‘Little plastic grenades’

“A new survey notes that a large percentage [of millennials], 41%, think using a credit card is a ‘scary thing’ while 6% think a late payment will help their credit score. … The LendEDU study noted that 45% of millennials didn’t know the interest rate they pay on credit cards while nearly half, 48%, say they keep a balance on their credit card each month rather than pay it off.”
“Study: 41% Of Millennials Think Credit Cards Are ‘Scary,’” ValueWalk.com

Years ago, I was talking money with a smart young colleague when he mentioned his three accounts.

“I’ve got my checking account, my savings account, and my credit card account,” he said.

According to my friend, that Visa “account” was no different from the money he kept at the bank—just one more source of cash. Seriously? I broke the news to him: Using a credit card is just like taking out a loan.

Fast-forward to today, and the alarming new LendEDU survey cited above. I don’t mean to pick on millennials, whose financial literacy isn’t getting much of a boost from our educational system. But I continue to be worried by how poorly many people understand credit cards. First, you’ve got to know the card’s interest rate. That’s what you’ll be dealing with if you don’t pay your bill in full and on time each month. And those on-time payments lead to a healthy credit score. But it all comes down to the most basic idea of all: You’re taking out a little loan each time you use that card, so use it wisely.

Having at least one credit card is often a necessity, of course, whether you’re renting a car or buying a mattress. I get it. according to LendEDU, 48% of millennials have at least two of these “scary things.” People fear what they don’t understand. So let’s replace some of that fear with knowledge: Credit cards are not cash. They deserve the same level of care and responsibility as a car loan or a mortgage.

I’ll leave you with some great advice Senator Elizabeth Warren once shared with me.

“I don’t like credit cards. They make overspending very easy. They can make life a lot more complex and stressful,” said Warren, who, thank goodness, spearheaded the creation of the Consumer Financial Protection Bureau. “My advice is to treat them like what they are: little plastic grenades that must be handled very carefully.