Deep Dive
Shownotes Transcript
According to the Federal Reserve, 8 in 10 adults have at least one credit card. And today, we're going to take a closer look at those eight people. So close that we can see their pores and smell the breakfast crunchwrap sausage they had this morning. And I know you're hoping to live mas, but at this point, I just hope you live. Yo quiero Taco Bell. So let's break down the eight types of credit card people, all with different motivations for using that precious plastic.
And if you have a credit card, I guarantee you fall into one or more of these categories. So consider this your financial buzzfeed quiz that's somehow more accurate than the which Taylor Swift era are you based on the pet you choose quiz. I'm in my reputation era, so don't come at me in the comments.
I'm a man filled with vengeance. - Don't wake the snake. - Before we jump in, hit those like and subscribe buttons and share this with your friend who could use a Taco Bell intervention. That's not what it sounds like, it's just their newest menu item. All right, the first type of credit card person is the one who says things like, "I pay off my card on time and in full every month. I never pay a dime in interest. I treat it just like a debit card." And I like to call this person,
the perfect spender. Not to be confused with perfect strangers, if you know, you know. And here's the harsh reality this person either doesn't know or chooses to ignore. Even if you pay it off perfectly, every study shows that you spend more when you use a credit card. And you might not even realize you're doing it. In 2021, researchers at MIT conducted a study using fMRI technology to examine brain activity during the moment of purchase.
and they focused on the reward center of the brain that releases dopamine, that feel-good chemical. Their conclusion? Quote, shoppers with credit cards are willing to spend more on items, check out with bigger baskets, focus on and remember more product benefits rather than costs, and make more indulgent and unplanned purchase choices. So there you have it.
The perfect spender isn't quite so perfect after all. Now, if that's you, I double dog dare you to try the challenge at the end of this video, and I guarantee you'll save money. Now, I would triple dog dare you, but it is a breach of etiquette to skip the double dog and go straight to the triple, and it's actually illegal in Utah. They put you in jail.
Right away. No trial, no nothing. All right, the next type of credit card user is the guy who says, this thing pays for my vacations. I never pay for flights. I get free hotel stays. And the cash back more than pays for my annual fee. We'll call this guy the rewards redeemer. This is probably the most common type of credit card user. Rewards and cash back are the top reason people keep their credit cards.
But what these rewards redeemers might not realize is that credit card companies run thousands of experiments on consumers every year to get them to chase the carrot of rewards through more spending. And they are experts in consumer behavior. They know you better than you know you. And I got the tea from an ex Capital One manager who basically told me that these rewards programs are intentionally created not to bless you, but to screw you over and get you addicted
to the measly rewards. And you think you're winning because you have 100,000 points, but they can devalue those points at any time. And when you go to redeem the points, you might end up just getting a $25 gift card to Dave and Buster's. More like Dave and Busted, bro.
Didn't land as hard as I wanted it to. Mission failed. We'll count next time. And aside from the whole spending more to get rewards problem, there's an even bigger issue with the whole reward system itself. Recently, the Fed conducted a study to determine who actually pays for these rewards. And what they found was, as we say in the South, ugly as sand.
And here's the direct quote. We estimate an aggregate annual redistribution of $15 billion from less to more educated, poorer to richer, and from high to low minority areas, widening existing disparities. That's pretty gross. I'm going to go throw up now. Now, I don't know about you, but I'd rather not be part of a predatory system where you benefit from other people's pains.
Which brings us to the word of the day, schadenfreude. A German phrase that means deriving pleasure from other people's misfortune. So next time you brag about your free hotel stay, I'm calling you out for your schadenfreudian slip. See what I did there? You gotta admit, that was good. That was like that transcended dad joke.
Okay, the next type of credit card person is the one who says, credit cards are so much safer than debit cards. I call these people the fraud protector. And I actually have some empathy for this person. They want peace of mind and they want to protect their hard-earned cash. And to be fair, credit cards do have solid protections. But here's the thing, so do debit cards. They're covered under the electronic fund transparency.
Transfer Act, or as I like to call it, EFTA. Not to be confused with UFTA, which is the Minnesotan phrase to describe pretty much any emotion they're feeling at any given time. Thanks to this act, if your physical card is lost or stolen, your maximum liability is 50 bucks, as long as you report it within two days.
If your card number is stolen, you have zero liability as long as it's reported within 60 days. Plus, if your debit card has a Visa or MasterCard logo on it, you're already covered by their zero liability policies, which covers credit and debit cards. So while the fraud protector's intentions are good, they're just a little misinformed, like your Uncle Steve who keeps warning you about chemtrails.
Thanks, Uncle Steve. We'll take it from here. Not the sharpest apple in the barrel. And speaking of airplanes, next up is the credit card user who says, I need a credit card for travel, rental cars, and hotels. We'll refer to this person as the world traveler, even though they've actually only been out of the country twice. And once was an accident. You think you're getting on a two-hour booze cruise? Next thing you know, you're whale-watching Nova Scotia. Happens to the best of us. We've all been there. Ha ha ha.
What this person needs to know is a debit card can handle those things, even the whales. My debit card has never stopped me from gallivanting around the globe. Now, to be fair, some car rental places do have more requirements for debit card users, like putting down a larger deposit. But if you do some quick research before your trip, you can avoid that problem altogether.
And to prove it, I made a whole video about this topic that I will link below in the description. So if you're a world traveler, no need to hang on to your credit card. Just like there's no need to hang on to a jar of Nutella that you bought in Europe. They have it in America too. It's not a flex. It doesn't taste better over there. Actually, it does. So they give you one of those little Stroopwafels with your espresso.
So good and tasty. Okay, the next type of credit card user is the one who says things like, I just love the convenience of a credit card. And I'm calling this person the convenience shopper. And I'm also calling BS here. Their argument is perhaps the dumbest of all, because debit cards are just as convenient as credit cards with the added convenience of never going into debt. So if what you mean by convenience is that you can use someone else's money right now to buy the thing you want and just
hope you have the money to pay for it later, that is a terrible financial plan. If you can't afford it right now, don't buy it right now. If you don't have the money, wait until you have the money. And that's all I'll say about that. Next up is the person who says, I need my credit card in case of emergencies. And we'll call this person the emergency shelter.
And I've got news for them. That's what your emergency fund is for. Oh, is there such a thing? The peace of mind that comes with having a big old pile of cash tucked away just in case is a game changer. And the fact that four in 10 have zero in savings is a big problem because that means they're probably using credit cards to fund the emergencies. So once you've paid off your consumer debt,
I recommend having three to six months of expenses in a fully funded emergency fund. And that should be plenty. If you were to use a credit card to pay for an emergency and you end up paying interest because you didn't pay off the balance in full, it just makes the emergency more expensive, like 22% APR more expensive. So that little plastic card might give you the illusion of safety, but it's not a peaceful reality. Before we move on to the next credit card user, I want to tell you about another type of person who makes smart money moves, particularly when it comes to savings.
and we'll call this person the high yield hero. This is the type of person who has a high yield savings account like the one offered by online bank Laurel Road, one of the sponsors of
of today's video. With Laurel Road's high yield savings account, you can earn a great interest rate of 5.15% APY right now, which means you're making money while you sleep. And there's a ton of other great perks. No minimum balance, no monthly maintenance fees, and your deposits are FDIC insured. So this is a great place to store your emergency fund or sinking funds as you save up for that next big vacation. So be the hero you deserve and go to laurelroad.com slash george or click the link in the description to get started.
Another smart move, keeping your personal info away from data brokers who sell it for a profit. For that, check out Delete.me, another sponsor of today's video. Delete.me finds and removes your info from hundreds of these data broker sites, and they send you an easy-to-read report. And I don't know if you've heard, but there's a new scam out there called pig butchering, where a stranger texts you by mistake and then butters you up
to steal your bacon. And listen, all they need is your phone number to make it happen. And Delete.me can help wipe your phone number from the creepy corners of the internet. So help protect yourself and the risks of identity theft and online scams with Delete.me. And right now you can get 20% off their plans by going to join delete.me.com/george or just click the link in the description. The next type of credit card user is the person who says, "Having a credit card makes me feel more secure." Let's call this person the fear tranquilizer.
And what they need to realize is that credit cards give you a false sense of peace while adding on a very real sense of stress, anxiety, and risk. So instead of tranquilizing yourself with credit cards, get to the root cause of your fear and address it with facts. Because facts are your friends. And I learned that from my best friend, Dr. John Deloney. I don't want to be your friend anymore.
So here's why credit cards are a terrible solution to fear. Using other people's money makes you feel less in control because your body is keeping score. It knows that you're not truly safe when you borrow money or owe someone money. When you don't use debt, you have less risk, less stress, fewer payments, and more peace. Couple that with an emergency fund and sticking to debit cards and cash, and you'll be amazed at how quickly the grip of fear will begin to loosen.
Okay, last but not least is the person who says, I need a credit card to build and keep up my credit score. And we'll call this misguided young buck the credit score keeper. Here's why I say misguided. In reality, you don't need a credit score to live your financial life. And therefore, you don't need a credit card to keep it up. Now, if you've been watching this channel, you probably know by now you can accomplish all of your financial goals without a freaking credit score.
It is an overhyped scam that keeps you playing the debt game forever. Why? Well, to get a credit score, think about this. You have to go into debt and you have to meticulously play their game perfectly all so that you can access more debt. So if you're holding onto credit cards for the stupid score, it's time to take a page from Elsa's book and let it go. ♪ Let it go, let it go ♪ ♪ Can't play this game anymore ♪ ♪ Let it go ♪
That was crazy! I've never actually experienced that sort of atmosphere a game before. Now look, I'm not on some moral high horse here, or in this case high reindeer, trying to guilt you into cutting up your cards. If anything, I'm more of a low rider. RIP Lil Sebastian.
But it's worth asking yourself, is this the kind of system I want to be a part of and benefit from? Is this the game I really want to play for the rest of my life? Do I want this kind of poison in my financial waters? And before you jump in the comments like, George, we have no choice. This is how the system works. Yeah, but no.
The truth is you do have a choice. You can opt out of the system by simply using cash and debit cards. And as someone who hasn't had a credit card in over a decade, let me share my honest experience. Bucking the credit card system has given me more perks and benefits and rewards than any company ever could. Once I cut up my credit cards for good, I weirdly built wealth faster with more confidence and more peace and more margin in my finances. And I am willing to bet you'll experience the same exact thing.
So if you're not ready to pull out the scissors quite yet, that's fine. But at least try my no credit card challenge. Here's how it works. One, stick your credit cards in a block of ice or lock them away somewhere you'll never see or think about them. Delete your card info from apps and sites that you use. Yes, even Keanu Reeves mousepads.biz. Number two.
For the next 30 days, stick to using a debit card or cash for all purchases, all of them. Number three, track your spending with a budgeting tool. I highly recommend and personally use EveryDollar, and you can check it out at everydollar.com slash george, or click the link in the description below.
Number four, after 30 days, compare the numbers from your previous credit card days. See if you spent less. See if you were more intentional. See if you got closer to your financial goals and that you felt more in control and aware of your money. And I wouldn't be surprised if you end up cutting up the cards and never looking back. But again, I'm just inviting you to try it.
And don't worry, the credit card companies will always welcome you back with their tiny T-Rex money-grubbing arms. So here's the deal. Let me know in the comments below if you're committing to the no credit card challenge. I triple dog dare you because I can do that now legally, except in Utah. And I commit to responding to all of your commitment comments, letting me know you're committed.
The bottom line here is we've got to think bigger than points and rewards and perks. We've got to quit stepping over dollars to pick up pennies. And we should probably stop helping credit card companies transfer wealth from the poor to the rich. And if you're still not convinced the system is messed up, check out this video to see just how ugly it really is. I'll also link it below in the description. Thanks for watching. We'll see you next time.