Are Credit Cards a Form of Investing?
Video Summary
Many people believe that credit cards are a bad idea, citing the numerous examples of people accumulating debt and being taken advantage of by high interest rates and fees. However, for those who can manage their finances responsibly, credit cards can be a viable option for earning rewards and cash back. The key is to never carry a balance and pay off the full amount each month, which can cancel out any interest charges. Additionally, having a credit card can also encourage people to overspend, as they are less likely to keep track of their spending due to the lack of financial friction when using plastic. However, for those who are mindful of their spending and can resist the temptation to overspend, being strategic with credit cards can be a way to earn rewards and benefits. The author argues that they are one such individual, able to manage their finances responsibly and use credit cards effectively to earn cash back and rewards. They present an example of how using a no-annual-fee cash back card, such as the Citi Double Cash, can earn rewards and cash back, and compare it to investing in other options, such as government bonds and high-interest savings accounts, finding that credit cards can be a more effective way to earn returns.
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