I was inspired by reading this post on Huffington Post to re-share this post that I wrote for another site a few years back.
People are often quite surprised to find out I’ve never had a credit card. In fact, sometimes, they have to ask three times just to be sure they heard me correctly:
“So you’ve never had a credit card?” they ask incredulously.
“Nope,” I respond.
“Like ever?”
“Right, never,” I reiterate.
“Not even when you were younger—ten years ago or something?” They continue to quiz.
“No, really and truly, I’ve never had a credit card,” I reply, again.
Usually people just end up looking at me aghast like I’m from some other planet or something. That’s okay, I’ve gotten used to the fact that I’m weird.
But you know what I’ve also never had? Credit card debt.
Yes, it’s true. I’ve never had to worry about how I’m going to pay off the credit card bill that’s coming due. I’ve never had to hassle with being harassed by credit card companies because my payment was late. And I’ve never had to dread opening up a credit card bill to see how large it was.
Do I think credit cards are evil? No. I have personally seen that there is a small percentage of people who can use credit cards without being tempted to go over-budget. If that’s you, you can skip this article altogether.
However, if you are struggling to make ends meet and you are swiping your card on a regular basis, I want to encourage you to consider switching to a cash budget — at least for a short-term experiment. Here’s why I love using cash:
1. Using cash keeps you from over-spending.
Yes, cash can burn a hole in your pocket and you can blow it. But here’s the thing: if you only use cash, when the money’s gone, it’s gone.
You either learn to pace yourself and your spending so that you have enough money to buy groceries at the end of the month, or you go without buying groceries. If you don’t have any grocery money to spend the last week of the month, you’ll probably think a lot more carefully the next month when you’re tempted to spend all your grocery cash during the first few weeks of the month.
2. Using cash forces you to evaluate your purchases.
When you use cash, you can’t mindlessly swipe a card—you have to pull green bills out and hand them over. It doesn’t take a month for the purchase to show up on your credit card bill; the pain of purchase is immediate.
This direct correlation can give you a much better grasp on your finances and on where your money is going. And it will probably also cause you to step back and carefully evaluate each purchase.
3. Using cash prevents you from betting on the future.
So many people say, “I treat my credit card like cash and always pay off my credit card bill in full at the end of each month.” That sounds great—in theory. But very few people are truly treating their credit card like cash.
Unless, before you make a purchase, you set aside the full amount of money to cover the purchase in a separate account and never touch that money until you pay your credit card bill, you are not truly “treating your credit cards like cash”.
If you don’t have the money set aside for the full credit card bill, what happens if you lose your job tomorrow or you have a major financial crisis that puts you in a big bind?
By using the bank’s money or store credit to pay for your purchases, you are presuming that you are going to have enough money to pay the bill when it comes. And if you don’t, you could end up getting hit with high interest payments on top of the money you owe.
4. Using cash guarantees you never have to pay anyone back.
When you pay with cash, you can’t buy something unless you have enough money to pay for it. This often means you have to work hard, scrimp, and save up to make a purchase.
This process of scrimping and saving can be grueling, but the satisfaction of exercising self-discipline and waiting to buy something with your own hard-earned money is every bit worth it in the long run.
And you know the best part about paying with cash? You never have to worry about paying anyone back. When you buy something, it’s yours—free and clear!
Am I the only crazy one who doesn’t have a credit card? Anyone else out there NEVER had a credit card?
We did have credit card debt and late payments and the stress that goes along with that, so I fully agree with everything you just said. However, we did a complete turn-around about 4 years ago when the word got out that most of the people in my husband’s department would lose their jobs within 1 – 2 years of that time. Right before that happened, we heard a very convicting sermon series on debt and those two things together really changes our hearts about debt. We ended up doing a major debt snowball and got rid of all debt but the mortgage and we are even now making extra payments on that.
But…we still have a credit card – one we get cash back on and that we only use if we have the cash in the bank to pay it off at that moment. And recently, we added a Lowe’s credit card because we are doing some minor remodelling (that we saved to pay for) and Lowe’s gives a 5% discount if you use their credit card. Since we will be purchasing a lot from there over the next few months, we decided to get the card, although the plan is to cancel it when we are finished with the remodel.
So, it can be done, but before 4 years ago, we were also the couple with the good intentions without the discipline to carry it out.
I didn’t sign up for a credit card until after I was out of college. Up into that point, I paid cash for everything including college tuition. I graduated debt free! After college for various reasons, I signed up for my very first credit card with a $100 a month credit limit and would fuel my car and pay it off immediately. Since then, I have gotten married and we have 2 credit cards that we treat like cash. We use ynab.com to budget. We live on last month’s income and every dollar we spend has already been budgeted, it doesn’t matter in what vehicle we spend it. Our credit card has saved us in multiple circumstances, from credit card fraud to a little fender bender we were in, in a rental car (the credit card company paid for what our private insurance wouldn’t).
I can see where credit cards aren’t for some people. My in-laws for example don’t understand how credit cards work. They look at how much money is in their checking account and think they have money and forget about the money they have spent on their credit card.
I think credit cards are a very personal choice. It is very admirable that you can survive without a credit card! Through life experience, we have chosen to have and responsibly use a credit card.
Intriguing idea…
As has been raised in the comments not having a credit history can pose problems.
Here’s what I wonder…
What is the least amount of activity you need to participate in to get a good credit history? For example, let’s say its $12,000 a year in charges. Then you could break it up into $1,000 expense items each month for a few years.
I do use a credit card, for two main reasons: security and rewards. (I love your site, by the way-you have so many inspiring ideas and new perspectives.) 🙂
1. SECURITY. Ok, so I actually work for a bank, in the credit card division-so I am probably a lot more aware of fraud than most people. Yes, everyone’s probably heard about recent merchant compromises in the news…but think about how many merchant compromises you’ve heard about, multiply it by a REALLY large number, and that’s how many there have actually been. Credit cards have a 0% fraud liability, so in the case of fraud, you’re not out that money. With a debit card, you’re just out of luck. If you are going to make online orders w/ a debit card (a practice I stopped a long time ago because of all the crazy fraud out there), I would suggest opening two accounts-and designating one for online purchases only. Only put enough money in it to cover your online transaction right before you submit it-that way, in the case of fraud, they won’t completely wipe you out. Also, be wary of gas station pumps were you slide your card-it’s pretty easy for fraudsters to put an inconspicuous cover over the actual slider and steal your information that way. That’s why I always use a credit card to fuel up, too (and I suppose you could pay cash, but I have 3 kids ages 4, 2, and 6 mo., so we don’t often go inside the gas station to pay). Other things that I normally pay online, like a utility bill, I ALWAYS pay w/ the credit card. And yes, you do have to pay off your credit card using your bank account information, but I would rather make one payment to my credit card than 10 payments to pay various bills using my checking and routing number. That makes you 10 times more likely to get your information stolen.
2. REWARDS. Now there are some pretty darn good cards out there that offer great rewards. My husband is from Peru (where his family still lives), so we put most of our monthly expenses on the card (designating those funds out of our bank account, first, to make sure that we can pay for the bill). You would be surprised how fast the miles add up. There are plenty of cash rewards cards, too, if that’s your thing. I see people earning an extra thousand dollars or two every year just by using their credit card and paying it off every month. (It also should be noted that I see many people carrying a balance every month and paying over a $100/mo. in interest-so definitely be responsible and don’t spend beyond your means.)
Just my perspective as someone who works in the credit card industry. If used correctly, they definitely have their usefulness, in my humble opinion. 🙂
I’m 27 and have never had a credit card.
I work at a bank and know how vital good credit is to getting the mortgage we will need one day.
I actually moved to the US from Canada when I got married, and credit ratings do not transfer over the border, so I have had to build my credit from scratch.
Not having a credit score is an absolute nightmare in this day and age. We had to do everything in his name, such as cellphones, internet, the car loan, applying for rental houses etc.
Knowing the fastest way to build solid credit is with a credit card, I applied for one in my name, plus added my name to my husband’s existing card.
We also got a bank loan for the truck we were buying for $2000. We had the cash in hand, but I knew adding an installment loan to my credit would help round it out. We then paid the loan off over a year’s time, so that it would show at least 12 months of solid payments.
When it comes time to upgrade my spouse from the beater truck, we will wait until we have the cash in hand again and just pay up front. Our credit is stellar now, and we don’t need the effects of any more debt payments.
For those who prefer to use cash for large payments, I suggest getting a loan the first time or two to round out your credit, and once your credit is great you can maintain it with just credit card usage.
While that is true if you want to be a part of the system, it is not true if you don’t want to be. There are plenty of ways to work around not having credit, if you are willing to look. Deposits for the cell phone or utility companies, private mortgages, and lots of ways around for an apartment. It can be done, if you choose to do it, but it may take a bit more time to research than buying into the hype.
We’ve had credit cards for 24 years and it has been financially beneficial for us, as we’ve gotten many, many thousands of dollars from points. If you have the discipline to be frugal and pay your balance every single month, credit cards are a great money-maker.
My husband and I relied on credit cards for things like car repairs, dental emergencies, etcetera after our son was born and we were living on one income for a while. Big mistake if you’re not able to pay them off in full every month. We got everything paid off about four years ago and cut them all up.
Life is so much simpler when you just pay cash or use a debit card. I’ve never had issues shopping online or making travel arrangements with a debit card. Thrifty and Enterprise both take debit cards if you’re traveling and need to rent a car.
I would like to add that at least twice our debit card has been hacked but we were reimbursed and charges dropped because we have a debit VISA card.
We’ve had the same experience.
I’m 47 and I’ve never had a credit card.
My husband was 36 and I was 31 before we ever had a credit card. At that point we had owned and sold two houses on which we borrowed a small amount from a family member and paid off. We then moved to another state and rented for 5 years. Real Estate hit bottom and we were ready to buy. Found a fabulous deal and started working on a loan. Well, whatayaknow…NOBODY would give us a loan! We didn’t have bad credit we just weren’t ‘in the system’ anywhere. After being told repeatedly that we needed to get at least two credit cards and work on building credit, we finally did just that. A year later we had enough credit to take out a loan and because the maket was on the rise, bought a property for 35,000. MORE than the one we wanted originally. Ouch! We’re keeping one credit card for gas purchases just to keep our credit alive and well, incase we ever need to take out a loan again.
One thing I haven’t noticed addressed in any of the comments – the thing that disturbs me about debit cards are the dangers of them, concerning fraud. I have had several fraud issues happen with credit cards, including one where someone got a several hundred dollar cash advance. I was liable for none of these. Also, as many other commenters, we have received great rewards, probably at least $2,000. We are debt free.
I am 50 years old and have never had a credit card. (I don’t consider having them “sin”. My father is 86 and has always used credit cards and has ALWAYS paid them off at the end of every month.) My husband I were missionaries in Mexico for many years and decided that we would live by faith and ask only God for our needs. My husband’s poor health forced us back to the US 11 years ago. We were finally able to get a house loan but it was only by God’s grace because we had no credit history. I asked the banker if it did not count that we also had NO outstanding debt? It feels good when the telemarketers call and offer to help solve our credit card debt to be able to respond, “We don’t have any.” Never have had and never plan to!
I’ve never had credit card debt. But I have had credit cards for about 25 years.
We personally have been able to use credit cards responsibly, but I know there are many others with whom cash should be the only option — especially if you aren’t disciplined in this area! Still, no matter how careful you are with credit cards, they have the potential to get out of control rather quickly.
As we pay for each purchase with a credit card, we “set aside” that amount in our bank account so we will have it when the bill comes due {like you suggested above}. It really is the only way to treat a credit card like cash!
My husband & I are those in the very small percentage and actually DO pay off our credit card every month. Yes, credit card as in ONE.
Except for a few years, DH always got paid only once a month. Boy, let me tell you, THAT makes you learn to budget quickly…and wisely!
We have no mortgage, our kids are grown (and thankfully supporting themselves quite well) and we chose a credit card that gives GREAT travel points for using. So, we pay everything with it…insurance, groceries, dinners out, etc. But, our retirement checks immediately get put in a savings account shortly after being direct deposited in our checking account/s.
But…very few people can do what we do. We’ve saved well, invested well and were blessed with a bit of inheritance (that was all invested). We are frugal in most aspect…but if we really WANT something, we buy it.
Now don’t get me wrong…we have not deprived ourselves ONE BIT!! We have a 30 foot cabin cruiser boat (paid cash), take vacations, LOVE to eat out and travel, have the latest in technology in our home along with some pretty nice kitchen ‘gadgets’. We just never got caught up in the ‘instant gratification’ a lot of credit card users experience. We dress nice…but have never been ‘clothes hogs’ and have never had such a thing as a ‘clothing budget’, even when raising 3 children.
Did any of this make sense? Again, not everyone can do what we do. We did spend many years paying ‘cash’ for things before getting that one credit card. It’s worth it, to us, to be able to get the 5 round-trip airline tickets and 3 nights in a luxury hotel, along with at least 10 nights in a ‘Comfort Inn’ type with our points in the last year…with extra to points to spare.
Kudos on not being in debt and being financially responsible.
You believe that you are in the “very small percentage” or “very few people can do what we do” because of the advice promoted by many frugal financial experts. The truth is nearly half of credit card users pay off the balances on all their cards every month. You are in good company. There are many, many people who are able to use credit cards for all the perks and never end up in debt.
Just scanning the comments here would show that more than half of MSM’s readers successfully use credit cards without ever going into debt. According to a graph I see here (http://www.nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/) roughly 47% of US households have credit card debt. Now, it doesn’t say what the other 53% are doing- cash only, or paying in full each month- but it would seem that more than a “very small percentage” of Americans do handle credit cards responsibly. That same graph also suggests that those who don’t handle them responsibly, REALLY don’t handle them responsibly. Average debt on those cards is $15500. Yikes!
Credit cards really aren’t the evil due to debt. It is our discipline of buying and paying off the credit card in full each month. Some people are discipline and some really struggle with it. I know I have a kind of an addicted personality so there are things I will never do because I know that about myself.
Credit cards are not really a struggle to be disciplined. We are frugal and pay off our credit card balance each month. Due to my husband travel we earn about 10 free flights a year (credit card bonus) which helps fly our family to Canada to see my kids 92 year grandmother. Also, for our 12 anniversary we went to Prague for 10 days–flights were free, free stay in Marriott (in which due to my husband’s level we had free breakfast, free appetizers and dessert at night). That trip we only spent money on lunches out–appetizers were big enough for dinner. We did lots of sight seeing and had a great time together.
Also, I do a lot of the other rewards and earn quit a bit of money (cashback). It is also helpful when I do online shopping. I buy lots of giftcards from discounted giftcards. Just the other day I got homedepot cards for 15% off their true value and I also made 5% going thru a cashback site to buy them. That is 20% I saved without even using coupons but I needed a credit card.
Reality, I am for credit cards if you know how to be responsible. My dad and sister both teach financial peace (Dave Ramsey) and both use credit cards, too. My feeling is that things like these aren’t black and white–it really depends on the person. There are many other things that we HAVE to stand up for that are black and white.
I’m 41, and don’t own a credit card. Never had one, never will. 🙂
I’m inspired!
I have had credit cards since I was 16 and love it. My 1st credit card was a Hudson’s store card to save 30% on my purchase. I was working and responsible for purchasing all of my own clothing & personal items. I paid the bill the day it came in the mail. Since then, I have had a few store cards if they offer substantial discounts on purchases.
We use our credit card for everything we do. I can’t think of anything we need cash for except the occasional parking meter. We earn at least $1300 in cash rewards every year from our credit card. We’ve never paid an interest fee or had a balance at the end of the month.
Plenty of credit card users are responsible people deliberately maximizing discounts and benefits. I see using credit cards as no different than using your time to earn swagbucks or sharing your email address for a coupon. It’s a way to save money and earn rewards.
Our car insurance and homeowner’s insurance are discounted because we have excellent credit.
According to this website –>
http://www.creditcards.com/credit-card-news/credit-card-industry-facts-personal-debt-statistics-1276.php
Of credit card users, 45% of men and 40% of women never carry a credit card balance from month to month. That is a substantial number of people who are using credit responsibly. To pretend that making purchases deliberately and paying off the balance monthly is a phenomenal feat that almost no one can accomplish is silly.
Obviously it is everyone’s personal choice of whether or not to have credit cards but someone mentioned that you build credit by paying your regular bills on time…that’s not really true. Companies like utilities, phone carriers, cable etc do not report to the credit bureaus monthly. You have a credit rating with each company and that determines if you have to pay deposits for additional accounts or if they require you to have a deposit on your current account but it’s not going to have an impact on your actual credit score. The only bills that report monthly are credit cards and loans, mortgage or vehicle. Other companies will only report to your credit if you default.
Yes. That is why we have credit cards. We are debt free and we need to keep up our credit score in case we have need of it. The credit cards are actually in my name so that I have credit in case I am ever widowed and need to have a credit rating since I have not worked for 35 years.
One of the first things our accountant daughter did after getting out of college and landing a good job was to get a credit card so that she could build credit for a mortgage one day. She is very money savvy at 23 and it does not worry us at all.
Crystal, you are such a great example to me! When I was 18, my parents opened a credit card for me to build credit; it was to be used to buy gas only. I paid it off every month. Fast forward a few years. I was out of college, and God had provided a good job for me. Since I “could afford it,” I opened up another credit card and started charging. No, I did not go into debt and always paid the cards off, but I was always surprised how much my bill was at the end of the month. When my husband and I were married, he said that we were not using credit cards anymore. If we did not have cash, we would not buy it. We have stayed out of debt as a newly wed couple, and I am so thankful for my husband’s wisdom.
I have been on both sides. I’ve had credit and used it responsibly and then had credit and it got away from me. We struggled to pay it off but it was hard. Lesson learned. Should have listened to my dad, who said ” if you use a credit card you better have the money to cover what you spend when you spend it and if you do then just pull out the cash and pay for it!” He lived by that until the day he died. Never had a credit card. Saved for everything he ever owned. It’s amazing how much smarter our parents become as we age!
We stopped using credit cards several years ago when our credit card company took us to court for non-payment. We did end up paying the whole balance off within the year but after that we have only used our debit card and cash, even for car rentals and travel. Before, we used credit cards for emergencies. But after the lawsuit, we have always had a cash emergency fund. And that brings a lot of peace of mind. It has worked out great for our family to not have credit cards. (Although, when those “free” vacation offers from timeshares come up, we can’t participate with no credit card. And that always makes me so sad!)
Supposedly most of this generation is not buying into the idea of the credit card, probably because they are learning about buying on credit thanks to student loans.
It seems like a lot of places on line take only credit card. Some of these will accept Pay Pal as an alternative, but a lot don’t.
How do you handle those- just by not shopping at these stores?
Does Amazon allow you to pay with a debit card?
I save so much time and money by shopping on line that I would hate to lose this resource.
I shop online with my debit card all the time, as long as the debit card has a Visa or MasterCard logo there is no problem
26 and both me and my husband have never had a credit card.
This being said, he does have student loans. As much of a pain as those are, they are the sole reason we were able to buy a house last year. Both of us had paid cash for our first couple of cars and until a few months ago, we didn’t have a car payment. So he was the only one with a credit score to get a loan on the house. In the past 6 months, we have had two transmissions go out (both of our cars) and it would have cost more than the cars’ worth to replace. Because we had credit, we were able to buy a nice used car for a lot less than it’s value and then refinance that car a few months later to get a car for him when his broke down.
Although I’m glad we haven’t fallen into the debt trap with credit cards, a person still needs to think about at least taking out a small loan to establish credit. If I could do it over, I would have taken a loan out on my first car, then paid it in cash in 1-2 months. Yes, it would have had a bit of interest added, but it would have been worth it. If it weren’t for my husband, I don’t know where we would be!
I am the exact opposite. I love credit. We charge everything we can and pay it in full every month and have received thousands upon thousands of gift cards, miles etc in rewards and bonuses. We have superior credit scores and were easily able to qualify for loans even with a low income.
I also find if I have cash in my wallet I spend it like water. So easy to stop for a dollar coffee if I have a dollar, but I try not to swipe my card for small purchases. I also get nervous I will drop cash and it will be gone or my wallet would get stolen and I will never see my cash again, but i can just call and cancel the cards. I also do not like debit cards because if that is frauded your whole bank account is in trouble. No thanks.
I shop online all the time and love using my cards for that too. While I respect the choice to not use credit cards and stay debt free. I do believe you can stay debt free and still use them. I will teach my kids how to responsibly use credit.
I agree with Corrie. Cash tends to walk out of my pocket, never to be seen again. I am 32 and my husband and I just got credit cards this year when we were moving cross-country (neither of us had one previously). We’ve racked up so many points already to use for flights to visit far-flung family…this was the main reason we got the card. I actually pay off the balance every week.
Also, he had superior credit due to a car loan. I had zero credit because I always saved and paid for things up front (even cars). This caused issues when I was trying to get an apartment on my own, etc. before we were married as I had no credit. It shouldn’t be that people who save and don’t use credit are penalized…but sometimes it happens.
I also agree with Corrie — I put EVERYTHING on my credit card, from monthly utilities to car and homeowners insurance premiums. I have never paid one cent in interest charges, as I have the full balance automatically deducted from my checking account every month. Like Corrie, I earn interest on the money in my checking account for the 30 days or so until the bill is paid plus have earned thousands over the years in rewards. I love Discover, since I can use $40 of my reward dollars to buy a $50 gift card, so once again, earning free money. For example, I wait for a great sale at Lands’ End, buy my family’s wardrobe, and use the free gift card to pay for it. Free new clothes for everyone each season! I agree, Crystal, that if someone is not disciplined this would not work for them, but please don’t state your opinion that there is only “a small percentage of people” who can use credit cards wisely as fact, as it is misleading.
I’m all for using cash and not having debt- that’s wonderful!! However, as a banker and loan officer, I will caution you not having some type of revolving and/or unsecured debt like a credit card can hurt you if you apply for a loan at a bank. Banks like to see you have good established credit like this. Typically in a tight financial situation, unsecured debt like credit cards are the first to not be paid, so being able to show responsible credit history is important.
As a mortgage loan processor, we were able to use utility bills and personal statements to secure credit with less than a half-point increase in interest rates. So, it can be done, you just have to choose the right broker.
We never had one either and it came back to bite us when we went to buy a house. We had zero debt but zero credit so we couldn’t get any loan. We had to have hubby’s parents get the loan for us while we established credit. I wished that someone had told us to just maintain a credit card and use it once a month and pay it off so that we had established a credit rating. Now credit ratings are used to check so many other things–insurance, rentals etc. that it is foolish not to think about that.
I’ve had a credit card for 17 years now but have never paid any interest or fees. We use it mainly for gas purchases since we get more rewards on those purchases. Balances are paid each month and it works really well for us. My husband and I have never had a car payment in our 12 years of marriage, which is highly unusual in these times. I love seeing the shock and surprise on the car salesman’s face when we inform him we plan to write a check for the purchase. Priceless!
Credit cards scare me. I think if I had one, I’d pay it off every month. The problem is, I’ve known quite a lot of people who have said the same thing, and done it for months or even years… but then they start charging. There’s this one thing that they genuinely need (like car tires), but can’t afford, so it goes on the credit card, and it’s just a slippery slope from there.
So my opinion is that credit cards get you comfortable with the idea of consumer debt. And that’s no bueno.
I do admire that. I have had a credit card now for almost 20 years and always payed balance in full, but I suspect I spend more than I would if it were all in cash. We have plenty of savings and make a good bit in cash back every year — we put all necessities on cc as well and probably make about 600-800 each year in cash back. Our credit is absolutely excellent.
We can afford to wisely have a cc. However, just because we can afford to spend the money, does not mean we should. More money means more opportunities to give. I think what it really comes down to is self- control and priorities. We may have more temptations with a cc, but I still try to weigh each of my purchases against our long term priorities and Gods plan for our life. As you mentioned, cash has to teach self- control or you don’t have money for groceries at the end of the month, but you can and should do the same with a cc. God does not bless us with money simply so we can live to higher standards, but to be a blessing. (And I know this is an area, you guys have chosen to do likewise)
Completely agree. And I think Crystal’s point about immediately transferring money to cover a purchase helps avoid the temptation to overspend when using a cc. Just because I CAN pay the bill at the end of the month doesn’t mean I SHOULD make those purchases.
I have had a credit card since I was 14 or so, when I began doing some of the family shopping/prescription pick up on the way home from school. I am fortunate in that I have never been tempted to spend more on credit than I could pay off at the end of the month, a habit I continue to this day.
IOW for me, a credit card is like cash, but with benefits. However since I don’t like the idea of someone knowing about everything I buy, I use cash most of the time.
I’ve had credit cards since for 28 years and I have paid off my full balance every month since I got my first one. That’s my deal to myself, I can spend as much as I want as long as I pay it off the next month. I have no debt of any kind, plenty of savings and an excellent credit score. I mostly use my Discover card and get a nice amount of cash back every year, so I actually make a profit for using credit. It is possible to use credit cards correctly and responsibly and make them work for you.
Crystal, you’re so right with so many things related to money management, but sorry, I respectfully disagree on this point.
Credit cards DO NOT necessarily equal debt,. They just need to be used wisely. Paying balances on time so that you don’t incur interest charges actually can MAKE you money, not only from the cash back and other perks, but also from simply holding onto your money longer.
It is very important to establish good credit, and having *available* credit is one key way to do that. Having a credit card that you pay off every month will help someone establish good credit.
You and your husband have made financial decisions that have allowed you to pay cash for everything, including real estate, and that’s great for you. And, yes, your credit score doesn’t matter if you can do that. But the majority of readers, I would guess, and not in the position to do that. To not recognize that is a disservice to your readers.
I can’t imagine traveling as much as you do without using a credit card. The first time I realized the holds placed on debit cards, which can be $1000 or more — never again. With credit cards that doesn’t happen. For someone with deep pockets and plenty of cash and available funds on a debit card, that’s fine, but many people are not in the position.
I spent the first decade of my career living pretty much paycheck to paycheck but also needing to travel for work on occasion. Those expenses were reimbursed by my employer after the fact, but I did have to pay them up front. Early on, I used my debit card for travel expenses and got stuck with a $1000 hold and causing my mortgage payment to bounce. Never again!
And you don’t have to look far to see instance after instance of card fraud. Yes it happens with credit cards in addition to debit cards, but with a credit card you have more recourse if it happens to you, and it can be fixed without cash out of your bank account.
I have a credit card with a relatively low limit that I use for all online purchases. If you use a debit card and something goes wrong, you can be completely wiped out. That happened to me once. I didn’t have a credit card and thought I was being responsible by using a debit card (or cash) for all purchases, but it was a disaster that took several months to resolve. Again, never again.
I have heard of that happening with debit cards. If someone hacks into your account, the money is gone. Hopefully the bank can still resolve it, but to me it would be much scarier than when it happens with a credit card (which has happened to us occasionally.) With a credit card you can usually dispute the charge easily if it’s fraudulent, and they give you a new card number right away.
I agree with you on this. My husband never had a credit card – until we tried to buy a house. His family is a cash-only household with absolutely no credit history to speak of between them. It would seem that never carrying debt would be a good thing; but the mortgage company wanted proof that my husband could a very large debt and pay it off in a timely fashion.
He was forced to get a credit card which he now uses for his monthly gas charges for his work truck.
When we went to refinance our mortgage, he’d gone from no credit to over an 800 credit score and the mortgage company was tripping all over itself to be nice to us.
Thank you for making this point.
Thank you for making this point. I don’t think people realize how risking making online purchases with debt cards are.
Excellent points. For better or worse, our society is a credit-based one. If you don’t play by the rules (ie, have a credit card or some other form of debt), then your credit score suffers. More and more, that credit score ends up being a factor- renting an apartment, applying for a job, insurance rates, and mortgage rates- and there’s no easy way to avoid it, unless you have very deep pockets. We will be teaching our children how to use credit wisely, as they have already seen by our example.
People can handle money poorly whether they use credit or cash, though I do admit using credit will dig you a deeper hole. If you don’t have control of your spending, you will spend all that you have. And when the emergency happens you won’t have the cash to pay for it.
The meaning of the word credit is DEBT, so I have to fundamentally disagree with your first point, Susan.
And having lived payday to payday as an entrepreneur, it gets a little scary, but God has always provided in his time. Credit is not an option in this (single mom) house. I haven’t used it since I was 18, and I have a (private) mortgage. There is always a way to do it, if you only will look. Debt is not a requirement for life.
One way to keep the debit card fraud at bay is to not have money in the bank – i.e., use cash. Or, have the necessary (small) amount in a savings account, to be transfered right before the draft comes out. If the money isn’t there, it can’t be taken, fraudulently or otherwise.
I’m the same age you are and have never had a credit card either! 🙂
Like most advice, this is great for some, but not all people. The main group that I worry about it are stay-at-home moms without much of a resume, work experience, or a big savings account.
If she were to be suddenly widowed or divorced, would she be able to immediately take care of things like renting an apartment, getting a (cheap) car, setting up utilities in her name, etc.? Not having a credit history would make it all harder.
One could always get a card, use it a few times carefully and freeze it in a block of ice.
As a seperated 34yo mom that only had a credit card from 18-19 years old (paid off before the charge hit the bank – always a credit on my account, NEVER a balance), I can say I’m so thrilled I don’t have a credit card. Even though I homeschool my three boys, I had enough entreprenuerial skill to go to work immediately after the seperation, working at local co-ops and doing classes for engine work myself, that even with NO savings and ALL the bills to pay, I was able to cover it for all but the first month. The church was able to help me in that immediate crisis. My husband’s credit was ruined by his ex-wife, so everything was in my name anyway. I still have no vehicle, which saves on monthly expenses, and I can pay someone to take me to work for the gas money. I intentionally got a private mortgage for this very reason- so there would never be a credit issue. Yes, I’ve had to pay deposits for things, but have gotten them all back. Cash is king.
I had a credit card from 18-19 years old, always with a credit balance – I’d transfer the money to the card before the charge ever hit the card. I got tired of it after the year and closed it down.
Fast forward 5 years. My husband’s ex-wife ruined his credit. Everything was put in my name. I had to pay deposits, but was able to get them all back.
We financed our mortgage privately, so no credit was needed.
We separated in December, with no savings. He took the car, but I stayed in the house. Everything was in my name, anyway. I had enough entrepreneurial experience to get right to work for myself, and through contracts in the local home school co-ops. I was able to take over all the bills in January, with a little help from the church in December. (We don’t do Christmas, so this wasn’t a big deal for us.) I am able to still set my schedule and home school all 3 boys on my own, without working a 9-5. I am still operating without a car, but able to pay the gas for a ride, since I don’t have all that tax/tag/insurance expense going out the door.
All that to say, I am SO glad we don’t have any non-mortgage debt, especially credit cards. Cash is king, here. Wouldn’t have it any other way. There are so many other ways to build credit. As a former mortgage loan processor, I had several cases where there was no credit and we were able to work around it using utility bills and personal statements.
Point is, where there is a will, there is a way, with prayer and thanksgiving, no matter the situation.
We went credit-card free about 4 years ago. Best. Decision. Ever.
I never found the perks all that alluring. I’d rather save up for a trip or gift and just pay cash for it, rather than constantly follow my perks number and make sure I use them before they expire. Ain’t no one got time for that.
You are not that weird. I am 36 and I have never owned a credit card. My husband was a credit card collector earlier in our marriage. His stories were enough for me to stay away from credit cards for the rest of my life.
How do you manage to book rental cars and hotel rooms without a credit card? This seems to be a requirement for most companies.
We use a debit card. We have a separate travel account that our debit cards are connected to for this. So far, we’ve never had an issue with this.
Unfortunately, we’ve had some problems with debit cards being hacked…which can be a nightmare with the banks to get your $$ back as opposed to a credit card company which is immediate. It is one of the reasons we got just one credit card and pretty much quit using our debit cards except at the ATM for cash.
Thank you for the encouragement to use cash!
That you is not you personally just the royal you 🙂
I don’t like credit cards, but here’s the thing. I fell into the trap of getting one in college, and actually I’m glad I got it then because I did have a good credit score from having it. When I got married, I had to put everything in my name (even power/water and our cell phones!) because my husband didn’t have any credit since he never had a credit card. I remember being so mad at his parents, lol. We have ok credit, but I wish our society didn’t “force” people to get credit cards so they can show businesses that they are reliable. It’s such a bummer to me. How would you deal with this with your children? How will they establish credit?
Rebecca,
You don’t need a credit card to show that you are reliable. Paying your current bills on time will do that (utilities, cell phone, insurance etc). Having a steady job will do that. Credit Cards just show you can make minimum payments. It has nothing to do with how reliable you are. I would be thanking my husband’s parents who loved him enough not to get him a credit card. I’m not sure about your state but credit is not required for utilities.
For the kids teach them to save and pay for things in cash. It’s a change in mindset.If you don’t have the money you don’t get to buy it. Little weird but normal has you in credit card debt.
JF – what you describe should be true, but isn’t always. In a sensible world, a pattern of regular payments on any periodic bill – including utility bills – should help establish whether one is a good credit risk. Unfortunately most (all?) of the credit rating agencies haven’t incorporated periodic non-debt payments into their algorithms. This leaves a lot of people not just uncredited but unbanked, and at a disadvantage not just in, say, home buying, but in opening a business.
I know that’s how it should be. But in my actual experience, I had to put all our utility bills, except water I think, in my name because my husband didn’t have credit. What if i didn’t have credit either? Could I have been able to get power, a cell phone, even an apartment then? I don’t want my kids to have credit cards. I have already begun to teach them to use cash and refuse to even talk about credit cards to them. But I don’t want them to go through that when they are on their own since that is what businesses use to determine they’ll be reliable. Whether it was the state’s decision or not, it doesn’t matter. It happened to me, and made the first few months of my marriage frustrating and I want to avoid it for my kids.
Yes, but to get a loan they look at your credit score. When your car breaks down and you have a job to go to, it’s nice to be able to get a loan and another vehicle quickly.
Or a house! We ran into that problem when we bought our home a few years ago. My husband had a credit card that he had since college and used occasionally and paid off each month. I had never had a credit card–I always paid cash or used my debit card. We ended up having to put the house just in his name because our interest rate was so much higher when it was in my name too because of my credit score since I had never had a credit card.
Absolutely true!
I was told that would be impossible to get a loan to buy a house….well guess what? I have never had a credit card an I had no problem to get my house loan approved. If you pay your bills on time and you have a regular income from your job, that is all what is needed.
As for the perks of credit cards…well I get the best perk…No debt other than my monthly house payment that is cheaper than renting in my area.
I am not against credit cards, I just don’t need them. I am in my 40’s 🙂
Cheers!
You’re missing out on huge rewards buy not having one. It’s no different than cash knowing you have to pay it in full each month. We probably bank $600 on products we already buy such as groceries that we get 6% back on. And gas is 3%. It’s also much more convenient to pay at the pump than it is to pay inside.
For me, the rewards of paying with cash far exceed the rewards I would earn by swiping a card. I’m probably weird, but that’s the truth. I rarely ever even use my debit card, except for online and business purchases. I’m a cash girl. 🙂
That said, we do earn points through travel by signing up for hotel/airline rewards programs and booking with our debit card. Not as much as we would with credit cards, but it’s still significant since I travel often for business (and most of my travel expenses are reimbursed since it’s for speaking, etc.)
I am with you Autumn! Crystal, I love everything you write, but I just can’t get on board with this one. Credit cards are very useful when used responsibly. We pay our balance in full each month and never use it to overspend. I probably earn $500 in rewards each year which we save until Dec. and use to pay for Christmas gifts. (So much easier than spending my time on Swagbucks surveys! 😉
Totally agree! We have taken our family of five to Europe twice for free from points we have earned using credit cards. We have never paid a late fee or any interest, so it was totally free! A fantastic reward to share with the family. Would not be without a credit card if my life depended on it.
I have to say I’m surprised that you don’t have a credit card, as you apparently fly fairly often for business and personal travel. I do use a Discover card paid in full every month, but I think your suggestion to put cash aside to cover each purchase is an excellent idea. Online banking makes that a snap to do, and it prevents the temptation to push accountability for the purchase back to the end of the month.
We use a debit card through a separate travel account we have set up to book travel.
I am 32 and never had one!
Woohoo! We need to start a club. 🙂
I’ve never had one either! 🙂 I’m 29.
Woohoo! Welcome to the club. 😉
Also 29 and never had one! My husband never has, either.
I’m actually for credit cards but enjoyed the article. My dad got me my first credit card and gave it to me when I was 16 and said only use it to put gas in your tank (this was back when gas was $0.99 a gallon mind you 🙂 He did it because he wanted me to build credit. He told me never charge it unless you have the money right then and there in the bank to pay it back. ALWAYS pay each bill in full each month. I have been able to follow those rules ever since, I am now 31. When I met my husband he was 27 and had never had a credit card. It had worked for him, he wasn’t in debt but he also is a saver not a spender, he just never saw a reason to have one. When we married he was open to start using credit cards and saw the incentives that have come along with them, mainly the cash back. Right before our daughter was born 5 months ago we were able to cash out over $300 we had accumulated in cash back to help pay for baby expenses. Now to give the biggest reason as to why my dad giving me my first credit card when I was 16 and teaching me how to responsibly use it was a great idea. We went to apply for a loan for our first house, we were nervous about the experience as I sat there pregnant with our first child and were living in a rental with a flooded basement (we were SO tired of renting). We were approved for a government loan at a low rate that required ZERO down payment to get us into our dream home. All this was possible for one reason, our credit scores were both over 800. The loan agent took one look at that and said she would be able to make it happen. Our home is the only thing we ever plan to owe money on, both our cars are payed off. I would say we haven’t made perfect money choices with credit cards (you do sometimes get carried away) but I have never missed a payment and never let any part of my bill rollover. We don’t live lavishly, my husband is a youth pastor and I work part time at a library but be have a stable home to raise our daughter, food on the table and Godly parents who helped us make good financial choices.
We are some of the few that can use. A credit card like cash. We never leave a balance at the end of the month and we do have the money to pay it off even if we lose our jobs, but I also know from dealing with others that some people need to switch to cash. No have some people in my circle though that have had trouble because they have no credit according to financial people. They are being told that if they want a mortgage they have to establish credit first by having a card and such. I know there are those that pay for a house in cash but most don’t. I wish there was a better way to establish credit without banks encouraging young people to get a credit card.
I never had a credit card till after we married and I was pregnant with our first child. I was thrilled to find out we could get free money just for buying many products we were already buying with cash!
Honestly, I have never paid a fee of any sort and have made literally thousands of dollars in the past 20 years using credit cards with great perks. Never ever would I encourage someone to do this unless they had great spending habits in place first.
People have told me it would ruin my credit score but I have the highest rating possible. Love free money!
Agreed – the free flights and hotel rooms are so worth it! Just don’t carry a balance, and don’t spend more than your budget allows. It’s the only way I can afford to go on international trips for pennies on the dollar! I have a ten day trip to scandanavia and germany next month… I booked nice hotels for every night with rewards points (including a ritz carlton!) with no out of pocket costs. I even booked the flight with points and only had to pay taxes. I’m hooked on big travel with a small budget!