I do not use credit cards

I don't like credit cards. Many smart people — including my wife — use them wisely and never have problems. I'm not one of those people. Most of my money woes stem from credit card debt acquired when I was first out of college. Eventually I wised up — I have not carried a personal credit card in more than five years.

NCN at No Credit Needed has posted a detailed list of the reasons he does not use credit cards. He writes:

I have not used a credit card in over two years. So far, I have yet to find myself in a situation where I had to use my credit card. (I still have one, active, credit card account. I keep my card tucked away in my wallet. I'm not sure it actually works anymore. I do not plan to find out.) I do not advocate closing credit card accounts. I have an account that is open and in good standing. I just don't use it. What have I learned about NOT using my credit card?

Among the lessons NCN has learned:

  • Spending cash hurts more than swiping a card.
  • If you don't use your card, you don't get a bill.
  • He doesn't care about missing cash-back bonuses or card rewards.
  • He can use a debit card in nearly every place a credit card would work (including car rentals and hotel reservations).

I, too, have suffered no adverse effects from giving up personal credit cards. It helps, of course, that I use a debit card. I also carry a couple of business credit cards, but I have no problem using them responsibly. Business is business, and is completely separate from my personal life.

I'll admit that I've considered trying to use credit cards once more now that I seem to have developed a solid understanding of personal finance. Ultimately, however, I've decided the rewards are minimal and the risks too great. For now, I'm credit card-free and proud of it.

[No Credit Needed: I Do Not Use Credit Cards]
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Gaming the Credit System
Gaming the Credit System
13 years ago

I’ve got to say that I can’t really understand this sentiment, from you or anybody else. I also can’t understand your advocacy of the Debt Snowball; I guess my financial psyche is just different from yours. As you can tell from my blog’s name, I’ve got more of a detached attitude towards money; to me, it’s not the emotional heavyweight that it seems to be with many others. I am working on a couple of posts about credit card and general financial management right now on my blog. They should be up in the next couple of days. Maybe they… Read more »

J.D.
J.D.
13 years ago

I’ve got to say that I can’t really understand this sentiment As with many money-related issues, I believe this comes down to psychology. We’re all different. We each have different ways of seeing and interacting with the world. In my case, personal credit is problematic. Something inside me allows me to rationalize its use for little things, which turn into big things, which turns into mountains of debt. Obviously I am not the only one with this problem. There are milllions of people in the U.S. who have problems with credit card use. Some of us are bright college-educated folk… Read more »

jay
jay
13 years ago

It’s not true that you can rent a car with a debit card everywhere. I tried to rent a car from Hertz at Newark Airport and was denied. I talked to managers, called customer service, tried to pay cash, and was still refused. I had to take the train back home (45 minutes) and then back out there to get a car… on the evening before Thanksgiving.

Geoff
Geoff
13 years ago

Use a credit card only for specific purposes. American Express, for instance, has a card that pays 5% back on groceries or petrol. Using that card only for those purposes will keep your bill predictable. I spend about $800 a month on these items, and Amex helpfully pays for $40 of that for me.

Flexo
Flexo
13 years ago

Jay — I agree, I’ve found that some reservation agencies like rental cars and hotels won’t take a debit card to hold a reservation, but that was several years ago, and I I think that has mostly changed. Then again, I don’t se a debit card, so I’m not sure. I do know that some hotels will accept a cash deposit rather than a credit card to hold a room, but when so much is booked online or over the phone, that doesn’t work so well that much any more. J.D.’s right about psychology. People look for a one-size-fits-all solution…… Read more »

anonymous..
anonymous..
13 years ago

Congrats to the individual from No Credit Needed. That’s a huge step, considering you haven’t used a CC in two years. Let me ask you this though. What if you are trying to build credit? What are other ways of doing that without a credit card line or two? I’m one of the few that still uses my CC for online purchases, car rentals, and emergencies. I try hard as possible not to carry a balance though. I pay them IN FULL, even before the monthly is due! I’ll make two or three payments in the same month if I… Read more »

Kevin
Kevin
13 years ago

I can respect your decision, and his as well. However, I was actually thinking of typing up an article along the lines of “Credit Cards: It Isn’t All Bad.” True, there are a ton of things bad about credit cards. If you can’t control your use of one, then by all means stay away. The interest rates are ridiculous, changing of terms on the policy in fine print is ridiculous, etc. Yet, I ONLY use credit cards. It ‘hurts’ just as much to me because I understand getting dinged with a bill. I pay the entire bill every month. I… Read more »

Jacki
Jacki
13 years ago

My POV: My husband and I use our Discover card for just about everything. It’s so much easier than always going to the bank for cash, and we pay it off in full every single month, so we never have to worry about interest fees. And the cash back bonus is great! I have $100 sitting there for me to redeem now, which will probably be turned into $125 at The Gap or Bed Bath and Beyond. That’s free money! Another bonus: The credit card statement/website helps me keep track of expenses when my husband loses or forgets to give… Read more »

Ty
Ty
13 years ago

One good reason to occasionally use a credit card is that Debit cards are, in my experience, not insured. I use my credit card for online purchases, but otherwise it is used only in emergencies.

Disclaimer: The previous statement is based on my personal experience at three community banks over the past couple of years. (I move too much)

Great Blog BTW.

Jason
Jason
13 years ago

Aside from the ability to track expenses, the rewards, etc., many credit cards offer lesser known perks for free: warranty doubling, 90 day theft/damage insurance, price matching assurance. I never buy extended warranties because purchasing with my card gets me twice the manufacturer’s warranty (and I have used this feature with Amex–very convenient and no hassle).

James Davis
James Davis
13 years ago

Personally, I’m not much of a gambler. I don’t play the lottery. I don’t bet on sports. I don’t frequent casinos. In fact, I once spent four days in Las Vegas and couldn’t bring my self to put even one quarter in a slot machine. I know the math. The odds are overwhelmingly stacked against me. Likewise, I no longer use credit cards for personal expenses. (I have one card for reimbursable business expenses only.) My wife and I got rid of our credit cards about 4 years ago and have been living debt free for over a year now.… Read more »

mlathe
mlathe
13 years ago

I read http://www.2millionblog.com a lot, and he advocates to carry large balances, do 0% transfers, and put the money into a Money Market to earn interest. This appears to be pretty common, but it feels to me like a silly thing to do. Any comments on this?

Christine
Christine
13 years ago

I haven’t used a credit card since September 2004. I’ve never missed it as I use a Paypal debit card. You transfer money from your bank account to your Paypal account. Once it’s there you can use your card! Or if you shop online the Paypal card will pull the money right out of the bank account. So you never go crazy as you can’t spend what you don’t have. The only time I had a nightmare was getting a rental car on vacation. I had a car waiting for me, reserved and no one had a problem. I fly… Read more »

BxCapricorn
BxCapricorn
13 years ago

I’ve had credit cards for over twenty years, and they’re rebated around $300/year and all of the Sony Electronics in my home (except for my computer). All I had to do budget my spending with it and pay the balance off ‘in full’ every month. Do you realize that I would have to have quite of bit of money tied up in a 4.5% money market to get that kind of yearly return. It’s a great talking point though and a great rebate card is a “reward” for having excellent credit, which a goal many of your readers have.

jpsfranks
jpsfranks
13 years ago

Credit cards are pretty much mandatory for building your credit. I had a totally blank credit history until I finished college (lived at home, used a debit card, paid in-state tuition as I went w/o student loans, drove a used car paid in cash). Once I moved out on my own I found I was getting blocked at every turn for having no credit. It was tough to get an apartment, and I was even denied a cell-phone deal once. I eventually started out with a secured card (all I could get) and now I have a couple of good… Read more »

Dan S.
Dan S.
13 years ago

Something I don’t hear mentioned often enough in discussions of living without a credit card is the way banks handle identity theft. If a criminal manages to sneak a charge onto your credit card, the inconvenience to you is limited to having to contest the charge. By law, your liability is a maximum of $50, and most credit card companies will cover the whole thing. But if a criminal drains money out of your checking account using your debit card, that money *stays out of your account* until your fraud claim is resolved. This can mean thousands of dollars of… Read more »

Robert
Robert
13 years ago

We still have 2-3 consumer credit cards for our family use, but only for very specific reasons: (1) We use an L.L. Bean card for buying stuff from the L.L. Bean catalog/web store because it gives you free shipping, which can sometimes represent a HUGE savings. (Also free monogramming, which is kind of cool.) (2) We use a low-interest platinum card for online purchases. As others have mentioned, debit cards typically do not have fraud insurance and that makes them a real liability. Somebody mentioned using Paypal; sorry, but PayPal SUCKS and my experience with them has been horrible. (3)… Read more »

MillionDollarJourney.com
MillionDollarJourney.com
13 years ago

J.D

I’m not sure about the states, but here in Canada using a DEBIT card is MUCH more dangerous than using your credit card. Debit cards and the bank accounts attached are not insured if someone gets your PIN number where Credit cards are covered for fraud.

http://www.milliondollarjourney.com

Angela
Angela
13 years ago

JD do you have a credit card account? Do you use your wife’s credit card – not as in actually take it and use it, but if you two need to rent a car do you use her credit card as a deposit? I could live without using my credit card, although its a great cashflow tool as I pay off the bill in full every month by direct debit. I don’t think I could live without the account for car rental deposits, or for having a credit record. In a real emergency where I had to leave home at… Read more »

Jag Nogg
Jag Nogg
13 years ago

Even if you pay off your entire balance each month and earn cash back, you may still be hurting yourself financially by using a credit card. That’s because people spend an around 30% more when they use a credit card. So, unless you are getting a 30% cash back reward, you are probably spending more money than you would if you used cash or debit. Of course, everyone will claim to be in the 1% of the population that doesn’t actually spend more while using credit. Statistically speaking, that isn’t true. It comes down to behavior and being honest with… Read more »

ageekymom
ageekymom
13 years ago

My husband & I stopped using credit cards about 15 years ago after ruining our credit rating with huge credit card debt, owing more than $30K. Except for one incident involving renting a car from Hertz at an airport years ago, we have never had a problem using our debit cards. BTW – Alamo allowed us to rent with a debit card.
A couple of months ago we got another credit card, and I’ve got to admit, it makes me nervous. I never want to be in the hole because of a credit card again!

icup
icup
13 years ago

jag nogg –

I am one of that 1% (LOL). I only buy gas with my card and pay it off in full every month. I would need to fill my tank no matter what, so I don’t think I’m spending 30% more by using the card.

Angie
Angie
13 years ago

I think it’s pretty interesting that there are several different ways to cope with credit–and I concur with JD that it probably just boils down to psychology. More power to the people who really can stand to game the system and keep all those plates spinning without having it all come crashing down. For most others, paying off balances in full each month or avoiding credit entirely is a big load off the mind. My husband and I are in the “pay it off in full” camp, generally, but we appreciate being able to use credit and carry a balance… Read more »

Adam
Adam
13 years ago

I’m trying to rebuild my credit and thought having a credit card would help since I had nothing in the “accounts in good standing” section of my report. I just got it this month and plan to only use it for gas as well as any misc things that require credit cards. I also transfer cash to a separate account to match what I’ve spent on the card so that it still “hurts” the same, hopefully helping to keep me from spending more than I can afford. Speaking as someone who just recently got a card, debit cards are great… Read more »

Emily H.
Emily H.
13 years ago

I wonder at the statistic that people spend that much more when using a credit card–how was it obtained?

My credit card purchases are much higher than my cash purchases for one simple reason: I don’t like carrying more than $60 or $80 in cash, so when I buy a camera, or an iPod, or a computer, or a few housewares, naturally I use a credit (or debit) card.

moneymonk
moneymonk
13 years ago

Im with you Get rich slowly. I do not have a credit card. And most importantly, I do not have credit card debt.

No regrets!

One thing I hate is as Adam said :

Rental car companies, for example, generally reserve an extra $250 from your account on top of whatever they are going to charge you.

I hate that. But Im willing to live with it.

NCN
NCN
13 years ago

I don’t really worry about “building my credit”. I don’t plan on ever borrowing any money. As for the “safety” issues involved, I use a debit card linked to a checking account with no over drafts allowed and a fixed amount of money. I’ve never run into a problem. Granted, I don’t travel that much, but I’ve rented cars on 2 occasions, and stayed in hotels multiple times. No worries. As for carrying cash, I usually keep a couple hundred dollars on me. For those of you who feel you use cc responsibly, let me give you this challenge. Go… Read more »

name
name
13 years ago

You are a moron.

You screwed up and went into debt, now you piss and moan like a whining infant instead of accepting the responsibility.

Credit cards are NOT evil; they are a tool. Being “anti-credit cards” is a childish revenge tactic for your previous mistakes (debt).

Filip
Filip
13 years ago

All accounts begin at 0 (zero). You can put money onto a credit card (actual credit) before you debit money out of it, effectively using it as a debit card.

Plus you’ll have protection (something debit cards don’t have).

JRsail
JRsail
13 years ago

My husband and I haven’t used CCs for 4 yrs because we were in debt bad. Couldn’t even keep up with the mins. We had used the 4 major cards for medical bills and to get our sailboat ready for travels. Thinking that we would be able to keep up with the bills. But, that never happened. After the creditors and collectors drove us nuts for a long time, we serched for a det consolidater and found Debt Settlement USA. They take 12% and then keep the wolves at bay till we can get the money together to settle 40%… Read more »

Greg C
Greg C
13 years ago

You know, I had trouble with debt myself at a young age, but at least I didn’t starve ( my debt was for things like food and books). I found myself “rock bottom” I guess and swore I would never live/feel that way again. And that is the reason I now use credit cards and do so RESPONSIBLY. I realize some people are “addicts” and feel the only way to overcome their addiction is abstaining. Well good for them, but I prefer to deal with problems head-on and manage them. I also HATE HATE HATE preachy a-holes. You know the… Read more »

beanspants1
beanspants1
13 years ago

i have no particular opinion on not using credit cards, but keeping them open. i agree that it somewhat seems like to you are getting your “revenge” against them, but hey, that always worked for Rambo and Chuck Norris, so go for it. i used movie “revenge” over real “revenge” for a reason – it doesn’t actually hurt anyone and it’s a bit of fun. however, 2 points on the comments: 1 person mentioned fund transfers and high balances: that’s a good SHORT TERM strategy, but you will lose in the long term. Pay them off in whatever order you… Read more »

knuffel
knuffel
13 years ago

I use the feature of balance transfer and benefit from 1.99% interest rates on my credit card. Yes.
First I calculate how much I can pay off before the 1.99% expires and that is the amount I transfer.
Otherwise, I spend no more than I can afford to pay off the next month. That way I don’t pay interest at all. Kind of like overdraft.

anonymous..
anonymous..
13 years ago

NCN. So you don’t worry about building credit? I guess you always have enough cash lying around to buy a car? Or a half a million dollar home?

Everyone needs credit. You just have to use it right.

I can go a month using cash. That’s easy. I just don’t like carrying all that change around. That’s what a debit card is for.

Like I said, my credit cards are simply for internet purchases, car rentals, or emergencies. Pay in full every month.

Ken Lombard
Ken Lombard
13 years ago

It depends on the person. My wife and I find that we have less wasteful spending by using cards only and not taking cash out. This is because when we tend to have cash, we tend to spend it on a bunch of little things that we don’t really need – things we wouldn’t whip the card out for. Also, we live within a budget and have our own personal ‘allowance’ to spend as well. I think credit cards are bad for people that tend to make LARGE spontaneous purchases. Meanwhile cash is bad for people who tend to make… Read more »

Roy
Roy
13 years ago

I haven’t had a credit card in four years. Mortgage went away two and a half years ago along with the car payment. I looked at my life at where I used to live, sold over-taxed, over-priced real estate, quit my job and went someplace warmer. Sure there’s a lot of bennies that credit cards offer, but it doesn’t overcome the mental benefit of owing nothing. I live cheaply now. No cable, No live television, nothing beyond the Sunday paper. No movies or eating out, or take out. My place was paid for in cash from the old one. Credit… Read more »

Spamchop
Spamchop
13 years ago

Christine: You need to read the Paypal terms and conditions you agreed to. Moving your money into a Paypal account is rather foolish. Since Paypal is not a bank they are:

1. Not FDIC insured
2. Not required to follow any sort of banking regulations.

They can and will lock your account for any reason. Kiss your money goodbye.

(it’s all fun and games until someone fraudulently opens a Paypal account using your snail mail address and they lock your account for fraud…)

timothy j fallaw
timothy j fallaw
13 years ago

i don’t use credit cards because i don’t like interest rates

Praveen S
Praveen S
13 years ago

I appled for about 3-4 credit cards just to get the $50 perks and join on bonuses and then I cancel a few months later although I feel kind of guilty doing so. Does anyone know what I mean?

Eric
Eric
13 years ago

I havent used a credit card or debit card or had a checking account for 5 years. Banks make money on these and the only person I want making money from me is me. Stop using banks would be the best thing to do but unfortunitely I dont get paid in cash

Julie Ramsey
Julie Ramsey
12 years ago

I do not use a credit card except for safety: online purchases and unusual situations. If the service or item is not as described, you can dispute the fee. Credit cards take away your privacy; anyone with a few smarts can access your online or over-telephone information. Credit cards benefit big banks, and take away your freedom too. A CASHLESS SOCIETY IS ONE THAT CAN BE TRACED AND TAXED.

Myself
Myself
12 years ago

Eric said: “Banks make money on these and the only person I want making money from me is me.”. As others have mentioned, ANYONE can make money from a credit card. We get an extra $600+ every year, simply for buying things that we would have bought anyway. But on credit cards. As others have said, it is a personal issue. Some have self-control, and others do not. My wife and I recently (as in yesterday) purchased 3 new laptops. We were planning on replacing our outdated PC equipment at home anyway (it’s been almost 8 years since our last… Read more »

Sean
Sean
12 years ago

Very interesting article and one that is widely debated. I currently own a condo here in Chicago and plan to purchase a home in the next few months. My credit sore isn’t as high as it should be but I’ve worked hard to pay down most of my debt into a house payment, car payment, college loan, and credit card. Lenders are now saying my credit score is not high enough and it’s due to my lack of open credit cards with balances on them. I find this crazy that people are recommending that I open a few more credit… Read more »

Glenn
Glenn
12 years ago

Hello, I just found this site and have been surfing around here a bit. It looks fantastic with a lot of great ideas. Hopefully I can contribute back for what I learn from here. Now about Credit Cards… They are a tool, nothing more, nothing less. With a tool you can either build, or destroy. Many people don’t seem to realize the great opportunities afforded with them and instead swing them around wildly, wreaking havoc wherever they go. Allow me to elaborate. My personal experience directs me into keeping 2 CC accounts open with around a 15k limit on each… Read more »

Myself
Myself
12 years ago

Wow Glenn. I could have written your post about 8 years ago. Except our debt was almost 3 times more than yours is.

Ohyeah
Ohyeah
12 years ago

Sorry about all the misfortune, I’m glad to see alot of people back to normal and moving on and hopefully none of you will have a relapse… maybe we should start a debt anonymous program. Hi my name’s Bob i’ve been a recovering debtaholics for about 5 years.. one day at a time guys, one day at a time.

Jason
Jason
12 years ago

Anonymous,
I do not use Credit. I have cash lying around in the form of Emergency funds. The concept of borrowing is not the right message . Live within your means and learn to save. Cash is king. If i want to buy a car, I will use cash. And I always negotiate the price down, that is for a new car. Although buying a new car does not make much economic sense since they depreciate quickly. Not everyone needs credit. Please speak for yourself.

Jim
Jim
11 years ago

I think credit cards can be used to put a nice chunk of change BACK in your wallet. Right now, I have a credit card with a balance of $6500; and I am gladly using it every chance I get. Wanna know why? I got 0% APR until January of 2010 (got the card September of 2008). So what I do is this. Pay for anything and everything I can with the card (hell, I even tell friends to let me put their purchases on my card and just give me the cash). Then, take that money (cash) that I… Read more »

Myself
Myself
11 years ago

I too have done the same as you Jim. My wife and I have at one point borrowed $45,000 or so on our credit cards that had a very low or zero rate. Some things I noticed – we earned money from the interest after putting it in the savings account – we had to pay the minimum payments. This either came from our pocket, or from the money that we borrowed (typically the latter). The flip side of this is that if we used our own money to pay for the card (i.e. because it was locked up in… Read more »

Jim
Jim
11 years ago

@Myself Yes, you must be careful when you are doing the balance transfers. In addition to your point about not making purchases on cards which you did a balance transfer, you also need to talk to the company and ask them if they have any transfer fee’s and how those are charged. For example, most credit cards, if they charge a balance transfer fee (most do), will put treat that transfer as a cash advance. Now this is VERY BAD. Because those transfer fee’s will be charged the highest interest rate (15% or higher) and you wont even be able… Read more »

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