Do You Consider Credit Cards an Asset or a Liability?

Today’s morning question is, Do you consider credit cards an asset or a liability?.

I have seen this issue from both perspectives. When I first met my wife, she had about $10,000 in credit card debt and in her case credit cards were a huge liability. Everything she bought actually cost a lot more than the price she paid because of all the interest she ended up paying on it.

On the other hand, I have always paid off my credit cards in full each month and have enjoyed taking advantage of the perks and insurance that they provide over payments in cash. I usually earn a free round trip ticket from Japan to the US each year and there have been a couple of instances where I took advantage of protections that credit cards provide that cash doesn’t (including getting my money back from a retailer after purchasing a fairly expensive camera that didn’t want to work properly and the retailer wasn’t going to do anything about it).

I consider credit cards as an asset (and my wife does now too) because they do provide us with a number of advantages that we wouldn’t have without them with no additional cost to us — the key point being that we always pay them off in full each month.

Please share your own experiences on this topic as a wide variety of views and thoughts are helpful to everyone. If there is one thing that I have learned about personal finances from all of you is that there are always exceptions to the rule and differing circumstances can mean completely different solutions. If you have a blog and you have written about this topic in the past, feel free to link to your writing (although a short summary would be helpful). If you have recently read a good article on this topic, please links and share in the comments.

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15 Responses to Do You Consider Credit Cards an Asset or a Liability?

  1. toopoor says:

    Credit cards are the most evil financial instruments ever developed. Their sole purpose is to enslave the poor into debt so that they can never escape. They pretend to be doing you a favor and then make your life miserable by ruining your credit and demanding huge interest payments.

    How anyone can say something that has ruined as many people’s lives as credit cards can ever be a good thing has no idea what they are talking about. If you don’t believe me, go and watch the movie Maxed Out and see if you can say anything positive about credit cards.

  2. SaveForHouse says:

    As usual, a thought provoking article. In my personal situation, my credit cards are both an asset and a liability. On the asset side, I’m getting free rewards. Just recently, I got several hundred dollars off a well deserved vacation to my favorite vacation spot, Las Vegas! I had been saving my points for years and they finally added up enough to make a meaningful impact on my trip. I always make sure to pay my credit cards in full so they are not as much of a liability in the sense that they are taking money out of my pocket in the form of super high interest payments. Even so, I look at them as a liability because I know they entice me to spend more than I otherwise would. It’s just so much easier to spend money when you just swipe a plastic card vs. seeing hard earned cash leave your pocket! If I were to only make purchases in cash, I would no doubt spend less money. Hence, the liability aspect of the cards. Interesting paradox. 🙂

  3. Joel Carry says:

    credit card companies are our best friends until we reach a point when we don’t have any money in our accounts. then, they become our worst enemies.
    I guess its a simple equation. If you have money, a credit card is an asset; if you don’t, the credit card becomes a liability.

  4. merch says:

    Credit cards are never an asset or a liability. They are just a form of payment. Is a check an asset, a wire an asset, a debit card transaction? No of these are assets or liabilities just froms of payments.

  5. Lori says:

    Recently they were an asset. My husband and I moved across the US for a new job, and we used an introductory card (0% for 1 year) to pay for the moving bills. We’ve already paid it off and got an extra $150 for all the money we put on it. We are now very careful how we use it, so that it won’t become a liability in the future.

  6. david says:

    @ merch

    I have to disagree. The difference is that you can gain things with a credit card (protection, bonus money, etc) where you can’t with a check or a wire transfer. You can also pay a lot to use a credit card if you don’t pay it off. Yes, it is a form of payment, but the way you use the payment can give you an advantage or cost you.

  7. Hilary says:

    I recently opened a new credit card, and I was shocked at how aggressively they pushed the “Payment Protection Plan” – that is, super-expensive and not-worth-it insurance on the balance, at a pretty penny of $1.50 per $100 in the balance. I consider myself educated and credit-savvy, and I still got confused during the phone call and almost accepted it. “Let’s get started!” the lady on the phone cried. “Uhh… get started with what? Is this even optional?”

    I can only imagine for someone who has just entered the credit-card world, they would certainly accept this “protection”, which is basically an extra fee for carrying a balance (as if 30% interest isn’t fee enough). Predatory lending, indeed.

    Maxed Out is fantastic. Be prepared to cry :(.

  8. Joshua says:

    Credit cards are a payment utility that can yield you nice rewards if used right. If I am diligent, why not pay for my everyday needs with a credit card and have it pay me back later? It just doesn’t make any sense not too.

  9. Steve says:

    They are the greatest financial asset aside from discipline and thoughtful spending. Their statements consolidate my expenditures for easy evaluation at the end of the month. For items not delivered at the time of payment, a credit card allows me to pay without risk. The float between when I incur the credit and when I pay it off at the next monthly billing garners me a profit.

    In 26 years I have paid not one penny of interest while realizing thousands of dollars of benefits from using my credit card. That is an asset indeed. Thank you Citi.

  10. Robert says:

    No way are they and asset.
    When we stopped using the one credit card we paid off each month we no longer got the airline miles.

    But, we actually spent less since we actually had to have the money when we purchased something. Made us think more about the purchase whether it was the latest electronic gizmo or eating out.

    There is life after credit cards. Now debit cards give points too. But lets be honest. The banks are not giving anybody anything for free.

    Credit card and consumer debt free.
    Try it, you might like it. If being debt free doesn’t fit your style, its easy enough to get some more debt.

  11. Johnny Canuck says:

    Get real, everyone! Credit cards are a wonderful asset for the disciplined and a woeful liability for the weak. To hold a credit card means one holds the capacity to purchase NOW when we may only have (or choose) to exercise a FUTURE ability to pay for the purchase. You and I

  12. Cindy M says:

    Unless the individual can handle and not abuse credit early on, it just spells disaster. Actually, that should be said of money in general. I was “working” from the time I was a kid, babysitting, chores, always had change for goodies when my friends didn’t. I attended a vocational type high school where we worked 2 weeks, went to school 2 weeks during junior/senior years, so I had my own car and paid my own car insurance from the age of 16 on. I had credit cards early on but was always scared to death of incurring much debt, so they’d get paid off pretty quickly. I have the attitude even now that credit cards are useful only for emergencies/travel and nothing else, and I’m glad I feel this way. Better you do without if you can’t pay cash outright but tell that to younger people.

  13. Topwaystosave says:

    A credit card can be an incredible asset as long as it’s used responsibly.

    I never have to carry large amounts of cash. If a credit card is lost or stolen you are protected. You can earn miles and rewards for using a card versus cash. You can have multiple bills paid through it and then just pay one online payment to cover the credit card.

    Credits cards are definitely an asset, but just like some people shouldn’t handle sharp objects some shouldn’t have credit cards either.

  14. Mark says:

    No matter the emotive nature of the subject in cold accounting terms a credit card is recorded as a liability because it is regarded as a property claim on the assets (property) of the person or business involved i.e. whatever you bought on your credit card.

    The value of the asset being equal to the value of the debt/liability that you need to pay back.


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