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In today’s episode of The Stewardology Podcast, we will look at the purpose, promises, perks, and pitfalls of credit cards. How should wise Biblical stewards view credit cards? Are they dangerous? Are they useful? Both? Join us today as we discuss the topic of credit cards and wise stewardship!

 

The Purpose of a credit card:

  • A credit card is a financial tool wherein a bank gives you a loan, known as a credit limit, that you can use for everyday expenses or large purchases. Like traditional loans, a credit limit is subject to interest, known as APR, which is added to your statement if you don’t pay off your balance each month. (BankRate.com)

 

The “Promise” of Credit Cards

  • “Convenience”  
    • While this is true, the convenience could make spending WAY too easy for someone that does not have the proper checks-and-balances built into their budget
  • “Simplicity”
    • One actual payment that covers multiple purchases
    • Many banks also provide data showing how much we spend in categories like food, clothing, and travel.
  • Safety
    • When carrying cash is not a good choice or best practice, a credit card is helpful. If you are robbed, cash will most likely never get back to you. But a credit card adds an additional level of safety where the credit card company can “turn off” the usage of the card and also free you of the responsibility of the unauthorized purchases.
  • Reservations:
    • Since our society is moving more and more toward “cashless” operations, credit cards enable the user to guarantee rental cars, hotel accommodations, and many other things that need to be reserved.
  • “Cash flow”:
    • If one finds a discount on an item yet does not have the full amount of cash to purchase it, the Credit Card company has no problem lending you the money to get it now! Using a credit card enables us to purchase it now and pay for it next month when you have the money.
  • Emergencies: 
    • Credit card companies tout that in times of emergencies, they are there for you!  
      • When there are expenses for medical care, car repair, or some other emergency and we don’t have enough cash or a checkbook with us, OR we don’t have enough to cover the emergency expense, they are there to “rescue” you.
      • Some portions of the above information was drawn from: Clinton, Tim, Bethany Palmer, and Scott Palmer. The Quick-Reference Guide to Counseling on Money, Finances & Relationships. Grand Rapids, MI: Baker Books, 2012. Print.

 

The Pitfalls of Credit Cards

  • TEMPTATION
    • Easy to use and easy to spend more than wanted or needed!
  • Impulse purchases are easily made!
  • Increased spending. People who use cash spend 30 percent less than those who use credit cards, so it’s a good idea to use cash whenever possible to stay within the budget.
  • Losing track of spending. Whipping out a card is so easy that many people don’t stay on top of the amount they’re spending.
  • Carrying a balance beyond a month.
  • Only making minimum payments
  • Missing a payment
  • Not reviewing all purchases each month
  • Taking out a cash advance (fee on top of fees!)
  • Maxing out a credit card 
  • Not understanding introductory 0% APR offers
  • Applying for new/additional credit cards often
  • Additional interest, fees and expenses. 
    • Annual fees are charged for some cards, but the real culprit in this area is the interest rate banks charge on the unpaid balance. These rates may be from 8 to 35 percent, and the interest is paid on the accumulating balance each month. Some people think that paying the minimum is acceptable, but paying only the minimum means that it will take a long time to pay off the balance, and during that time, the total interest payment soars.
  • Obligations on future income. 
    • When people sign the agreement to open a credit card account, they make a commitment to use future income to pay the balance. The more debt that is incurred, the more future income is obligated.
  • Worry and conflict. Beyond the numbers on the statement each month, the emotional and relational costs of the misuse of credit cards is staggering.
    • Clinton, Tim, Bethany Palmer, and Scott Palmer. The Quick-Reference Guide to Counseling on Money, Finances & Relationships. Grand Rapids, MI: Baker Books, 2012. Print.

The Perks of Credit Cards

  • Convenience 
  • Building credit
  • Earning rewards (Cash back, airline miles, etc)
  • Fraud protection
  • Price protection
  • Special offers
  • Extended warranties
  • Operate cashless
  • Tracking of spending
  • Travel benefits:
    • Rental car insurance
    • Roadside assistance
    • Lost/delayed baggage insurance
    • Plus much more…

 

The Good Steward’s Practice for Credit Card Use

  • Live within your means. Credit card use is never outside of your budget!
  • Always have the cash on hand for ALL purchases
    • “Don’t Buy Stuff You Can’t Afford” – SNL Video
  • Always pay the balance off at the end of each month
  • A credit card is not an Emergency Fund. Don’t plan on using a Credit Card for emergencies and pay it off over time.  Use your Emergency Fund.  That is what it is there for!

 

Biblical Principles to Keep in Mind

  • If we have borrowed money, we must repay. The use of a credit card is an implicit promise. We MUST keep our word and pay it back.  
    • “It is better not to vow than to make a vow and not fulfill it.” (Ecclesiastes 5:5, NIV84)  God takes commitments very seriously. When we sign up for any kind of credit, we make a solemn vow—to the bank or other lender, but also to God—to pay what we owe. Some of us may think that paying it eventually is good enough, but the proper use of credit cards means that we pay off the full amount each month.
  • Timely payments Glorify God!
    • “Give everyone what you owe him: If you owe taxes, pay taxes; if revenue, then revenue; if respect, then respect; if honor, then honor. Let no debt remain outstanding…” (Romans 13:7–8a, NIV84). Credit cards give us the opportunity to put off the payment of debts, but we shouldn’t take this opportunity. Instead, the pattern of our lives in every area should be to pay each person and institution what is rightfully due.

 

Closing/Application:

Credit cards are simply a tool that could lead to great ruin if used without checks and balances. One must use great caution when using credit cards. On the other hand, they do provide convenience and some benefits if used properly. At the end of the day, if you live with revolving credit card debt, you are lowering your own standard of giving and living while funding someone else’s luxurious living with your hard earned money.

 

 

 

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