Some people just shouldn’t have credit cards. Period. Don’t get me wrong, credit cards can be a great tool for personal finances. They can be used to build credit, earn rewards, make safe and secure transactions, and even consolidate spending and budgeting. But there’s a number of personality types that, for one reason or another, can make a person a credit card liability. And for that reason, these people probably shouldn’t be using them at all.
Here are my top 6:
The impulse shopper
You know who you are. The type of person that can’t help but buy things they know they can’t afford, that is: if they bother considering affordability at all. People who can’t seem to keep their shopping habits to any sort of spending budget probably shouldn’t be using a credit card.
Impulse buys aren’t the end of the world all the time, but they certainly add up. And then, suddenly, you’re stuck with a credit card bill you can’t afford. The best advice for using credit cards is to make sure you never use it to go beyond your normal means. Use it wisely and your credit card can be an asset; abuse it, and it will become a liability.
An impulse shopper doesn’t have this respect, and should therefore stay away from credit cards until they do.
The key to responsible use of credit cards starts with having well organized finances. Without a plan, budgeting or any kind of organization, it’s going to be difficult to keep your credit card usage under proper control. Tracking how much you’ve used it and knowing how much you can afford is just the start, however.
Paying the bill on time and checking your balance even when you aren’t using it is also a big part of responsible credit card usage. Same goes for reading the fine print, canceling old accounts, and a number of other responsibilities.
It doesn’t take an accountant to manage, but credit cards are simply not a good idea for the chronically irresponsible.
The spoiled brat
People who are used to getting exactly what they want make very dangerous credit card users. Especially those who spend money without the understanding of what it takes to earn that money. The concept of a credit card may well be fully understood, but it won’t matter when the money is being spent. These people are too worried about getting the things they want. And when it comes time to pay the bill, the bare minimum is the route they often choose. Because it’s the easiest way.
Obviously you can see what trouble this situation leads to. It’s a much more sinister form of irresponsibility than the rest. That makes the spoiled brat one of the worst types of people (even on this list) to have a credit card.
The overwhelmed student
Students are high risk credit card users. In fact, it’s been made more difficult for a student with no credit history to get a credit card in the first place, as a result. But not impossible.
One of the reasons students don’t make good credit card users is because they are relatively new to the idea and sometimes don’t fully grasp the concepts of interest and credit. As a result, they end up in situations they didn’t fully understand the consequences of.
Another reason students tend to make terrible credit card users is that unexpected expenses of living on your own (for the first time) can turn a “for emergencies only” credit card into a ticking time-bomb. Especially for someone with little to no income (typically). Not to mention the increasing costs of tuition for those of you paying your own way.
The last thing a student needs when they graduate is high-interest credit card debt on top of a mountain of student loan debt. If you must have one, get a secured credit card.
The over-generous guy
Everybody loves good guy Greg! He got a credit card just for these reasons, and he trust you’ll pay him back later, somehow. Though, this is the third time this week, he’s done this, and you know most people he’s paid for won’t ever pay him back. It’s actually a very common story. And good guy Greg is probably going to regret using his credit card this way.
Now, there’s nothing wrong with being generous. If you know you can afford it, I’m not trying to stop you from treating your friends and/or family. It’s just that: an easy way to get burned with credit card debt you can’t afford to pay off is to offer it for other people’s purchases. Even if they give you cash right there: you still need the discipline to save the cash so the purchase can be paid off.
If you are the generous type, try to be generous with cash and not your credit card. And if you must, just be very careful…
The below image is word-for-word something an acquaintance once told me when he thought he had figured out a way to “beat the credit card companies”. He used low interest balance transfer offers and planned on transferring the debt back and forth across a number of cards without ever having to pay a dime for his purchases. Obviously this plan didn’t work out too well for him.
Before you get a credit card, be sure you fully understand what you’re getting into. Educate yourself. Start out slow, like with a secured credit card, and get used to keeping track of purchases as well as paying off the balance in full each month. Credit cards are a serious tool meant for responsible purchases when cash isn’t readily available. It’s not a great tool for long-term credit.
Credit cards are not for the financially ignorant.