Yahoo Finance Mark Cuban Says Not To Use Credit Cards — Should You Take His Advice?
Mark Cuban is known for his savvy business skills, owning the Dallas Mavericks, and, of course, his long run on Shark Tank, but he wasn’t always wealthy. The investor is now worth $5.4 billion, and part of Cuban’s climb to success was not using credit cards.
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“If you use your credit cards, you do not want to be rich,” he said on an episode of The Ramsey Show. “That’s my favorite line; I tell it to people all the time,” he added. Cuban went on to share that people ask him where to invest all the time, and his response is to pay off all credit cards and burn them. “Your credit card, you know what your return is,” he told Ramsey. “If you’re paying 15%, 20% interest, if you pay that down, you just earned 15% or 20%.”
Credit cards are a part of our everyday lives, and with Americans $1.12 trillion in credit card debt, according to the Federal Reserve Bank of New York, is Mark Cuban on to something? GOBankingRates spoke with financial experts who provided their insights on the practicality of not using credit cards and managing them effectively.
Using Credit Cards Can Be Risky
While credit cards are a convenient way to pay for things, they can also get you into financial trouble.
“Mark Cuban’s advice to cut up credit cards might sound drastic, but it carries a strong message about financial discipline,” Shawn Plummer, Financial Advisor and CEO of The Annuity Expert, said. “While it’s true that some people rely on credit cards for emergencies and building credit scores, the risks of high-interest debt and overspending are real concerns.”
Eric Mangold, CWS Founder of Argosy Wealth Management, added, “While credit cards can be a convenient tool, it’s very easy to go down in a hole with them. Meaning that it’s not hard to accumulate a lot of debt on your card. When you do that, the interest charges alone can make it hard for you to climb out of that hole.”
Credit Cards Don’t Have to be Bad
While Cuban has sworn off credit cards and always advises not to use them, Plummer has a different take.
“Personally, I believe that credit cards aren’t inherently bad; it’s how we use them that matters,” he told us. “Being smart with credit cards means understanding their terms, paying off balances in full each month, and avoiding unnecessary purchases. There are definitely other factors to consider, such as budgeting, saving, and financial education, which can all contribute to a healthier financial life.”
The Benefits of Using a Credit Card
When used correctly, credit cards can provide financial advantages, Plummer stated.
“When managed well, credit cards can offer benefits like rewards, cashback, and the opportunity to build a strong credit history.”
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How to Be Smart with Credit Cards
Using credit cards doesn’t have to equate to debt if you use them wisely and responsibly.
Mangold suggested that you “Remind yourself that a credit card should be used as a ‘charge card.’ Meaning, if you made purchases during the month where you needed to use your credit card, do your best to pay it off the card every month so interest doesn’t build up.”
He also stated, “Credit cards should be used out of convenience, i.e. you don’t have that amount of cash on you. It should not be used to make purchases that are out of your budget.”
Having boundaries is another important factor in credit card usage. Plummer advised to “Set spending limits and use credit cards for planned purchases rather than impulse buys. Remember, the key is to leverage credit cards as tools for financial growth, not as a means to live beyond your means.”
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This article originally appeared on GOBankingRates.com: Mark Cuban Says Not To Use Credit Cards — Should You Take His Advice?
