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September 6, 2011

What's Wrong with Credit Card Debt?

Are they financial tools or charging us into sin?


whatswrongwithcredit.jpg

Earlier this year, we asked whether churches should accept credit cards for tithing. Christianity Today recently asked what's wrong with credit card debt? Three Christian leaders with backgrounds in theology and personal finance weighed in.

Read excerpts of their answers here, then tell us your views on credit cards:

"It's a lack of faith. ... Financial choices and predicaments are always symptomatic of other issues. Some of the more common issues that lead to credit card debt include a lack of contentment, a lack of self-discipline, the search for security, and the search for significance.

The bottom line is that we should avoid putting a lender in the place of God by depending on them to meet our needs, and we should not play God in our own lives by deciding that the only way to meet our needs is to borrow.

God wants us to be obedient to his commands, but he also wants us to be wise in how we live. Ephesians 5:15-16 (NASB) says, "Therefore be careful how you walk, not as unwise men but as wise, making the most of your time, because the days are evil." When we make unwise choices, such as accumulating credit card debt, we must live with the consequences. However, we can also trust that God will work out his good purposes as we walk through the tough disciplines of living within our means and paying off the debt we have accrued (Rom. 8:28)." --Ron Blue, who has written 15 books on personal finance and is president of Kingdom Advisors, which advices Christian financial professionals.

"It's dangerous. ... The Bible gives, as always, good advice. And the Bible must be interpreted contextually. In the economic contexts in which the Bible was written, debt was dangerous and best avoided entirely. But in our economic situation in North America, debt can improve the quality of life for oneself and for others if managed well. In developing countries, prudent use of credit can make the difference between literal life and death, and between liberty and slavery.

Yet biblical teaching not only addresses what is right and wrong, but what is wise and what is foolish, and what is prudent and what is risky.

Credit card borrowing is among the very worst ways to borrow any significant amount of money. We all know why. It's too easy--just hand over the card. It's too accessible--almost anyone can obtain a card, and most of us can get quite a few. It's too extortionate--interest rates are shockingly high relative to almost any other kind of loan. That's why they print them in the tiniest possible fonts.

So I have a mortgage. I have had educational loans, and my son have them now. I have made use of car payment plans. And I have a line of credit.

But I never, ever incur credit card debt. I pay off my cards every month, so the companies make not a dime off me in interest.

While debt isn't necessarily immoral, credit card borrowing is dangerous--for everyone." --John G. Stackhouse Jr., Sangwoo Youtong Chee Professor of Theology and Culture at Regent College in Vancouver.

"It's potentially immoral. ... So while the Bible does not forbid debt, its emphasis on stewardship suggests some rather strict guidelines:

  1. The borrower should have resources readily available to repay the debt. With a mortgage, the collateral held by the lender (the property) secures repayment of the loan. But credit card debt is unsecured. Here is the test: If you do not have enough money to pay your entire credit card bill in a single month, you've violated this guideline. You've allowed yourself to slip into the lender's bondage.
  2. The cost of the debt should be reasonable. The average credit card interest rate is currently 16.82 percent (IndexCreditCards.com), a rate that could hardly be considered reasonable. Paying the balance in full during the grace period precludes paying any interest, while offering the financially mature personal financial flexibility and opportunities.
  3. Borrowers should pay off debt as soon as possible. It is difficult to fit long-term credit card debt within this guideline.

Carrying credit card debt within the guidelines is, at best, difficult, but the test is simple: Am I able to pay the entire balance in full in a single month? If the answer is no, you need to put that card far, far away until the day you've reached a level of financial stability that allows you to operate within biblical guidelines. Otherwise, I believe your debt will become immoral." --Mary Hunt, author of several books on financial responsibility, and founder of Debt-Proof Living, a website on escaping debt.

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Posted by Matt Branaugh on September 6, 2011 8:00 AM

Related Tags: finances, giving, pastors, Relationships, tithes

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