash advance services compare to the 29% APR that some credit card companies charge their borrowers? Consider this key point: Credit cards (and car title loans and home equity loans) allow you to borrow several thousands of dollars, depending on the line of credit they extend to you. With online cash advance services, you are limited to an amount less than your next paycheck.

In other words, you’re less likely to get caught in a long-term spiral of debt. You do best when you pay back on the loan in a single paycheck. Thepayday loan can be extended, but you need to consciously do that every two weeks, unlike a simple but growing credit card balance that becomes a piece of mail you ignore for a while.

  

Responses

  1. Jeff Cutts says:

    June 28th, 2011 at 8:04 pm (#)

    This post got me thinking back to my childhood, and brought several questions to the surface.
    Did I ever see my parents use a credit card? ans NO
    Did I ever hear my parents argue about money? ans NO
    So how on earth did they survive? Well as a child I seem to remember we had exactly the same major household items we have today, yes we probably had less toys but we had the great outdoors to play in.
    Yes I must admit I use the credit card today, but I use it to my advantage, I borrow the banks money for the 50 days no interest period but I make sure that the card is paid in full at the end of that period. Failure to pay what you have borrowed will lead to interest payments, sometimes up to 28% so be disciplined and you won’t get into trouble.
    Due to that discipline I now have all my retirement wishes and I have a well balanced happy life.
    With thanks
    Jeff