Having gone through a life-changing experience in which my wife and I nearly lost our only child at ten months of age, I’ve learned many lessons.

Our little boy had to undergo an emergency surgery – following ten days in the hospital and a $75,000 bill. Both of us were unemployed but medical and legal bills added up quickly. We’ve managed our way through it, but not without having several wake-up calls along the way.

The first is – as our Pastor once noted – people deal with adversity much better than they do with prosperity. It seems to be a strange statement, but there are examples ad infinitum to support this observation. How many stories have you heard about someone winning the lottery only to wind up broke a short time later? On the other side of the coin are those stories about individual’s fighting overwhelming circumstances and come out victorious.

The point of the assertion is as long as money isn’t an issue; people tend to behave as if it won’t ever be. But once there’s an upset in the apple cart, perspective changes rapidly. And that brings us to the ugly truth about credit cards and credit card debt.

Simply put, credit cards are a lose-lose proposition. Too much debt adversely affects your income-to-debt ratio and the fine print terms have a provision for that – a higher interest rate, a lower credit limit, et cetera. Small credit card balances mean potential debt – not something mortgage brokers like to see and interest remains unpaid.

So what about those cash back rewards, airline miles, and incentive points? That’s perhaps the biggest practical joke you’ll ever play on yourself. There are restrictions and stipulations, not to mention how much you actually have to spend (and pay interest on) before they’re redeemable or worth wild.

These enticements are carrots-on-a-stick. Credit card companies have the clear advantage: think about it, when you sign-up for a new credit card, to who’s terms do you have to agree to, yours or theirs? Earning points and other rewards come at a greater cost than their benefit.

When you put the scenario into these terms, rewards and rebates clearly don’t have much value. But cash does – and it’s a finite value.

Using your bank debit card or cash forces you to do the arithmetic; you feel an obligation to keep an accounting and be responsible. Whereas credit cards are a swipe-and-go mentality, you don’t feel as if you’re spending your money.

Now to the on their nickel argument I’ve heard countless times. Rationalizing using a credit card because you pay-off the balance every month – the old prideful, “My credit card company hates me” – no they don’t, you’re still gambling and they know it. And just because you’re not paying cash now doesn’t mean you’ve saved anything: statistics show that when using a credit card for a purchase, cardholders spend 12 to 18% more.

Lastly, using credit cards doesn’t do much for budgeting your spending. Purchasing with your debit card will place all your transactions in one place, plus you’re not incurring interest rates, annual and other fees.

--Balance for Dads

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