Can I Buy Equipment With A Credit Card?
I see this question a lot. Mostly on forums and gear groups but sometimes I’ll get an email or something about it. With the cost of musical gear and accessories such as PA or computer equipment being so high, doesn’t it make sense to use a credit card to make purchases on high cost items? Won’t it be too late to use it by the time I save up for it?
Sadly, the answers people give are often over-simplified or limited in their scope. People living in one context might not see that the person asking the question might exist in a different situation then they do. In this post I hope to address the central question and give some perspective that might be helpful, not only in deciding when or if to use credit, but how we buy our equipment in general.
BUT DAVE RAMSEY SAYS…
Let me just start by saying that I’m thankful for Dave Ramsey. I know many, many people who have gotten their fiscal house in order after reading one of his books or attending a Financial Peace class at their church. I also think there are a lot of other benefits for the Kingdom of God and for individual people that have come from Dave’s work.
But, Dave Ramsey isn’t the Bible, his words are just his well informed opinions. When someone posts on GearTalk or some other forum asking for advice on whether they should use a credit card to buy a guitar, inevitably someone posts a link to some article from Dave or one of his associates. One of his basic tenets is that you should only buy with cash, no exceptions. “Live like no one else so you can live like no one else”… you know the drill. I generally agree with this point of view.
As someone who has always lived either on the American West Coast or in the more expensive parts of England, while I appreciate Dave’s principles, I recognize that they weren’t written for my context. His cost of living budget guidelines are obviously written for the south and mid-west of America and not for the East or West Coast or similarly expensive places. The proportion of income that someone living in the San Francisco Bay area will have to spend on things like housing will always exceed the Financial Peace suggestions. So will gas, cost of food, and so forth.
So while I appreciate Dave’s ministry and the principles of living as good stewards of the money God has given me, I think its important to remember that they are only principles and good advice. I will probably say some things in this post that will go against some part of the FPU program and I welcome a discussion about that below. But for now, lets move forward with the understanding that this is where I come from.
CAN YOU HANDLE A CREDIT CARD IN THE FIRST PLACE?
It’s a lot easier to have safe, black & white answers to everything. It is a lot easier to make blanket statements like “no one should ever use a credit card” or, “having a credit card is no big deal, why do people make a fuss?” Each of these statements shrinks the world into more manageable concepts but don’t address the complex reality of our system.
Many of us were never taught basic finances either at school or at home. We might have been told not to spend money foolishly or to “save as much as you can” but we were given very little beyond this. Accordingly, many people have gotten their first credit card and not known how to handle it. Maybe that’s you, and maybe right now you’re sitting under a massive debt and you see only the bad side of credit cards. Maybe you paid off a card years ago and you’ve sworn off credit altogether. On the flipside, the majority of people pay off their cards every month (58%) and there is also a correlation between households that have credit card balances and those that are putting into savings monthly (see previous link).
The point is that some people can handle the responsibility of credit cards while others cannot. Some people can’t be responsible with a credit card at one point in their life such as college or at the start of their working life but gain that responsibility later on. It’s neither cut & dry nor black & white. Additionally, many Americans, including pastors such as myself, need a credit card for business/ministry purposes. There is no “one size fits all” answer.
Honesty is required. Honesty with yourself, and with those you are accountable to such as your spouse or your parents.
If my value is to be a good steward of my finances, does a credit card help?
If my value is to “owe nothing but love” (Romans 13:8), does a credit card help?
WHY DO YOU WANT TO USE CREDIT? (AKA SAVE YOUR MONEY)
Why do you want to use a credit card? This is where I’m in almost total agreement with the Financial Peace crowd: If you don’t have the money for it, you shouldn’t buy it. I can’t think of a piece of gear that’s worth going into debt over. Plus, the fiscal discipline I’ve learned by being forced to wait and save my money has put me in a position to buy more gear then I would have otherwise. If you have discipline in the moment you will have rewards in the long run.
Plus, the higher the cost of the gear, the longer it will take to pay off and the more it will cost you. If you pay off your card balance on time each month then you will be charged no interest; I do this with things like gas and other items that I get rewards points on. However, whatever you don’t pay off has interest added each month. The national average is around 15%. What this means is that if you have a $300 balance on your card (the cost of a Strymon pedal) and you don’t pay it, you have an extra $45 that you owe your card company. So if you buy a Strymon Flint for $300 and you pay it off $50 each month, the interest on the remaining balance will come to over $100 extra depending on your interest rate and how good you are about making payments. So that Flint is really a $400 pedal after all is said and done, and that is a waste of money. This will only increase as the cost does. If you buy something like a Fractal AxeFX for $1200, the cost with interest will be almost $400 if you make the monthly $50 payment. Even if you paid more each month, it’s still a massive waste of money.
DO YOU REALLY NEED THE GEAR?
Now, assuming that a credit card is the right thing for you and assuming that you have the finances ready to make the purchase, do you really need the gear? Worship ministry is a funny thing, because it often intersects our hobby (music) with our ministry (worship). Generally, I’m never going to tell someone that they don’t need the gear, but I think it’s worth examining how and why we make our gear purchases from time to time.
Maybe the better question to ask is: do I need the gear right now. If you have a TC Nova Delay and you want to upgrade to a Strymon Timeline, there is no ministry that won’t happen if you wait a few months and save up your money, and the discipline you will build up in yourself will be worth more than any pedal.
DOES IT MAKE SENSE TO USE CREDIT?
So, should I use credit card to buy gear and equipment? Assuming you aren’t going into debt, here are some scenarios in which I would use a credit card to buy equipment.
-Most people don’t live near places like Rogue Guitar Shop or Wildwood Guitars or Andertons, let alone a Sam Ash or Guitar Center. If you’re trying to decide between two different pedals, how are you gonna know which one is right for you? Often we are just taking an educated guess. However, if someone bought a Styrmon Dig and El Capistan from a shop with a good return policy and returned the one they didn’t want, and paid off the balance on their card that month, then it makes a lot of sense and their checking account isn’t burdened the extra $300 needlessly.
-Generally speaking, I use a credit card vs. a debit card with online purchases for safety. If someone hacked an online business and got my card number and made fraudulent charges, it would be easier to deal with my card company than my bank where real dollars could be withdrawn.
-If I’m asked to buy something for my church, that I will be reimbursed for, I will use a credit card. This isn’t uncommon and I do this for a few reasons. One reason is that I like to keep the extra layer between my checking account balance and church expenses and the second is a side benefit to me: the more I buy and pay off on time, the better my credit score is in the long run and that just seems the responsible thing.
I’m not saying these are the only cases where I could see someone using credit, but there probably aren’t many more than these.
A QUICK REVIEW
-Everyone’s situation is different
-Never buy something you can’t pay for
-Buying things on credit without being able to pay for it will end up costing you more in the long run.
-Gear can wait, and fiscal discipline will lead to discipline in other parts of your life… including your music.
Agree, disagree, have other thoughts? Leave a comment below