Should You Use Credit Cards? Here's What Mark Cuban Thinks

You may be surprised at Mark Cuban's advice on credit cards.

Credit cards are a common financial tool. You can earn rewards, such as points, miles, or cash back when you charge purchases on a credit card. Many cards, especially travel cards, also offer other unique cardholder perks such as free companion airfare tickets or free checked bags.

Despite the fact that credit cards can help you earn rewards, take advantage of perks, and even improve your credit score, there is some controversy over whether you should use them. In fact, there are several financial gurus who have spoken out against using credit cards. And billionaire Mark Cuban is one of them.

Here's what Mark Cuban thinks about using credit cards

Mark Cuban is a self-made billionaire, and the advice he provided for others regarding credit card use is clear. Cuban wrote on his blog in 2008 that "If you use a credit card, you don't want to be rich," and he urged his readers to cut up any cards they have. He believes that those who want to be rich will steer clear of using credit because "the first step to getting rich requires discipline."

Cuban has been consistent in this position for many years, indicating in a 2014 interview that he believes "credit cards are the worst investment you can make." The reason he gave for steering clear of cards in this interview was that he can save money on interest by not having debt, and this saved interest that comes from paying cards in full provides a better return than he could get with other investments, such as putting money into stocks.

There are problems with Cuban's advice

Cuban is absolutely right that carrying debt on credit cards is not a good financial decision, and he's also correct that if you carry a credit card balance, focusing on paying it down before investing is a smart move. Many credit cards have interest rates that are sky high -- sometimes upwards of 17% to 20% -- and it's unlikely you would be able to earn that much in the stock market.

However, his advice ignores the fact it's possible to use a credit card while still being disciplined in your spending and avoiding getting into debt. You can charge purchases in order to earn rewards, and if you have a budget and are financially responsible, you can pay off your card in full before you end up paying even a penny in interest.

Not only does this approach allow you to get some money back, or get other valuable rewards for spending you would do anyway, but it also enables you to improve your credit score. Charging purchases on cards, paying off your balance in full, and maintaining a reasonable credit utilization ratio can all help you earn a good credit score that opens up financial doors for you.

So, while you may want to listen to Cuban about the benefits of avoiding carrying a credit card balance due to the high interest rates, following his advice about steering clear of credit cards altogether probably isn't in your best interests in the long run. Instead, you should make sure to work on developing your financial discipline -- which he's correct, it’s key to building wealth -- and should use credit cards as a tool in your arsenal while spending responsibly.