American business owner, investor and panelist on ABC’s Shark Tank, Mark Cuban, has warned against using your credit card if getting rich is your goal. Here’s why Cuban feels this way.
During an appearance on financial guru Dave Ramsey’s show, The Ramsey Show, the two financial experts discussed the money-saving equation of income coming in and going out.
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While discussing building wealth, Cuban told Ramsey, “If you use your credit cards, you do not want to be rich.”
Ramsey and Cuban shared a laugh after Cuban’s remark, with Ramsey revealing that people will often share this remark with outrage or disbelief. He exclaimed, “Look what Cuban said!” But despite laughing, Ramsey agrees and repeats Cuban’s remark, “So, cut up your credit cards. If you use a credit card, you don’t want to be rich.” Ramsey adds, “I like that line.” Cuban agrees and reveals that it’s his favorite line and that he always tells it to people.
In response, Cuban explained that people would ask where to invest instead. He reveals that the “best place to invest is to pay off all your credit cards and burn them.” You should do this because when you use your credit card, you know the return. For example, Cuban said that if you’re paying 15 to 20% interest on your credit card and once you pay that down, you’ve just earned 15 to 20%.
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Ramsey agrees wholeheartedly with Cuban’s advice that you should not build wealth using a credit card. Ramsey reveals to listeners how to build wealth and warns listeners that he’s told this to people about 100 times. He also notes that a Forbes survey found, “75% of wealthy people — not your broke brother-in-law with an opinion — but wealthy people say ‘get out of debt and stay out of debt.”
Cuban reveals that high-interest charges on credit cards keep people in debt and prevent them from building wealth. Cuban’s dislike of credit cards is nothing new. In fact, in 2014, Cuban told Business Insider that “credit cards are the worst investment you can make.” According to Cuban, his best personal advice came from his father, who told him not to use credit cards.
Ramsey echoes Cuban thoughts on credit cards and, in a blog post, writes, “Life is better without credit cards.” Ramsey believes people don’t need a credit card if they build emergency saving funds and use cash to pay for everything.
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However, Cuban and Ramsey’s advice may not work for many Americans, as using credit cards is a way for them to build a credit history. Colin Palfrey, chief marketing officer at Crediful, explains why: “For many average Americans, buying a home is a major part of their wealth-building plans, and not being able to establish a credit history will make it harder to get good rates.”
So, if you’re going to use your credit card, you should do so responsibly. For example, using your credit card to build a credit score means paying your credit card bills on time, as payment history is calculated in your credit score. Cuban revealed that he wished he had followed this advice when he was younger, saying he “should have paid off my cards every 30 days.”
Another way to responsibly use credit cards is not to charge more than you can afford and pay your bills in full monthly. This means avoiding making minimum payments, which just add daily interest to your credit card bills.
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This article “If You Use Your Credit Card, You Do Not Want To Be Rich,” Warns Mark Cuban On The Dave Ramsey Show originally appeared on Benzinga.com
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