5 Reasons to Get Rid of Credit Cards

Establishing and following a budget, as well as setting goals for your business or even your personal life, are often difficult steps to take. It may surprise you to learn that these positive steps can easily be made more difficult by the use of credit cards. While there may be legitimate reasons for having a credit card - for instance, international travel - it’s important to recognize that there are, unfortunately, a host of negatives associated with credit card use.

You Spend More Money When Paying with Credit

Research has shown that consumers pay more when spending with credit than when spending with cash. Purchasers also tend to forget or underestimate the amount of money spent on recent purchases. Handing over a plastic card, as opposed to handing over tangible cash that has an immediate impact on your available funds, makes you less able to focus on the actual amount of money being spent. You end up spending more money overall.

Credit Cards Encourage You to Live Outside of Your Means

You won’t only find yourself spending more when using a credit card. You’ll also find yourself disconnected from your budget. It’s been shown that Australians with lower annual incomes have the same amount of debt as Australians with the largest annual incomes. This kind of disconnect between what we can afford and what we purchase with a credit card is what drags consumers into debts that are not easy to pay back.

Your Purchase Decisions Change When Using a Credit Card

Similar to how credit cards lead you to spend above and beyond your income, paying with credit makes you more prone to impulsive spending. While in the past Australians may have used credit in emergency situations or to cover expensive, one-time purchases, the increase in individual debt that has occurred over the years makes it clear that we’re increasingly using our cards to pay for day-to-day items. This leads to more changes in buying habits. You’re less likely to spend impulsively when you’re using cold, hard cash.

Many Credit Card Users Don’t Actually Benefit from Reward Programs

One of the most common reasons people sign-up for a credit card is to reap the benefits of reward programs. However, these cards often come with a costly annual fee and interest rate - a way for the bank to offset any rewards consumers receive. Plus, unless you’re spending a great deal of money annually, there really isn’t much of a reward from the card at all.

Interest Rates are a Huge Expense

In 2017, it was noted that the average Australian carries several thousand dollars in individual credit card debt. When this debt isn’t paid in full each month, and is combined with an interest rate, you end up paying more money than you ever spent on your initial purchase - often, hundreds of dollars more than the original debt. This is true for businesses, as well, which typically carry more debt, and, of course, more interest.

Letting Go of Credit Cards Means Welcoming a Better Financial Future

Credit card use leads to greater and less stringent spending, allows you to ignore your own income limit, and carries with it enormous interest rates. The tangibility of cash will help you stick to your budget and succeed at your financial goals. When it comes to emergency needs, have a savings account built up, so that you can fall back on your own interest-free money, instead of someone else’s loan.

Cash helps you stay financially free and secure, both professionally and personally. TCA Darwin can help you further by providing cash flow management and budgeting services. For your convenience, you can easily schedule an appointment with us online to learn more about our accounting and bookkeeping services.