The Credit Card You Need for Each Major Stage in Life

Oh, that's the best laugh I've had all day. I assure you, I know more about how credit cards work than you do. I won't bore you with the details.

But, I guess at this point you have to play semantics. How do you define debt? Look it up in your favorite dictionary, for starters, and you'll see that it's a "liability" or "obligation to pay." By the loosest definitions, your electric bill is a debt.

I have a credit card, and I use it wisely. I pay off my balance each month, for example. But, the instant I am unable to do that, I am in debt with the credit card company. That is a fact that holds for any reasonable definition of debt.

I've heard more than one person try to justify their purchases by saying that "it isn't really debt unless I'm paying interest" or that they're "building credit." Both assertions are false on their face. It really is debt (that you'll end up paying for in some way) and you don't need to build your credit.

Here's the first lesson from the "clue bus" -- if you need to know your credit score, you're doing it wrong.

Credit and debt are tools, of course, but most people seem to be unable to use these tools wisely and end up cutting off their own hands and feet. College and high school students seem to be the most likely to make these poor choices -- maybe it's because they're already loaded up with student debt or maybe it's because they were never taught how to manage money, who knows.

Here's what's remarkable: the goal of a credit card company is to get you to put as much on your credit card as you can afford to pay off, no more and no less. More and you'll default (and they end up paying for your plasma TV), less and they're not making as much interest as they could. (I'm simplifying a bit, of course.) The goal of "rewards programs" and other credit card gimmicks is to encourage you to spend, spend, spend. The remarkable part is how easily and often we fall for it, to our own detriment.

Doug of CO 2:10PM October 03, 2011