Why I don’t own a credit card?

Since I remember myself my family always struggled financially. But I learn first to earn money and only after spend it. Not opposite. Credit card create illusion that you have more money than you actually have.

In western culture it’s part of everyday life to use credit card as debit card. And it’s became a way of life for majority of working class in US and other developed countries.

When someone buys an item with cash, they immediately know how much that item cost, which can be painful. However, when someone pays with a credit card, there is a time period between when they purchase the item and when they have to pay for it, which makes the cost seem less important, according to Psychology Today.

Forbes magazine

Companies that operate credit card business provide a lot if perks for customers. But free cheese only in mouth trap (points, miles, cash back, discounts, etc). For companies your perks it’s expense balance sheet and they know how to do business in profitable way (obviously profitable for them).

For purpose of writing this article I’ve watched a few videos on YouTube by people who mastered the use of credit cards. And there’s a catch. Who don’t want free flight tickets on sing up and after spend $3k in one month? Almost everyone fall for it.

For example in India American Express calculate monthly percentage rate in next way. Any unpaid balance carried over to the next payment cycle gets levied Monthly Percentage Rate. If credit card has MPR of 35% than daily interest rate will be 1.15%. You read it right! That’s come to 419.75% per year. This is how most people will understand. But that’s simple interest rate. On credit card there’s compound interest rate. This is the reason for such an attractive signed up bonus and other doubtful perks.

Formula to calculate daily compound interest

American Express India charge annual fees (maintenance charge). Higher fees = more benefits. American Express Platinum Reserve charge ₹5000 + taxes in the first year and ₹10000 + taxes from the second year onwards.

Honestly ₹60000 + ₹5000 + taxes that’s quite a lot. For that money you can buy flight tickets and visit golf club (who play golf now?) and visit airport lounge without owning the card.

Credit card operators done a lot of work to present card as status symbol. But is it? Can you consider someone wealthy who spend on credit? I don’t think so.

Think twice before falling in trap of credit card debt.

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