College Connect: Follow Buffett’s advice and avoid credit cards

Posted By Crystal Beasley

By Kouichi Shirayanagi

In his talk to a group of high school students in the Omaha area, Warren Buffett has one major piece of unsolicited advice before he takes questions: “Avoid credit cards.” (https://www.youtube.com/watch?v=70uJA45BmPs) Buffett says that young people need to adopt good financial habits early and it is impossible to have a good financial future if you are borrowing money at 18-20% carrying credit card debt. This advice is particularly telling because Buffett is a major stake holder in many companies that issue credit cards including Wells Fargo Bank, American Express and Bank of New York Mellon.

Just because Buffett advises young people not to take out credit card debt, that does not mean the American public does not have a huge appetite for credit cards. According to the financial website Nerd Wallet, Americans owe $880.3 billion in credit card debt. The average American household carrying credit card debt owes the major credit card companies $15,593 in credit card debt. The average household owes $7,274 but that, includes about half of American households who don’t owe any credit card debt at all. What that means is that the average American who owes both money on their credit card and $32,000 on average in student debt, owes about $45,000. It is very difficult to pay off that level of money. It is much better to start a working career with that amount of money in savings rather than that amount of money in debt.

Buffett says that the habits you develop when you are young stay with you for the rest of your life and it is good to avoid bad financial habits early in life. Credit cards and their just as harmful cousins pay day loans are habits that no person should get themselves involved in.

Kouichi Shirayanagi is a student at University of Missouri

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