I still don't get it. My credit card is a device by which my bank gives me some incentive (aeroplan miles, cash back) to put my transactions on a card and then immediately pay them off, instead of performing those directly against my bank account.
I feel that on a rational level, I understand the credit card companies' game, but more than that, I fear them and their power and intelligence.
Sure, I'd like to think I'm smart enough not to be tricked by them, but it's safer to avoid the deal with the devil altogether.
I'd only say two things in defense of credit card use (both valid in the US - not sure about other countries):
- Credit card companies are required to compile all of the information I mentioned into a fairly standardized form per the Truth in Lending Act (see: https://www.federalregister.gov/articles/2010/02/22/2010-624... )
- Credit card companies are competing for your business. At least with decent credit scores, it doesn't make sense for them to have unreasonable terms or try to screw you over
Get a no-annual fee credit card. Put it in your sock drawer. Take it out every 6-12 months and buy lunch with it. When you get home put card back in sock drawer and RIGHT AWAY pay off the amount you had for lunch on your bill. (You almost always can make payments on a zero balance. Citi was kinda weird about it but I make payments over my balance all the time and only Citi gave me a "can't pay over 20% of your balance").
Just having the card and not using it "counts" in your score. The lunch is just to keep the bank from marking your card as inactive and cancelling it.
If you feel you will be tempted to use it to increase your overall spending - then by all means avoid it.
I feel like the issue isn't just the TV. It's that it's the TV, plus the next thing, plus the next thing. Or in other words, tiers of debt usage from best to worse: (1) completely avoid paying interest charges, (2) pay interest charges on large purchases with full knowledge and planning and in a responsible manner, (3) pay interest charges without knowledge of what you're paying or what to do about it.
Personally, I think it's a failure of financial literacy of the US educational system on one of the most important aspects of kid's lives. I have met incredibly educated people that are still ignorant about how credit cards/interest charges work and only internalized "Never use credit cards!" advice. I've also met less educated people who never think past "This is what it says the minimum payment is, so I pay that."
Neither position is good. And they. aren't. that. complicated.
The disclosure sheet gives you annual fee (if any), APR when interest is charged, and any penalties that may result in an APR adjustment. After that it's simply "If you have a >$0 statement balance from the previous month after your due date and payment, then you begin accruing interest on the daily total of your balance." Not rocket science.