You might be surprised at Mark Cuban’s advice on credit cards.
- Mark Cuban is a billionaire entrepreneur who occasionally gives helpful advice.
- It is not advisable to use credit cards and their high interest rates.
- He believes you won’t use cards if you want to get rich.
Credit cards are a common financial tool. You can earn rewards, such as points, miles or cash back when you charge purchases with a credit card. Many cards, especially travel cards, also offer other unique benefits to cardholders, such as free companion plane tickets or free checked baggage.
Despite the fact that credit cards can help you earn rewards, enjoy perks, and even improve your credit score, there’s some controversy over whether you should use them. In fact, several financial gurus have spoken vs using credit cards. And billionaire Mark Cuban is one of them.
Here’s what Mark Cuban thinks about using credit cards
Mark Cuban is a self-made billionaire, and the advice he’s given others about using credit cards is clear. Cuban wrote on his blog in 2008 that “If you use a credit card, you don’t want to be rich”, and he urged his readers to cut up any cards they have. He thinks those who want to get rich will avoid using credit because “the first step to getting rich requires discipline.”
Cuban has been consistent in this position for many years, stating in a 2014 interview that he believes “credit cards are the worst investment you can make”. The reason he gave for avoiding the cards in this interview was that he can save money on interest by having no debt, and that interest saved that comes from paying off the cards in full offers a better return. than he could get with other investments, such as putting money into stocks.
There are problems with Cuba’s advice
Cuban is absolutely right that going into debt on credit cards is not a good financial decision, and he’s also right that if you have a credit card balance, it’s a good idea to focus on paying it off before you invest. Many credit cards have exorbitant interest rates – sometimes as high as 17% to 20% – and you’re unlikely to earn that much on the stock market.
However, his advice ignores the fact that it is possible to use a credit card while being disciplined in spending. and avoiding going into debt. You can charge for purchases in order to earn rewards, and if you have a budget and are financially responsible, you can pay off your card in full before you end up paying even a penny in interest.
Not only does this approach allow you to recoup money or other valuable rewards for spending that you would be making anyway, but it also helps you improve your credit score. Charging card purchases, paying off your balance in full, and maintaining a reasonable credit utilization rate can all help you achieve a good credit score that opens financial doors for you.
So while you might want to listen to Cuban about the benefits of avoiding carrying a credit card balance due to high interest rates, following his advice for avoiding credit cards altogether is probably not in your best long-term interest. Instead, you need to make sure you work on developing your financial discipline – which he’s right, it’s the key to building wealth – and you need to use credit cards as a tool in your arsenal while spending responsibly.
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