When it comes to personal finance, few things spark more debate than credit card usage. However, it seems that for Kevin O’Leary, the “Shark Tank” investor and businessman, the issue couldn't be more obvious—credit card debt is a financial trap. O’Leary's recent remarks about the dangers of overspending and credit card debt struck a chord with many—and for good reason.
O’Leary's advice is to simply track your spending. “Take a piece of paper, you don’t need a computer, write down the money you made in 90 days and how much you spent during that same period," he said in an interview with local Fox morning show "Good Day New York" earlier this week.
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Most people are shocked to find they're spending more than they're earning. And where does that excess spending end up? On credit cards. With interest rates hovering around 21%, carrying a balance is like pouring money down the drain. O'Leary calls it "the silent killer" of American finances, and he's not exaggerating.
Credit card balances, which now total $1.17 trillion outstanding, increased by $24 billion during the third quarter alone and are 8.1% higher than they were a year earlier. These figures underline just how deeply entrenched credit card debt has become in American households.
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O’Leary isn't the only one sounding the alarm. Billionaire and fellow “Shark Tank” star Mark Cuban shares a similar sentiment. In a chat with financial guru Dave Ramsey on "The Ramsey Show" last May, Cuban didn't hold back, saying, “If you use your credit cards, you do not want to be rich.” His solution is to pay off all your credit cards and burn them.
Cuban broke it down like this: if your credit card interest rate is 15% to 20%, paying it off is like earning that percentage back. In his view, there's no better return on investment. Ramsey, who's built a career on helping people get out of debt, wholeheartedly agreed. He highlighted a Forbes survey that found 75% of wealthy people prioritize staying out of debt. “Life is better without credit cards,” Ramsey added, emphasizing that financial freedom starts with ditching high-interest debt.
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Not everyone agrees with the no-credit-card approach. For many Americans, responsibly using credit cards is a way to build a credit history, which is crucial for securing loans for big-ticket items like homes. Colin Palfrey, chief marketing officer at personal finance management company Crediful, points out, “For many average Americans, buying a home is a major part of their wealth-building plans, and not being able to establish a credit history will make it harder to get good rates.”
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