I know credit cards tend to be a controversial issue around here, and I’m probably opening up a can of worms in posting this, but reader Aimee sent over this article from Smart Money called “10 Reasons I’m Canceling My Credit Cards” this morning. I read it and loved it — especially since it had some points you don’t often see made in articles on why you should stop using credit cards.
I’d encourage everyone to take the time to read this article and consider the points made. You may not agree with it, but I hope it causes you to think about why you’ve chosen to use credit cards or why you’ve chosen not to use them.
Here’s a snippet:
The dollar bill needs you.
A growing number of merchants won’t accept cash anymore. That includes a lot of airlines, which insist you pay by credit card if you want to buy a drink or a sandwich on board. And now comes news that the U.S. Treasury is printing fewer dollars, as we move towards an all-plastic economy.
Great news for the banks. Great news for the card companies. Great news for the marketing establishment, which can now pore through our transactions and our personal lives in greater and greater detail.
Me? Call me a contrarian, or just call me ornery, but I view this with gloom. This is not a step forward. It’s a step backwards. Personally, I’ve been moving the other way. I’ve cut down on my use of credit cards and debit cards. The latest news is the final push I needed to get them out of my life completely. I’m going all cash.
Read the full article.
I’d love to hear your thoughts on this article. Since this can sometimes be a heated topic, please remember to be cordial in commenting.
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I think what some people don’t realize is that unfortunately an outstanding credit score may have to be a “safety net” someday and the only way to get it is to build it over time. We only have one credit card with our credit union, it has a very high limit, we use it responsibly and pay it off and my husband and I both have credit scores over 830. We also have our e/r savings, etc.
However, in my previous job (before I was a SAHM) I saw many people just like us who had real emergencies and needed their credit card/score for loans to sustain them. While unemployment is certainly devastating for many people, the types of things I saw were far more catastrophic – for example one couple, sadly, had two members of their family (mom and a child) diagnosed with illnesses – even with health insurance, Mom’s long term illness comes with many prescriptions that are several hundred dollars a month out of pocket. The child had cancer and both parents obviously missed a lot of work during treatments, etc. My point is it broke my heart as the father explained that he knew they looked like deadbeats but they had ultimately filed bankruptcy after they went through almost $75K e/r funds, loans from their IRAs, etc taking care of everyone. They had done everything “right” and now were starting over anyway.
I know this is a very extreme example but it is important to realize that part of being responsible is securing your family’s financial future in a number of ways and building credit responsibly can be one piece of the puzzle. It isn’t necessarily just about being able to buy a plane ticket or reserve a hotel room, but there may be a time 20 years from now (hopefully, never if you are so blessed) when you may find that you need you that credit score to help you and it may be too late!
My husband and I have never had credit cards. I had one before we got married, but my parents were cosigners on it (I got it when I was 16) and asked me to close it when I was 18. We bought a house 2 years ago with no credit. It was a pain to find someone that was even willing to give us a loan. Our interest rate isnt much higher becuase of it, but it took about 3 months to find a lender.
I read somewhere “what if you car breaks and you can afford to fix it and dont have a credit card?” I’m actually in that exact situation right now. And God blessed me with feet, a double stroller and a water bottle. So, anytime we need to go anywhere, my kids and I are walking. It’s good exercise! A broken car seems to save money too.
The argument that plastic makes you spend more is very true in my life. I have tried a couple times not to use cash, and use my debit card exclusively. Both times, I over spent the budget. And I was really trying to stay on top of it. I do use my debit card for online purchases.
I’m sure this won’t be read this far down, but… We’ve been on the CC system for 5 or 6 years now. Charge EVERYTHING and completely pay it off every month. We are both very detail orientated people and so recorded every purchase in our excel budget every month, always have – I can tell you every penny we’ve spent in each of our 12 categories for the entire timeline. That being said our spending did go up in clothing, household, dining and misc when we switched. We do have target amounts for each category and try to keep the spending reasonable, but without a daily ticker we often go over. We’ve always paid it off but we should have been able to save more than we have.
I’m going to talk with my DH tonight about switching just a couple of categories – clothing and eating out – since they fluctuate the most – and see if just maybe using cash only will help us to keep more for later!
I have to disagree with the article, I think the benefits of having a credit card far outweigh that of using cash. First, if you pay off the balance every month you are helping to increase your creditworthiness by increasing your credit limits. Therefore, when you go to buy a house or another large purchase you’re more likely to get a better rate in the long run. Second, I pay my balance off every month so I don’t have interest and then I use the credit card points I’ve racked up to cash in for gift cards at Christmastime. I use those to buy gifts or give the gift cards as gifts so I’m actually making money. Third, if you ever have a problem with a transaction, it’s easier to dispute with your credit card company and get your money back than if you paid cash. Fourth, I actually spend less using my credit card. I’m less likely to put a $3 coffee on my credit card. If the transaction isn’t over a specific amount then it just seems silly to charge it so I’ve talked myself out of a lot of small charges because of this and those do rack up over time. Fifth, I wouldn’t ever close out a credit card account. This lowers your credit score. If you have a problem then just cut up the card and don’t use it. Many companies will automatically close the account if it hasn’t been used in a certain amount of time. By that point you’d probably be out of your debt situation anyway. Personally I find cash easier to spend than I do credit cards.
While this article has some good points, I’m definitely not giving up my plastic anytime soon. While many of the points are valid – people spend more money using credit cards, etc – the real issue here is not the cards, it’s the fact that people don’t have the willpower to control their spending, or that they can’t handle budgeting themselves! And if that is the case, then the author is correct, they should be using cash instead of racking up debt and causing themselves a boatload of trouble in the end (isn’t that how our economy got into this mess in the first place?). But I think most of the readers here are much more budget-conscious, and using a debit card or an occasional credit card that is paid off every month isn’t going to be a problem. I can’t imagine the hassle it would be to have a pre-paid card everytime I wanted to make travel arrangements or buy something online. It’s just not worth it! I don’t even think you can rent a car without having a credit card. And like others have posted, having a credit score (a good one) is a necessary evil, so if you ever want to get a mortgage, you need to have at least a couple of cards and use them well. I can’t imagine someone trying to take out a mortgage without ever having a credit card! What really needs to be done, is that kids need to be taking personal finance classes in high school (IMHO, it should be a mandatory requirement!) so that people learn how to use credit cards correctly and learn how to build a credit history without burying themselves in debt.
I agree about requiring kids to take personal finance in high school – I always say that too. The concept of interest and compounding interest, and paying and earning interest are easy concepts that a junior high student can understand, yet I never really was aware of these concepts until I got I was in college, and I didn’t understand the impact until after I got out of college.
I didn’t have time to read all of these posts, but I wanted to mention that around where I live, I have seen a slight increase in retailers ONLY accepting cash, mostly local restaurants. I don’t have a problem with this since I know the restaurant is trying to avoid the credit card merchant fee.
What I do have a problem with, is the restaurant being cash only, and only mention it right outside the door and consequently the customer doesn’t know this policy until walking into the restaurant. I feel there should be a sign visible from the road so that customers know to come prepared with cash. Most of these cash only restaurants provide an ATM, but usually there is a fee to use it.
As for credit cards, I use the rewards, but have switched to cash for some purchases, like groceries, because I find it easier to stick to my budget that way.
We use the cash system for any expense that we can “work on keeping down” – groceries, eating out, entertainment, clothes, gifts, etc. For expenses that we MUST pay, and expenses that are tax issues for us, we use the credit card – doctor’s appointments, repairs to our rental properties, and gas (because I can’t NOT drive my kid to school!) So we keep our credit score good, and have the benefit of keeping most expenses low through using the cash system. I’m traveling a lot right now with my boys, and it’s awfully nice to have a credit card to put down for hotels! I end up paying with cash when I check out, but what’s the point in fighting so hard? It’s a credit card, not a cobra! Just keep an eye on your bill for any discrepencies, keeping spending to a minimum, and get on with life!
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