Do We Love or Hate Credit Cards?

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Credit cards are everywhere and most people have one. Do we love or hate credit cards and why? We reveal our opinions in this episode.

Transcription:

Credit Card, some people love them, some people who absolutely hate them. In this episode we want to talk about our beliefs and our stances on credit cards, whether we have them, whether we like them, whether we think people should use them and all that sorta good stuff. So what’s your stance on credit cards? Do you have any give out them. You know what my stance is probably like I’m not a credit card guy, I’m the reason I’m not a credit card guys because when I was 19 years of age I saved some money and went to Europe for three months with my mates and the bank before I went gave me this magic card which I didn’t understand and I ended up spending $12,000 on it. I’ve a chance and came back in at that time. This was before like get on the zero percent interest for two years or whatever rollover that they’re doing now.

And it was Kinda like 20 percent interest I think, or 22 percent interest. It took me six full months of working after I came back at that time because I was working at a shitty librarian job to pay the bloody thing off. Yeah. And it kind of, I think that that sort of experience scars you for life. That’s why I had a similar experience to that as well as always working as a casual, a news agency slash pharmacy and I had these two weeks where I worked like excessive amounts, like 60 hour weeks, two weeks in a row. Okay. So I just took in those payslips and they gave me a five grade even though generally out in the work, like two days a week. And so I ended up putting my honeymoon on that credit card as well as some other things combined with my wife’s 10 grand car loan plus her.

So we started out marriage at I was 20, she was 22 and we were 20, 40 grand at 20 grand, so 10 grand of credit card debt, 10 grand of personal loan and yeah, that took us years to pay off and like we got a bit of help from my mom as well in order to get out of that. So it was so easy to get into the debt and it was so difficult to get out of it that it kind of scarred me. And then I think the next time we got a credit card we got a $1,000 credit card. We just had a $1,000 limit which got up to two grand, you know, a few years later. And it’s kind of stayed there. I had a $1,000 credit card actually after when I bought my first property, they threw one in because obviously they want to get everyone’s spending and it had a $1,000 limit.

They told me that if I increase the limit to 20 grand, I get three points for every dollar that I spent. And at that time I thought points for a cool thing, so I increased the limit to 20 k, I never actually spent much money on it and ended up getting enough points every couple of years to get afraid, Gopro. And then I can the credit card, like it was a silly thing of all. I probably spent like alternate 100 grand over two years and all sorts of expenses and now that’s untrue. I don’t know what I spent. That sounds like a lot funny. I’ll tell you 1:50 grand a year. That time I was spending $100 on my credit card. But was it like. It seemed like I’d spent a lot of money to get a full $100. Toilet Gopro now probably getting wholesale for 200 bucks a pop.

And that’s the thing I think credit cards if used correctly. There’s some people out there who are amazing with credit cards. I have this friend who now lives overseas, but he was a treasurer and so he just lived in excel like he loves excel spreadsheets, managing money, moving money around. That was his vibe. That was his job and how he loved to live and Hae used credit cards to the Max. He got the best out of them. He got the zero percent transfers, which you would then take that money and earn interest on it. He would get all the. He would get all the points and everything as well. Probably never paid a dime in interest ever. And got all these benefits from it. He knew how to do that. It was his passion to work with money and to move money around and stuff like that.

I feel like he’s the minority and he’s the exception to the rule and credit cards can be used really well and some people do them really well. But I think the problem is the majority of us, myself included, don’t use them that way. They don’t take full advantage of the interest free period. All the points scheme. People use credit cards in a really positive way where they keep their wages in an offset account against their property. And then, um, you know, obviously spent everything on the credit card over that 60 day interest period. And then just have a walk back to zero thing just before the interest kicks in and you know, logically if you’re, you know, you’ve got an extra $20,000 off your timeline over 12 month period at five percent is a pretty significant financial benefit for someone to do that. And I completely understand that.

Wanting to save a thousand bucks in interest over a year or whatever, but it just requires diligence and while I am extremely diligent and disciplined with debt or just just I needed in my life like I’ve just got this theory from my dad, which is if you can’t afford it with cash to pay for it all outside of obviously assets. Yup. And I think I think the same thing, like I’m trying to get rid of the credit card and I actually got paid off and I was ready to burn it basically down and a safety net. I didn’t want to close mine for years because I’m like, what if I lose my job and I need that $5,000 radar? At some point it’s in your head. It’s a story you’re telling yourself. Most of the time, but I think the thing is you can create that safety net elsewhere and this is something that I got from the barefoot investor, which is you get rid of your credit cards and then you build up savings and your focus shifts from trying to pay off a credit card to building wealth in your life and it’s like a very small change.

By not having a credit card, you’re then forced to build wealth and you’re forced to build up savings so that you have that buffer. Whereas when you have the credit card to fall back on, you don’t have to do that. Yeah, not incentivized to do that and getting in that habit and we’ve talked about it heaps. The pay yourself first mentality. You build that up and wants your savings account goes past 10 grand or 20 grand. Then it’s like you don’t want to touch it. This shift happens in your mindset. Whereas if you have a thousand dollars saved, it’s really easy to go and burn that on a quick holiday. I can spend a thousand bucks on a night out with the boys. I can watch the guy down the drain like that, you know what I mean? I’m not saying that happens. If you get drunk then it’s.

I forget what you’re spending. Unlike buying all my friends shots like express. I martinis like oh he’s a hotel room for the night. Like just it can easily go or a surfboard or some cool stuff for the kids. Like there is a tipping point with saving and investing where it becomes more of a priority than the small discretionary items that most of the timeline ended up regretting to be honest with Ya. Yup. And something else that I found interesting when I did a video on credit cards was analyzing how much money I would have to have saved in an investment in order to pay for my credit card. Wow. So if you think about, so you’ve got the annual fee for the credit card, which varies from like 80 bucks up to maybe $200 depending on the credit card. And then if you credit cards maxed out, then you go to the interest that you have to pay as well.

And interests can be anywhere from what, like 13 percent up to like 22, 23 percent. It varies by credit card, by credit card, and thinking about just that annual fee, plus my credit card was two grand so you’re not even looking at it that much, but then the amount of the amount of money you’d have to have any investments in shares or in savings or whatever, maybe earning five percent, but then you’ve got to pay tax on that five percent as well. And so you just have to have this huge lump sum of money in order to passively pay for two grandkids credit card. It was just seemed excessive to have it because you’ve got this expense that you’ve created in your life that’s not really adding any value. Whereas getting it’s easy to get rid of a two grand credit card than it is to build up a. can’t remember it was like 10 grand or 20 grand in savings to pay for the credit card. It’s kind of just easier to get rid of it.

I would actually need about $9,423 in investments in order to make enough to pay for that $2,000 credit card, so I would need nine and a half grand in investments to pay the costs of having a $2,000 credit card.

Interesting concept because I just sensory experiences. You said it scarred me. It sounds like you got hit pretty hard as well. I just, I’m, my personality type is pretty binary, like it’s a one or a zero with everything as you know. And credit cards are just in the zero category, so I haven’t thought about them since. Like every time I get a home line, the bloody bank sends me a credit card. I chop it up straight away and get them to cancel the account because I just don’t need that temptation. Yeah. Well my brother walks in. Simon, as you guys know, a couple of days ago when we were in America a few years ago, we met this guy, hey was a lifetime member at the seahawks, one of the NFL teams, the American football teams and Simon setting contact in about six weeks ago. We’re having beers and we’re like, how cool would it be to go to the superbowl next year?

And then I’m like, heat up Steve From America and he hits him up and six weeks goes by, we haven’t heard from him and then on the weekend he’s like, I’ve got you boys superbowl tickets if you want to, you know, this is how much they are. And I think about myself in the old days before I had a bit of a savings buffer for this sort of thing and I would have just gone, hell yeah, like credit card debt, like credit cards, 10 grand gone where now I’m like, okay, I’m gonna. Think about it. I’m going to talk to my wife about it. I’m gonna like, go, is it really worth it? And I’m like, hell yeah, it’s worth it. It’s the superbowl man, like a once in a lifetime thing with my brother, so we’re going to go next year, but taking away the temptation and I’m only doing things that you can actually afford.

I think he’s a way better way to do stuff. And that’s how I think Megan Kelly said in such a good financial position for so many years was my refusal to take on extra debt. Like I refuse to get a bigger credit card. Um, we refused to get a car loan or anything like that. Yeah. You pay for everything in cash, which is. Yeah. Even though it would’ve been so much easier to get a car loan at the time then to live with the pain of only having one car or having a crappy car that if you just left it to idle it would turn off. So you had to keep your foot on the accelerator when here in neutral in order to keep it going. You know, we’ve had some pretty bad cause in our time. Like let’s have a chat about that for a second because you know, I have delayed gratification like materially, but neither of us.

I’ve got a nice time and I do like my like $20 a session. I said I asked her since like his shirt, but the reality is same as you. We had one car for seven years. I think I’d bought eight, seven properties before we bought a second car. Like I was just like constantly delaying the gratification. We drove this secondhand 15 year old Toyota echo that was worth about a thousand dollars that I remember like one night my neighbors when I was in Sydney living with it, it was sorry. Lot four of them got drunk, picked it up off the curb, carried it across the road and put it on my time is Friday on wake up the next morning. And the cows, he’d had a dodgy clutch that didn’t work for the whole time. We owned it and same age man. Like delaying that gratification for what you want most.

And in your instance like the last five years, you’ve had the most incredible lifestyle with your family and being so present to help raise the kids and for me, like I’ve been sort of just in like trying to walk away from my past or something like ingesting every cent that I’ve, not my business, so I haven’t spent any money either. And it’s, so it’s an interesting thing. It’s not the norm. I had with main kill at the very start of our marriage, had a second car so we had her car that she had to call her in for, that was an echo in good condition. And then we’ve got this car that we called the hammer and it wasn’t a hammer, it was just this old bomb of a car that I bought for 500 bucks and then it needed like $1,500 in repairs. So it was like a $2,000 car.

Um, but reggio came up and we couldn’t afford reggio. Yeah. So we let the Reggio lapse and we ended up selling the car to the records for like 100 bucks. And I took a loss on it because I couldn’t even afford bread dough in order to register it and then sell it and wouldn’t have been worth it because I was working on business at the time. But I’m sure that’s something we could have popped on the credit card actually we probably maxed out then and probably couldn’t anyway. But I came home. She even just that ability to let the car go and to be like this would be a great opportunity but we can’t afford it. So the headlock and then you make it where hey glad you get real fake. Cause like when fighting have two cars, I just ride everywhere and at some point it’s, my office was like five to 10 ks each way from my home.

So I like training stuff and I just, I just saw it like that, like it, it’s still not important to me. I came home two weeks ago and I said delays like I didn’t. I was just really wanted to sell my car and she’s like, it’s completely impractical. We’ve got three children. He likes surfing. Your office is like 20 ks down the road. We need a car. And I was like, okay, I’ll shut up about that. But I just, I liked the idea of keeping it simple. Let’s say it like may because may encounter split. So we bought another car so we had a car and the van and I’ve been driving the van which is this six meter long branch. I went down to Brisbane the other day. It’s like a vein to drive kids around and it’s like fully converted, like draw. It used to be like a 15 state of or something.

So that’s my car currently. So we’ve had to buy another car because it’s just guzzling petrol. But I go to Brisbane and for a tournament and the only parking is undercover parking and my veins to hide in it. So I’m like, okay, yeah, I definitely need another car so we’re going to have three vehicles at this point. And I’m like holding on hope to keeping that van because I love it, but I think it’s going to be one of those things that’ll probably. Unless I can Air Bayer and it pays for itself, it’s probably going to have to go because I just can’t afford to keep it at this stage of my life. And like Dave’s cleansing anyway, man. Like letting go. Stuff’s cool. Well, I think part of credit cards which is meant to be talking about is that there are these things in life that you’re like, well this is a once in a lifetime opportunity like this van that we rent out ourselves.

Like this is a once in a lifetime sort of vain if I sell that I’m not going to get it back. Um, but then realizing that you can’t afford it and letting that go is like part of life and part of living without debt and building wealth and getting that delayed gratification that, okay, I’m going to let this go now. But hopefully this pain drives me forward to get earned more money, getting a better financial position to have a better in the future. Of course it will man. Like with, uh, with faith, like things always work out like the mindset that you and I both have like things now. I’m not talking about religious faith, I’m just talking about an underlying confidence that maybe with faith and hard work and a lot of hard work and and some discipline around certain decisions, is it, it’s quite simple, like I’m absolutely until I credit cards now and like I think if you’d got them strong and said work on paying them off and then build a savings buffer and get yourself in a position where you feel comfortable without it, you certainly don’t need it.

I’ve realized from having one when I was ending 300 bucks a week to having one when I was earning 2000 bucks a week, it was only having it there. That was the name. As soon as I got rid of it, it was like I felt completely safe again. Workout not to need it. Yeah. And so yeah, I think we both agree on the same thing. I think there’s certain people out there that credit cards work great for and I know people can be really polarized about credit cards because there are some really good aspects to it and if you’re one of those people then more power to you. I wish I was like you could use credit cards like you, but I think you need to be honest with yourself about how you’re using your credit card and whether it’s actually adding value to your life and helping you build wealth through the point system and all of that good stuff.

Or if it’s actually taking away from it and constructing it and you can always try and get rid of your credit card, then you hide it. It’s generally not that hard to get another one again. So I want to give you credit cards. They always want to keep your credit cards. So yeah, I feel like without a credit card it’s easier to build wealth. I’ve got a really small one that I want to get rid of. Sounds like you don’t have any now for the ones that they give you for free, those bad boys out? Nah, it’s not for me. Yeah, so you guys go out there, you do you, but we don’t think credit cards add enough value to our lives in order to warrant having them and using them on an everyday basis and yeah, we’re just focused on building wealth and building passive income, achieving financial freedom without needing credit cards.

Yeah, and I think that’s a mindset around anyone that I’ve ever met that’s got financial freedom like a quarter with an absolute legend. If a client yesterday, who over the last 30 years is port for homes and built for granny flats on the main unit is 53, gets over 100 grand a year, passive income for life. Now he, you know, he just, I said to him, you know, a few of my education, where would, what would you do differently? And he’s like, I probably wouldn’t do anything differently. I might hold onto a couple of the properties that are sold, but he’s like, what I would say to myself is it, it takes a little bit longer than you expect it’s going to, but you will get there over time with the right strategy. And discipline and it was kind of just another realization that it’s slow and steady that wins investing rise.

It’s not a sprint, it’s not a get rich quick grab, which feels like, you know, the discipline of having a credit card kind of feels like that for me. It’s kind of just another reason to work an extra year in your life when you don’t have to. So go out there, get rid of my credit card, I’m going to pay that off and get rid of that bad boy. Hopefully soon I’ve got a strategy to get rid of it. And so I’m excited that I’ll talk about that in another video. Maybe you can cut it on camera, like we can cut the credit card together, but just hide the number. Like I’ll cut it out. But it’s own camera. Everybody can see it when I first at it. Yeah. Because I don’t have it in my wallet. I don’t use it. It’s just kind of sits there.

I Steal Ryan’s while at every time we get for lunch and I like just it on paper because he doesn’t check it off the map. And I said it’s not always dry and shit. Not sure today. Maybe. Alright guys, thanks so much for watching. I wish you the best with your credit cards and building your wealth a go ahead and check out one of our other videos that we’ve done like and subscribe to the channel or hello bar to on-property dot com dot a u and me and Ben will be doing a Webinar soon on how to achieve financial freedom through investing in property. So that’s going to be really exciting. Hellbent on property.com dot EU. And you can sign up for that. And until next time, stay positive by.