Credit cards can be easily considered one of the most controversial financial instruments and a lot of influential figures in the finance world had a say about them. “Shark Tank” investor Mark Cuban is one of them, being known for his stance ever since 2008.
“Cut up your credit cards. If you use a credit card, you don’t want to be rich. The first step to getting rich requires discipline” he was writing in the already famous “How to Get Rich” blog post.
In 2014 he was claiming that he had a few when he was in his 20s but believed that they were “the worst investment you can make”, while in a 2017 interview, he summed up the best financial advice he received: “From my dad: Don’t use credit cards.”
Of course, Mark Cuban is talking about those who are acquiring interest but, nevertheless, a few things can be learned from his opinion on credit cards.
Nothing new, but clearly evergreen advice
The billionaire is absolutely right, as carrying a balance can and will set you back, that’s why it’s highly recommended to pay any credit card debt before building an emergency fund. After all, it’s not a secret that they charge really high-interest rates and you can end up owning more with each month.
According to recent data from the Federal Reserve, credit cards charge, on average, 16.43% interest. Of course, this rate can easily outpace any return you can earn, thanks to savings and investments.
Having a credit card is not the worst
Even though Mark Cuban advises quitting using credit cards, we shouldn’t forget that they also have some solid advantages!
Specifically, as long as you use them wisely, credit cards can earn you rewards, such as points, miles, or even cashback, but, most important, they are great for building credit.
The latter is key to being able to access better financial products, including car loans, small business loans, or even car loans. Again, as long as you use credit cards with great care, paying your bills on time, and never charge more than you can afford.
Yes, Mark Cuban is right from many points of view and his advice is great for those who want to avoid any debt. But again, never ignore all the pluses credit cards have, as they can also have a positive impact on your finances!