Billionaire entrepreneur Mark Cuban has a message for anyone trying to build wealth: cut up your credit cards and never look back.
“If you use credit cards, you don’t want to be rich,” Cuban told Dave Ramsey during an appearance on “The Ramsey Show.”
Cuban’s argument is straightforward: credit cards come with high interest rates that eat away at your income. Instead of building wealth, you’re stuck funneling your money toward compounding debt.
“Where’s the best place to invest?” Cuban asked. “Your best place to invest is to pay off all your credit cards and burn them.”
High Interest, Low Return
Cuban emphasized that paying off credit card debt is like getting a guaranteed return.
“You’re paying 15, 20 percent interest in one way or the other,” he said. “If you pay that down, you just earned 15 or 20 percent. It’s that simple.”
As of late 2022, the average credit card interest rate was around 16.65%, according to Federal Reserve data.
For Cuban, credit cards are never a smart tool. “Credit cards are not your friend,” he told CNBC Make It. “Debit cards are ok if there are not fees.”
Build Wealth With No Debt
Cuban and Ramsey both pointed out that the majority of self-made millionaires started by avoiding debt entirely.
“The Forbes 400, 400 wealthiest people in North America, when surveyed, [were] asked what’s the way to build wealth. Seventy-five percent said get out of debt and stay out of debt,” Ramsey said.
“Because it gives you power over your largest wealth-building tool, which is your income,” he added.
Cuban backed that up: “The one thing in life that you can control is your effort.”
He believes that sweat equity, putting in hard work without money, is often more valuable than raising capital.
“Businesses don’t fail for a lack of capital. They fail for a lack of brains and effort.”
When a Loan Might Be Better
While Cuban isn’t a fan of debt, he did suggest that if you absolutely must borrow, a personal loan could be a better choice than a credit card.
With a lower interest rate and a fixed payment schedule, personal loans offer more predictability.
For people with strong credit, personal loans may provide lower interest rates and a more structured repayment plan than credit cards, while also contributing to a positive credit history if paid on time.
Still, financial experts caution that personal loans aren’t a cure-all.
Ted Rossman, senior industry analyst at Bankrate, said using loans for everyday expenses is risky.
“If your expenses are routinely outpacing your income, something has to give,” Rossman said. “You need to either find a way to earn more or spend less.”
Cuban’s Bottom Line
For Cuban, the math is simple and the message is clear: don’t use credit cards.
If you do, you’re giving up your best chance to build real wealth.
“Pay off all your credit cards and burn them,” Cuban said. “If you use your credit cards, you do not want to be rich.”
IMAGE CREDIT: “Mark Cuban & Doug Ducey ” by Gage Skidmore, via Flickr. Licensed under CC BY-SA 2.0. Image adjusted for layout.