Are Holiday Credit Cards a Trap?

Speaker A00:00:28

Listen to this. About 42% of adults carry credit card debt month to month. Roughly 30% of holiday shoppers choose to pick the 0% promotional financing offers.You see them everywhere whenever you're shopping. 50% of those using those promos. Here's the problem with that. They don't pay off the balance before the promo ends.When carried debt, the median payoff time for holiday debt is six to eight months. And listen to this. The average interest paid by spring, you ready for this? Is roughly $700 to $1,000.And the median holiday balance carried past the season is about $1,200 to $1,500. Which leads us to today's question. I got this one in. I said we got to talk about this on today's show. Ralph.I always tell myself I'll just use my credit card for convenience during the holidays. But somehow I end up paying for Christmas until spring. What, what am I doing wrong? Ralph? Here's the truth. Credit cards promise convenience.That's what they do. But the problem is oftentimes they deliver chains.Let's talk about the truth behind those holiday rewards and easy payments and credit card debt on today's show.

Speaker B00:01:39

This is Financially Confident Christian, your daily dose of gospel grounded insight and faith driven tips to help you break the cycle of financial shame with confidence.

Speaker A00:01:51

Welcome to the show. I'm Ralph. I'm a business coach and my goal every day is to help you break that cycle of financial shame and do it with confidence.And unfortunately in my accounting practice, working with individuals and small business people, I've seen how credit traps us into, into what we think is a reward, but it just traps us. And I've been there too. I think about how many credit card offers and buy now and pay later things. I'm going to earn those points.I'm going to make a this is going to be such a good deal. I can buy this now. I don't have to pay for it for later. And the promise for so many of us and me included, I've got the laser focused on me today.It actually brings buying pressure and regret. So I'm going to tell you right now, here's my warning. I don't usually give you a warning at the beginning, but watch those rewards deals.Let me tell you about this client. I had this client, she was super excited about this cash back for using her credit card. She said, Ralph, I'm going to take this credit card, man.I'm going to use it for everything this holiday. And she came in to see me to get her text. And she said, ralph, you're never going to believe this.And she was asking me about this because she wanted to know if this was taxable, but she had made $400 in cash back just from our holiday spending. And I said, that's fantastic. That is great. And then I said, okay, well, how did that play out? She goes, well, the problem is this.I spent a lot of money during the holidays, Ralph, and I really wasn't able to pay it off. And I said, well, there's a problem there, isn't it? And I said, do you have your credit card statement? She pulled it up on her phone.I said, let's go look at this statement because it's cool. You made $400 back. I wanted to find out what credit card she had, how she was able to do this. Well, first of all, I looked at how much she spent.I was like, wow, you certainly have a big holiday budget. She goes, well, you know, I got an increase on my credit card. They gave me more money to spend. It's like.So I just charged it up And I made $400, Ralph. I said, yeah, but here's the problem. You paid $1,000 in interest just through March, and you're still not able to pay that credit off yet.There's a problem here. Which leads me to a quote from Dave Ramsey. I don't always agree with David, man. He is right here on this one, 100%.Now, I do not take the same strong stance that he takes that never use credit cards. But this is what he said. He says, credit cards are like snakes. Play with them long enough and you'll get bit.So let me ask you right now, as you're listening or watching to this, have you gotten bit? It's not fun when you get bit. Which leads me to this. I have a special call to action right now.If you've got a story to tell, something about credit or something about finance, Christian finance, I would love to hear your story. I would love to hear your journey. I'd like to hear how we've gone from financial regret to financial confidence.Maybe your story could inspire others and make a difference. If you've got a story you'd like to share, here's what I want you to do. Go right to financiallyconfidentchristian.com contact again.You can tell us what's going on. Share your story. Hey, we may even have you on the show in a future episode. Go to financiallyconfidentchristian.com contact.Well, let's get Back to our show today. Let's restate the question because this is a great question from a listener. How do I avoid credit card rewards? Trap. And it's really a trap, isn't it?So first thing I want you to remember, rewards aren't free. See, here's the thing you got to understand. Credit card companies make money based on interest. They're not making money on the points they give you.They count on you messing up. They count on you slipping those buy now, pay later things.They're wonderfully profitable for the banks to do those because they know most people won't pay it off.Now listen, if you're one of those people that can pay it off, like my wife and I, we bought a new bed and they had this seamless cash offer for three years, I'm going to pay it off. But if you don't have the regimen to do that, and I'm not calling you, I'm not judging you, but the banks encourage you to not pay it off in time.So, number one, remember, nothing is free in life. Rewards aren't free either. Number two thing, debt steals your peace. So you'll never be able to celebrate freely when you owe for it later.Because so many people, and if I'm being honest, I was stuck in that cycle of debt for so long. And it just lasts, and it lasts and it lasts. We talked about that statistic at the beginning.People are going into this holiday season still paying off. This is a sad thing to say, several years worth of holiday debt. So remember that debt steals your piece.Another thing I want to encourage you to do, it's all about awareness, really. Right? So track your spending this holiday season. We've talked about this a little bit on the show already. Use an app, use a notebook.Every time you swipe that credit card, think about it like this.So one of the things that my oldest son does, every time he swipes that credit card, in his mind, he thinks, I got to take that money out of my checking account. He's using the card for the rewards, which is fantastic. He does a great job with that.He's using it for the convenience, but once a week he pays that credit card back. Maybe that doesn't work for you. Maybe you don't have the regimen to do that.I'm no judgment here, but if you can do it, then consider that withdrawal. If it doesn't work for you, then think about an envelope system. Here's how much I'm going to spend during the holidays. Put it in an envelope.And once it's gone, it's gone. Or. And I'm not a big fan of debit cards, but if you're struggling with debt, this is a great time to use a debit card.Which leads me to the next thing.Debit cards and cash really helped us because I truly believe psychologically, when you see that money leave your hand, man, I remember as a kid, like, I get a couple bucks for Christmas, you know, this woman, gimme this and I'll tell you.It was easy to spend mom and dad's money, but man, when I was taking that money out of my own pocket and passing that $10 bill or that, I was like kidding me. Five dollar bill across me, I was like, wait a minute, it makes you think twice. Well, as an adult, you think the same way.Another encouragement I want to give you, pay it off. If you already have a balance, that's okay. Create a 60 day payoff plan. Don't let that interest continue to linger.That cycle is just going to bury you deeper and deeper. So if you've got a balance, let's talk about how to pay it off.I've got a ton of shows on the website to talk about how to break that cycle of financial shame, especially credit card shame. Because as Dave said, they're like snakes. And when you get bit, they leave that venom. And that venom hurts for a long time.Which leads me to today's Bible verse. And this is kind of a harsh one, but I got to share it with you out of love. Proverbs 22:7.The rich rule over the poor and the borrower is slave to the lender. If you've listened to my show for any length of time, you know Ralph loves this Bible verse. I don't love this Bible verse, but it speaks truth.And this is so true. If you are continuously in debt, you are a slave to those lenders. And that's how lenders make money. They're doing a service. I get it.I'm a capitalist. I believe in the free market. But understand that's their goal. When you see those promo offers, we offer this much in credit card rewards.Just understand, if you play their game, you might get bit. You got to have the regiment not to do that. Well, how about we pray right now, Lord, right now.We don't want to get bit by that snake of credit card debt. So we ask you to give us discipline right now. Give us wisdom to use credit.And Lord, if we're one of those folks that can't do it, give us the understanding of how to do it better because we want to desire freedom more than those rewards, Lord. And teach us, Lord, to live within our means. You provided for us.You didn't say you're going to give us comfort, Lord, but you said you'd give us provision. So help us to embrace that.Help us to find contentment in that and help us to really have that freedom and discipline and wisdom when we look at the joy of the holidays and not going broken. And we ask this with confidence in the name of Jesus, Amen. All right, so here's your one action item for today.I want you to just think about one holiday purchase.I'm not asking you to do much, just one holiday purchase and switch that from credit to debit or maybe even cash this week and feel that freedom that comes with control of doing that. And again, if you've got a story for the show, I would love to hear it. Your story might very well be featured on the show again.You can get to us by going to financially confidentchristian.com/contact. I would love to hear. It's what grows the show and and I love hearing from my listeners. So thank you for joining me today.Remember, holiday shopping can be tempting. There's a lot of joy in that.But stay mindful of your financial well being at the same time and pledge today you're going to switch one holiday purchase to cash or debit this week and embrace the peace of mind that comes with control. We talked about it yesterday. Build that intentional holiday spending plan. So go out there today and be a financially confident Christian.I have confidence in you. Have some confidence in yourself. Stay financially savvy. God bless you. And you have a great day today.