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January 19, 2009 • Posted by Michael Ferrari

No Good Side To Plastic

With banks bracing for the next meltdown in the form of people not being able to pay their credit card debt, and Congress pushing hard for a Credit Card Bill of Rights, I thought it might be good time to touch on the topic of plastic. In a recent survey, 35 percent of Ladies Home Journal Readers indicated their top money worry was paying off credit card debt. For years, it seems, people have been living large, buying now and figuring out how to pay for things later. Later has finally arrived.   

I read an article recently where the author suggests that consumers should use credit cards for big-ticket purchases such as a refrigerator or home repairs. And while this author does make great points about the benefits and responsible use of credit cards, author and smart-money guy Dave Ramsey says credit cards are never a good idea. Don't believe Dave? Ask Thomas Jefferson who said, \”Never spend your money before you have it.\”

At SmartyPig, we take the words of both men seriously. If you don't have the money to spend on an item, the solution is simple: save up for it instead. We know that in these difficult economic times emergencies do happen. But if you want to charge a new plasma screen TV or a family trip, wait it out. Start a SmartyPig goal instead. Then, when you\’ve met your goal, the TV or the trip is all yours without a single credit card bill. Simply put, using cards in this economy, is an accident waiting to happen. Too much can go wrong. 

That\’s why we are working non-stop to make it easier for you to save money and stay away from your plastic. We\’ve recently added new features to help the goal saving process, and we hope these improvements will further motivate you to keep saving and meet your goals. As Mr. Ramsey states, \”There is NO positive side to credit card use.\” We could not agree more.

  • http://blog.ebillme.com Amy

    Good post. I like the sound of a \”SmartyPig goal\”.

  • http://planyp.us Alex

    I posted this on twitter already but will post here too. I generally agree with you. But credit is essential to any strong economy. Let\’s face it leverage drives America\’s power. However I think that solid, responsible use of credit cards, credit, and any leverage by institutions and consumers should be utilized.

  • Brian

    SmartyPig is wonderful. But it\’s pretty important to point out that it\’s critical to establish a credit history to let lenders know you\’re a good risk when you end up buying a house or a car or any other big purchase. Using a credit card doesn\’t necessarily mean that you are spending money you don\’t have. SmartyPig is a lifesaver, nonetheless.

  • http://www.myspace.com/hotpepper kyan

    I have never believed in ATM or Debit Cards, but have had a credit card since i was 13 years of age. I dislike the impersonalization of Debit Cards. However, I have never missed a payment on my credit card and will only spend what I have in the bank. Responsible credit is imperative.

  • http://www.gettingalife.net Dana

    FYI, you don\’t *necessarily* have to have a credit card to establish credit. If you go to college and, like most students, have to have a student loan, that will go on your credit report. If you buy a car on credit, that will go on your report. And if you visit http://www.prbc.com and set up bill paying through them so they can track you to see if you make payments on time, that\’s another way to do it. It\’s not reported to the big three credit unions but FICO has worked with PRBC to set up a scoring system for them, and someone who pays rent on time for a year or more can possibly get a mortgage through them, as they work with mortgage lenders for their clientele.

    Another way is to borrow money from a credit union or bank (more likely to be able to do it through a credit union) and stick it in an interest-bearing savings account and pay it back over time.

    And credit cards can be useful in a limited sense. They have better consumer protection than debit cards, for one thing. For another, there\’s no reason you can\’t save up for the big-ticket item beforehand, purchase it with the credit card, and immediately pay off the bill.

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