The Best Credit Card

by Donna Johnson

… Is No Credit Card

A few weeks ago, in response to a reporter’s query, I suggested that the best credit card for Indie Business owners was no credit card. I explained why. I never heard from her again.

Cut_credit_card_352

Presumably, her story ran without my input, but that’s OK becuase I have a blog so I can tell you what I think myself. I think that the best credit card is one that has a pair of scissors going through the middle of it.

Cash Is King

Cash is King, and if you don’t have it, you shouldn’t be able to spend it. Sound logical? One would think so, but the credit card issuers have turned this logic on its head. Ever wonder how they can afford those lavish offices, huge executive salaries and flashy advertisements? It’s not because we pay the balance off every month. Cash is king, and they want all of ours. I say, "Don’t let them have it."

It’s Not The Economy, Stupid. It’s Us!

They say that the economy is bad. Oh yeah? It’s not the economy. It’s us.

According to an article at a website with the romantic mission of "bringing consumers and card issuers together," consumer revolving debt was $904 billion as of June 2007, up from $879 billion just 6 months before that. Most families have credit card balances that equal 5% of their annual income, and that doesn’t count the compounding interest and late fees.

It’s not the economy’s fault. It’s not even the credit card issuer’s fault. It’s ours.

We can barely afford to put our kids through college for a year, yet we line up like cattle to beg banking institutions to help us live beyond our means so we can have a 64 inch high definition flat screen TV in time for the Big Game this weekend.

Have You Seen The Commercial?

A few days ago, I saw a commercial. It started with a man watching a sporting event on a tiny TV. His wife finally gives him permission to get a big screen and he goes running off to the electronics store, with credit card in hand. The American instant gratification theme song of "I want it all and I want it now!" plays mindlessly in the background.

I’m thinking it’s a big screen TV commercial. But wait! I discover that it’s a commercial for Citigroup when the announcer says, "Check your credit card balance whenever you want with the touch of a button."

At the store, the guy slides into a comfortable easy chair in front of the TV of his choice. Can’t you just hear him saying:

"Thank God my wife finally came to her senses and I don’t have to watch the game on the TV we can afford. I can watch the game on the TV the bank can afford, and I can pay extra for it in the form of the interest they’ll collect from me. Even better, I can use my cell phone to call the bank and get an instant indication of how much money they will loan me so I can take this TV home today. Gee, I’m a lucky guy."

Meanwhile, at the home of Citigroup’s former CEO Charles Prince III (who retired in November 2007 after the company wrote down millions and millions in debt), they’re living on $1,000,000 a year, plus $13,200,000 in bonuses and $258,338 in other perks and miscellaneous goodies, not including the $20 million "severance" that accompanied him out the door. Does he do that because we pay our credit card bills on time? Of course not. He does it because we promise ourselves that we’ll pay our bills on time, and then we don’t.

Reality TV

The lucky guy at the electronics store is not just a consumer. He’s being consumed. The reality is that he can’t afford the big screen TV. If he could, the commercial wouldn’t have started with him watching TV on a little screen — the screen he could afford.

Soon, reality will set in and the luster of the TV will wear off. Even if his team wins, if he’s even a minute late on a payment, he’ll get socked with a late fee. If he pays only the minimum balance each month (which the card issuer will encourage him to do by putting "minimum payment due" on the bill) he’ll get socked with interest. The result is real Reality TV.

What’s Indie Got To Do With It?

Everything. Get out of debt. Don’t go into debt. Hate debt. Yes, hate it. How can you build an Indie Business empire when you have to worry all the time about whether you can keep up with your own personal bills? If you need a card to conduct business, pay off the balance every month and keep close tabs on every due date and every fee. Better yet, use a debit card so when you buy something, you buy it with money you already have in the bank.

Freedom does not mean having a lot of money. Freedom is being debt free so you can do a lot with the money you have, even if it’s not a lot of money. Yes, cash is king. When you get it, keep it or spend it wisely. Don’t give it to the credit card issuers. They already have enough.

Post Script

Oh, and the reporter who asked for my opinion. She must have ran her story without me because I never heard from her again. It’s not a popular train of thought, I know.

What Do You Think?

Am wrong? Too much ranting? I’m just fed up, can you tell? And I don’t want to leave my children stranded and helpless in the middle of a bunch of commercials telling them how easy it is to live beyond their means. What are your thoughts? Is it unrealisic to live without credit cards? I cut all mine up so I know it’s possible.

Do I have a big screen TV? No. A bunch of fancy furniture? No. But I do have college savings plans for my kids and just about everything else I want and need for daily living. And I sleep at night because I don’t have to worry about whether there’s some computer out there at 1:00am charging me a $35 late fee because I either forgot to pay, or couldn’t pay, my credit card bill on time.

Join me, won’t you, in a cash only lifestyle. What do you think?

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posted on January 30, 2008 ·

Facebook comments:

http://www.gcdspa.com/ Emily Caswell

Amen! Thank you for being a voice of reason! I have found it necessary to have a credit card for business purchases, but I don’t believe in carrying a balance. I don’t buy what I can’t pay for–I know so many people who have ruined their lives buying things they didn’t need and couldn’t afford. It’s so important to teach our children how to live within their means and appreciate what they have. This is the best gift we can give them!
http://www.gcdspa.com/ Emily Caswell

Amen! Thank you for being a voice of reason! I have found it necessary to have a credit card for business purchases, but I don’t believe in carrying a balance. I don’t buy what I can’t pay for–I know so many people who have ruined their lives buying things they didn’t need and couldn’t afford. It’s so important to teach our children how to live within their means and appreciate what they have. This is the best gift we can give them!
http://www.gcdspa.com Emily Caswell

Amen! Thank you for being a voice of reason! I have found it necessary to have a credit card for business purchases, but I don’t believe in carrying a balance. I don’t buy what I can’t pay for–I know so many people who have ruined their lives buying things they didn’t need and couldn’t afford. It’s so important to teach our children how to live within their means and appreciate what they have. This is the best gift we can give them!
http://www.naturalbeautyworkshop.com/ Emmy

I completely agree! One of the best things I ever learned was how to live within my means. It’s tempting to blow money on fun things like televisions and clothes, but when the novelty of your purchase wears off you are left with the headache of trying to pay for it all. Once you break the habit of instant gratification you find that the freedom of being able to live without worrying about money day in and day out is a much greater reward than a new purse or a stereo system. One tip my best friend and frugal guru taught me was to never buy something until it goes on sale. Not only do you save a few bucks, you weed out the impulse purchases. If you want something enough to wait for it than you know it was worth buying!
http://www.naturalbeautyworkshop.com/ Emmy

I completely agree! One of the best things I ever learned was how to live within my means. It’s tempting to blow money on fun things like televisions and clothes, but when the novelty of your purchase wears off you are left with the headache of trying to pay for it all. Once you break the habit of instant gratification you find that the freedom of being able to live without worrying about money day in and day out is a much greater reward than a new purse or a stereo system. One tip my best friend and frugal guru taught me was to never buy something until it goes on sale. Not only do you save a few bucks, you weed out the impulse purchases. If you want something enough to wait for it than you know it was worth buying!
http://www.naturalbeautyworkshop.com Emmy

I completely agree! One of the best things I ever learned was how to live within my means. It’s tempting to blow money on fun things like televisions and clothes, but when the novelty of your purchase wears off you are left with the headache of trying to pay for it all. Once you break the habit of instant gratification you find that the freedom of being able to live without worrying about money day in and day out is a much greater reward than a new purse or a stereo system. One tip my best friend and frugal guru taught me was to never buy something until it goes on sale. Not only do you save a few bucks, you weed out the impulse purchases. If you want something enough to wait for it than you know it was worth buying!
http://www.soap-queen.blogspot.com/ Anne-Marie

You are totally right on.
There is an important distinction between rampant consumerism (i.e. big screen tvs) and getting well-thought-out business expansion loans.
Growth sucks cash and often, little entrepreneurs need short term loans to get through a particularly exciting growth period. Banks often don’t want to give those loans.
So where do the little businesses turn to? You got it … credit cards.
I did it in 1998 and then again in 2004. It was paiiiiinful to pay off the 2004 amounts but I am confident that if I hadn’t taken a well-calculated risk back in 1998 and 2004, that my business wouldn’t be around today. Or at least not around today in the same type of way that we are now.
Just my long, overpriced two cents =)
http://www.soap-queen.blogspot.com/ Anne-Marie

You are totally right on.
There is an important distinction between rampant consumerism (i.e. big screen tvs) and getting well-thought-out business expansion loans.
Growth sucks cash and often, little entrepreneurs need short term loans to get through a particularly exciting growth period. Banks often don’t want to give those loans.
So where do the little businesses turn to? You got it … credit cards.
I did it in 1998 and then again in 2004. It was paiiiiinful to pay off the 2004 amounts but I am confident that if I hadn’t taken a well-calculated risk back in 1998 and 2004, that my business wouldn’t be around today. Or at least not around today in the same type of way that we are now.
Just my long, overpriced two cents =)
http://www.soap-queen.blogspot.com Anne-Marie

You are totally right on.
There is an important distinction between rampant consumerism (i.e. big screen tvs) and getting well-thought-out business expansion loans.
Growth sucks cash and often, little entrepreneurs need short term loans to get through a particularly exciting growth period. Banks often don’t want to give those loans.
So where do the little businesses turn to? You got it … credit cards.
I did it in 1998 and then again in 2004. It was paiiiiinful to pay off the 2004 amounts but I am confident that if I hadn’t taken a well-calculated risk back in 1998 and 2004, that my business wouldn’t be around today. Or at least not around today in the same type of way that we are now.
Just my long, overpriced two cents =)
http://www.indiebusinessblog.com/ dM

A-M:
Thank you for pointing out that there are wise ways to use credit cards in business. You are disciplined and focused, two key traits to have considering the relentless marketing tactics used by credit card issuers who tie their outrageous interest rates directly to our hopes and dreams. I’m always glad to hear stories of people who used credit to make themselves wealthy instead of the other way around. You go girl!
http://www.indiebusinessblog.com/ dM

A-M:
Thank you for pointing out that there are wise ways to use credit cards in business. You are disciplined and focused, two key traits to have considering the relentless marketing tactics used by credit card issuers who tie their outrageous interest rates directly to our hopes and dreams. I’m always glad to hear stories of people who used credit to make themselves wealthy instead of the other way around. You go girl!
http://www.indiebusinessblog.com dM

A-M:
Thank you for pointing out that there are wise ways to use credit cards in business. You are disciplined and focused, two key traits to have considering the relentless marketing tactics used by credit card issuers who tie their outrageous interest rates directly to our hopes and dreams. I’m always glad to hear stories of people who used credit to make themselves wealthy instead of the other way around. You go girl!
http://www.essentialu.typepad.com/ Dennis

You don’t know how nice it is to have someone else screaming common sense about credit and debt. Young people today have almost no chance, when the credit card companies are standing in line to hand out applications at colleges and even some high schools. The kids have not even started studying for their new careers and they are already in debt to creditors. Consumerism is part of our country’s fabric, it is a bed we made and now must choose to either sleep in or roll out the futon and buck, pardon the pun, the system. In business, you always have a choice to use or not use credit, even when you are growing and need more of this or that. The issue is not that you won’t grow, you just may not grow as fast. It is proven that once your business gets to a growth point where money is needed to expand, either in the form of investors, bank loans or credit debt, the best option is always, anything but credit debt. It just seems to be the easiest way to go and thus by default, we tend to end up in that camp.
We financed our business with pop bottles that we collected from anyone and everywhere. We then rolled any profits over and over till we had some cash flow to grow. It was not easy, but today, we are debt free in both business and personally. And looking back, knowing that we could be five times bigger than we are today if I had taken on any type of debt, I still would not change a thing. The peace of mind that you get knowing you owe nobody nothing is Priceless.
http://www.essentialu.typepad.com/ Dennis

You don’t know how nice it is to have someone else screaming common sense about credit and debt. Young people today have almost no chance, when the credit card companies are standing in line to hand out applications at colleges and even some high schools. The kids have not even started studying for their new careers and they are already in debt to creditors. Consumerism is part of our country’s fabric, it is a bed we made and now must choose to either sleep in or roll out the futon and buck, pardon the pun, the system. In business, you always have a choice to use or not use credit, even when you are growing and need more of this or that. The issue is not that you won’t grow, you just may not grow as fast. It is proven that once your business gets to a growth point where money is needed to expand, either in the form of investors, bank loans or credit debt, the best option is always, anything but credit debt. It just seems to be the easiest way to go and thus by default, we tend to end up in that camp.
We financed our business with pop bottles that we collected from anyone and everywhere. We then rolled any profits over and over till we had some cash flow to grow. It was not easy, but today, we are debt free in both business and personally. And looking back, knowing that we could be five times bigger than we are today if I had taken on any type of debt, I still would not change a thing. The peace of mind that you get knowing you owe nobody nothing is Priceless.
http://www.essentialu.typepad.com Dennis

You don’t know how nice it is to have someone else screaming common sense about credit and debt. Young people today have almost no chance, when the credit card companies are standing in line to hand out applications at colleges and even some high schools. The kids have not even started studying for their new careers and they are already in debt to creditors. Consumerism is part of our country’s fabric, it is a bed we made and now must choose to either sleep in or roll out the futon and buck, pardon the pun, the system. In business, you always have a choice to use or not use credit, even when you are growing and need more of this or that. The issue is not that you won’t grow, you just may not grow as fast. It is proven that once your business gets to a growth point where money is needed to expand, either in the form of investors, bank loans or credit debt, the best option is always, anything but credit debt. It just seems to be the easiest way to go and thus by default, we tend to end up in that camp.
We financed our business with pop bottles that we collected from anyone and everywhere. We then rolled any profits over and over till we had some cash flow to grow. It was not easy, but today, we are debt free in both business and personally. And looking back, knowing that we could be five times bigger than we are today if I had taken on any type of debt, I still would not change a thing. The peace of mind that you get knowing you owe nobody nothing is Priceless.
http://www.indiebusinessblog.com/ dM

Dennis: Thanks for sharing part of your story. The success you and Kayla now enjoy with Essential Wholesale is a testimony to organic growth using your own resources as they come in. I think it’s a tougher way to build a business, but it’s also the safest. People like Anne-Marie at Bramble Berry who also shared some of her story are equally amazing. The discipline she has demonstrated in paying off loans and credit card debt on time while also expanding is impressive. She’s an exception in many ways to the usual rule — which is that we plan to pay things off on time, but it just usually doesn’t happen. Bravo to both of you!
http://www.indiebusinessblog.com/ dM

Dennis: Thanks for sharing part of your story. The success you and Kayla now enjoy with Essential Wholesale is a testimony to organic growth using your own resources as they come in. I think it’s a tougher way to build a business, but it’s also the safest. People like Anne-Marie at Bramble Berry who also shared some of her story are equally amazing. The discipline she has demonstrated in paying off loans and credit card debt on time while also expanding is impressive. She’s an exception in many ways to the usual rule — which is that we plan to pay things off on time, but it just usually doesn’t happen. Bravo to both of you!
http://www.indiebusinessblog.com dM

Dennis: Thanks for sharing part of your story. The success you and Kayla now enjoy with Essential Wholesale is a testimony to organic growth using your own resources as they come in. I think it’s a tougher way to build a business, but it’s also the safest. People like Anne-Marie at Bramble Berry who also shared some of her story are equally amazing. The discipline she has demonstrated in paying off loans and credit card debt on time while also expanding is impressive. She’s an exception in many ways to the usual rule — which is that we plan to pay things off on time, but it just usually doesn’t happen. Bravo to both of you!