Are Credit Cards Bad? Here’s the Truth

Credit cards are everywhere. You see ads on TV, receive pre-approval offers in the mail, and it can feel nearly impossible to navigate modern life without one. Critics like Dave Ramsey are vocal about the dangers of credit cards, urging people to avoid them altogether. But is that really the case? Are credit cards bad? Let’s explore.

Key Points:

• Credit cards aren’t inherently bad—they can be beneficial or harmful depending on how you use them

• National credit card debt is at a record high: The Federal Reserve Bank of New York reports $1.21 trillion in credit card debt as of December 2024

• High-interest rates are a major risk: The average credit card interest rate is 24.21%, which can quickly compound debt if you carry a balance

•  Discipline is key: Pay off your balance in full, use rewards wisely, and avoid treating credit like free money

  A Brief History of Credit Cards

The modern credit card was introduced in the 1950s by businessman Frank McNamara. Known as the Diners Club Card, it was initially accepted at restaurants before expanding to retailers. By the 1970s, the industry underwent significant regulation, paving the way for innovations in the 1980s, like cash-back rewards, and the introduction of travel rewards in the 1990s.

The 2000s saw the rise of premium travel cards aimed at frequent travelers and high-net-worth individuals. Fast forward to the 2020s, and there are cards for virtually every type of consumer—from first-time users to those seeking luxury perks.

Are Credit Cards Bad?

Ask 100 people this question, and you’ll get 100 different answers. Some view credit cards as a necessary evil, while others believe they’re essential tools in today’s financial landscape. The biggest issue? Credit card debt.

Here’s something everyone should hear at least once:

Do not buy something you can’t afford to pay off.

According to Bankrate, 1 in 2 Americans carry a credit card balance month-to-month. Think about that—if you asked those 100 people, around 50 would admit to carrying debt.

Zooming out to the national level, the Federal Reserve Bank of New York reported that credit card debt hit $1.21 trillion at the end of December 2024. In the chart below, you can see the steady climb from 2006 to today’s staggering figure.

Source: FRBNY Consumer Credit Pannel/Equifax

Why High Interest Rates Are a Problem

It’s not just about unpaid balances—it’s about the high interest rates they carry. Below is a graph from lendingtree showing credit card interest rates since 1994.

Source: Federal Reserve monthly G.19 report on consumer credit

Between 1994 and 2015, rates were relatively stable. However, starting in 2016, they began climbing steadily. As of now, the average interest rate is 24.21%. Even if you’re not a financial expert, it’s clear—that’s high. If you carry a balance, that’s the rate compounding against you every month.

Why Is It So Easy to Fall Into Debt?

Sure, the solution sounds simple: Just don’t carry a balance. But in practice, it’s not so easy. Credit cards are designed for convenience—tap-to-pay and contactless payments have become the norm, making spending frictionless. With many businesses going cashless, the temptation (and sometimes the necessity) to use a card grows stronger.

Emergencies happen, and for some, a credit card is the only financial lifeline. But once debt starts piling up, getting out is tough. Even with repayment calculators, most don’t account for new charges made along the way. Combine that with soaring interest rates, and your balance can snowball fast.

Can Credit Cards Be Good?

Yes—if used responsibly. A well-managed credit card can:
✅ Build your credit score, helping you secure lower interest rates on loans.
✅ Unlock premium perks like airport lounge access, free upgrades, and travel rewards.
✅ Provide cash-back rewards and exclusive discounts.

I’ve personally used my cards to score free airline tickets and earn extra cash back. There’s an entire ecosystem of resources, like YouTube tutorials, dedicated to maximizing these benefits.

But remember, these perks vanish the moment you start making only minimum payments or missing due dates.

Final Thoughts

Here’s my take:

Credit cards are as good or bad as you make them.

Most credit card issuers don’t operate with your best interests at heart—they profit when you carry a balance. The system can be predatory, often targeting the vulnerable or uninformed.

But the power of a credit card lies in discipline. Treat it with respect—pay your balances in full, spend within your means, and use the perks strategically. Handle it recklessly, and you’ll get burned.

Because in personal finance—like life—there’s no such thing as a free lunch.