I’m fourth in line at the pizza shop. The woman at the front of the line swipes her Chase Freedom. The man behind her swipes his Citi Rewards. The girl in front of me taps her Citi Double Cash. And I hand a $20 bill to the cashier.
Am I really the only person here paying with cash—for pizza?
I’m very bothered by this realization, even though it’s nothing new. I know that most families in our community rely on credit cards for day-to-day purchases. The biggest problem with it is that many of them don’t even realize what the repercussions are.
The fact is, it’s acceptable for young kollel couples to apply for credit cards. In fact, many kollel yungeleit have become experts on this topic and can tell you which cards are best. It’s also acceptable for young working families to have multiple credit cards. It’s just the norm in our community. Actually, it’s the norm in America in general.
I think it’s not right that our young men and women are not properly educated regarding the risks of living on credit. Most people just apply for credit cards because of the supposed points and benefits. I’m here to tell you that none of these banks have your best interests in mind. They have their own interest in mind, pun intended.
Get this: Even if you accumulate thousands of points, you will have spent more dollars than you would if you used cash. Instead of living within a budget and saving up money for a vacation, you swipe your card to earn points. But after that vacation, you are left with a huge balance. What did you gain? If, instead, you spent only what you could afford, perhaps you would have gone on a smaller vacation but ended up debt-free.
And cash back? Because you spend so much more when you swipe, the cashback is really not cash back. For those who like numbers, let’s do this: Suppose you have 5% cashback on groceries. You fill up your wagon with goodies worth $160. Then you see some new items on display and add them to your cart—you get 5% cash back, so it’s worth it, right? Your bill totals $200. You get $10 cash back. However, realize that because you were excited about the cashback, you actually paid $38 more than you would have otherwise. If you shop with a list in one hand and cash in the other, you leave the store with more money in the bank. Nobody needs to give you anything back! You already have the cash.
What about other rewards and prizes? I once overheard a newlywed, shopping in a maternity store, tell her mother, “I’m so excited because if we spend $2,000 on this new card, we get $500!” She was planning to swipe the card for a pile of clothes because she was almost at the $500 prize. But how will she pay the bill? She can barely afford her rent. I’m willing to bet that this couple has not thought about the bill. All they can think about is the $500 check and how they will celebrate with it. I want to say to this young woman: You just went into debt for this! Don’t you realize you have to pay this one day? But no, she and her husband don’t realize. Nobody told them. Nobody warned them not to open a credit card, not to use one, nada.
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