Renaud Laplanche is an entrepreneur who has launched a couple of very successful financial technology companies during his career. Therefore, he has a great deal of knowledge about matters that are directly related to personal finance. He has some informed perspectives about credit cards and how they have damaged society. He believes that they do much more harm than good. Here are a few of the main reasons why Renaud believes that people should not use credit cards under any circumstances.
First of all, Renaud Laplanche points out that there is a never ending cycle of debt. This is because the interest that is accrued every month makes it almost impossible for people to eventually start to pay down the amount they owe. There are many people who only pay the minimum amount each month. This will obviously get them nowhere fast. This is exactly the way the credit card companies want it. They do not want people to pay off their credit cards every month. If people did that, the companies would go out of business. The companies rely on people not paying off their monthly balance for their own survival. These companies live on the interest that people need to pay when they are not able to totally pay off their balance.
According to Renaud Laplanche, the rates that many credit card companies charge are very high. The amount of interest that you need to pay on a credit card is directly related to your credit score. People who have bad credit are going to be charged the most interest. In many cases, this interest rate is more than 25 percent every month. The credit card companies will also give people a very low minimum payment that they will need to make every month. This will keep the balance growing by a considerable amount if they only pay the minimum amount due.
Interest is not the only problem that credit card users need to deal with. They also must pay very high fees for a variety of variety of things that are associated with using the credit card. Renaud Laplanche feels that these fees make it very hard for people to afford using their card. For example, there are many credit cards that charge an annual fee. There are also fees charged for transferring a balance from one credit card to another. The fee that you pay will be a percentage of the amount transferred. Obviously, people who frequently fail to pay the minimum payment will be forced to pay a late fee on top of what they already owe.
Renaud Laplanche says that one of the biggest problems that is created by credit cards is the negative impact they can have on your credit score. Not paying your minimum balance gets reported to the all of the bureaus that monitor your credit activity. Having very large balances on your credit cards with a small amount of available credit will also drag down your credit score. Having too many cards is also a problem.