I appreciate a good magic trick! But frankly, I am always a bit frustrated at the end of the show. The frustration results from the conflict between what appeared to be true and what I know to be true.
Magic tricks present reality in a new realm – the realm of the impossible. Our eyes observe it, but our mind says, “This can not be true. The illusion created is not reality!”
You and I are constantly exposed to one of the best magic tricks the world has ever seen. I am referring to the illusion that is created each time we use a credit card.
This illusion creates the perception that we have spent money instead of borrowed money.
Let me illustrate what I mean.
A woman goes to the mall to shop. She takes very little cash with her. Soon she finds a jacket she likes. She sees that it costs more than the amount of cash she has on her and also more than she has in her checking account.
So, she leaves the mall, drives to her bank nearby, and takes out a personal loan. With that money in hand, she travels back to the mall, and buys the jacket.
A bit later she finds a pair of shoes. Again the price is more than she has in cash or in her checking account. Once again she travels to her bank, secures another personal loan, goes back to the mall, and buys the shoes.
This process is repeated for each of the five purchases she makes at the mall that day. At the end of the day she has five new items and five new loans. She is aware of the reality that she has borrowed money and gone into debt in order to purchase what she bought.
But let’s say that instead of the woman securing personal bank loans to pay for her purchases, she uses her credit card. Is it not true that at the end of the day, she once again would have five new items and five new “loans?” Reality is that she has borrowed money, not spent money.
But the two transactions are perceived differently. A trip to the bank emphasizes the reality of borrowing, but the use of a credit card seems to hide that fact.
Both “borrow” money and create debt, but it does not seem like that.
A bank loan seems like we are borrowing money, a credit card transaction seems like we are spending money.
Therefore, we need to see through the illusion and realize what credit cards do – they borrow money, not spend money!
This perspective would have greatly helped the college student who told me, “I am so glad I have some credit cards because no matter how broke I am, I always have money!”
It is our faulty perception that contributes to our faulty practice. No alarm sounds to notify us that we are going into debt. Sliding the card through the reader is getting to “feel” like spending cash.
I am not saying it is wrong to use credit cards, I am just saying it is wrong to use them and not see the reality of what they create – debt. The ideal is to use them only when we have enough “real” money to pay the balance off at the end of the month.
Credit cards may work like magic, but they are not magic. A misunderstanding of this simple fact may contribute to the average family (that uses credit cards) revolving over a $15,000 balance every month!
I believe that cultivating a proper perception would certainly make us more cautious in our credit card use.
Let’s not be fooled by the “magic trick.” When we use a credit card, we are not “spending money,” we are “borrowing money.”