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Why I hate using my credit card

Credit cards make you feel like you're not actually spending money

Why I hate using my credit card

A friend and I got into a rather irritating argument the other day. We had dinner, the bill came, and I immediately slapped down my debit card; she, her shiny Visa.

“Why are you using your debit card, fool?”

I use my debit card for everything – groceries, eating out, drinking out, pre-authorized bill payments. I even link my Uber payments to my debit card, which I’ve been told is hilarious and ridiculous. I’m frequently admonished for not taking advantage of the perks that come with using a credit card. I mean I have one. It sits there in my purse and is used mainly for big online purchases like flight tickets. But I’m told if I use my credit card for every single purchase ever, I could accumulate enough points to NOT pay for a flight ticket. Yes, one free trip a year if you’re loyal to your Visa.

According to data from RateHub, an online portal that allows you to compare different financial products like mortgages and credit cards to determine if you’re getting the best deal, 71 percent of millennials have up to two credit cards, and almost all of us – 95 percent – own at least one credit card. Two thirds of millennials who own credit cards, use it for 50 percent or more of their purchases.

The issue I have with using credit cards is that I find it much harder to keep track of my spending. Sure, there are credit card trackers out there, but because money is not immediately taken out of your account, you almost feel like you have unlimited spending rights, and don’t have to deal with the $120 you just put on your credit card buying shots for the whole group. This whole “do you want to start a tab” thing really screws me over financially.

One of the most well-known studies on the effects of heavy credit card use was conducted back in 2000 by Duncan Simester and Drazen Prelec, business professors at MIT’s Sloan School of Management. Their study, aptly titled “Always Leave Home Without It”, clearly showed that in certain situations, people were willing to pay up to twice as much for the same item on credit than if they had to use cold, hard cash. Simester and Pralec termed this the “credit card premium”.

In fact, similar research by Dilip Soman, a professor of Marketing at Rotman School of Management suggests that when your credit card limit is increased, you start believing that you’re actually earning more money. “These expected earnings can make prices seem relatively small, in turn stimulating spending”, the study says.

The reality is that credit card debt is a problem among young Canadians. RateHub figures tell us that 41 percent of millennials admit they have a credit card debt. That does not take into account the number of people who carry credit card debt, but don’t want to say they do. Of the number of millennials who admit to the debt load, more than half say they plan to pay it off in less than 3 months, but roughly 14 percent have are  close to maxing out their credit card, and don’t have the immediate means to pay it off.

My conclusion in all this (and how I made peace with my pro-credit card friend) is that it’s probably okay to use your credit card all the time if you have the financial ability to pay your bill on time every month. The argument in favour of using a credit card for every purchase to earn a variety of rewards only applies if you don’t end up negating the perks by incurring ridiculously high interest charges that come with missing a payment. Oh and spend wisely etc etc.

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