According to well-known US billionaire businessman Mark Cuban, credit cards should be burned. Here’s why and what he recommends.
Mark Cuban, a billionaire entrepreneur, said that credit card users do so because they don’t want to be rich. This isn’t the first time he’s spoken out on credit cards, but the claim quickly became hotly contested after an interview with personal finance expert Dave Ramsay on The Ramsay show on the radio. Where did the warning about credit cards come from? According to Cuban, credit cards have too high an interest rate. The entrepreneur refers to the latest data from the Federal Reserve which indicated rates for a credit card at 16.65%.
Cuban’s opinion on credit cards is a critical comment referring to high interest rates in the United States, whose monthly payment eats away possible investments. For this reason, instead of credit cards, Mark Cuban suggests applying for a personal loan, that is a form of installment credit to be repaid in regular increments over a certain period of time.
Not everyone agrees and several finance experts believe that credit cards are a great tool. In addition, credit cards have several other advantages including security when shopping online. Contrary to Cuban’s strategy, personal loans are not suitable for constant use as a credit card. In fact, personal loans are more suitable for a one-off expense. If the problem with the credit card is that the monthly management cost is too high, it is because, as analyst Ted Rossman points out, there is the problem of exceeding one’s income each month with expenses. In short, unlike Cuban, Rossman does not demonize the credit card as a money management tool, but rather the individual choices on how and when to use the card.
Credit cards, no thanks: Mark Cuban recommends burning them
Mark Cuban, an American businessman and famous billionaire president of the NBA soccer team Dallas Mavericks, is against the use of credit cards. According to Cuban, anyone who wants to get or be rich shouldn’t use credit cards. On the contrary, he suggests, during The Ramsey Show, to pay off credit card debts and then burn them.
According to Cuban, in fact, interest rates are too high and cause people’s possible monthly investments to be dispersed. This is because when you buy over the limit of your account (having the account in red) you incur an extra expense which, according to Cuban, is completely avoidable. In fact, he adds that credit cards are only good if there are no commissions.
Against credit cards: what alternative?
When asked about a possible alternative to credit cards, Mark Cuban proposes to apply for a personal loan. With a personal loan, a form of installment credit, you sometimes pay less interest than credit cards. For example, a 24-month personal loan at an annual percentage rate of 8.73% (according to Federal Reserve data). With a good credit score you can get a lower interest rate and once you run out of personal loan funds you can always receive another one.
There has been no shortage of criticism of this model proposed by Cuban. In fact, according to many other personal finance experts, the credit card is considered an excellent tool for their funds, especially for online security. While the personal loan is advantageous for one-off expenses, the credit card has a daily use. “I think it would be very dangerous to use a personal loan to finance a vacation or a boat or some other discretionary expense,” says Ted Rossman, senior industry analyst at Bankrate.com. This is because the use of personal loan to finance daily expenses seems an endless systemic problem and if the expenses exceed the income each month the problem is another: you can spend less or you can try to increase monthly earnings in another way.
Original article published on Money.it Italy 2022-11-05 18:02:17.
Original title: “Non utilizzate le carte di credito”: il miliardario Mark Cuban avverte i risparmiatori
