Is living without credit cards the best way to stay out of debt?
Americans might be more responsible now than they were in the early 2000s when it comes to the use of credit. At least, that’s what the evidence from a Gallup poll taken earlier this year seems to suggest.
The Gallup poll, which was based on random telephone interviews with 1,026 adults, shows that a full 48 percent claim to pay their credit card balances in full when the bill comes due. Not surprisingly, the opposite group, those who carried a balance each month, came in at a record low percentage since Gallup began recording this metric in 2001.
But the poll went further to reveal more about the secret lives of credit card users in the United States, and how the use of credit affected overall debt levels. For example, it showed that the average American carries 2.6 credit cards on average, but the figure jumps to 3.7 when you remove those who don’t carry a credit card at all from the equation. Furthermore, the average American carried $2,426 in credit card debt when this poll was taken. However, exclude those without a credit card and the figure quickly jumps to $3,573. So, what does this mean?
“Americans are less reliant on credit cards than in the past. They are carrying less credit card debt overall, own fewer cards, and are more likely now to say they always or usually pay their full balances every month,” Gallup summarized earlier this year.
“This suggests that credit cards — a staple of American consumer life for decades — might not be as vital a financial tool to individuals as they had been in the 1990s and 2000s, when Americans often used their credit cards to make ends meet.”
That’s a good thing, right?
Many experts would say yes.
Are Americans on Their Best Behavior Since the Great Recession?
Is the Gallup poll really telling us that Americans are on their best behavior when it comes to the use of credit? Say it isn’t so.
Gallup polls might indicate that trend, but other bean counters and media outlets are taking the opposite stance. According to this MarketWatch article from two months ago, “American credit-card debt hits a post-recession high,” Americans are relying too heavily on plastic for day-to-day living expenses. An excerpt:
“Americans added $28.2 billion to their credit cards in the second quarter of 2014, the largest amount in the last six years and nearly 200% more than in the second quarter of 2009, when the economy emerged from the depths of the Great Recession, according to new research from personal finance website CardHub.com. After paying off $32.5 billion owed during the first quarter of 2014, consumers ran up roughly 86% more debt during the following quarter.”
Yikes.
It’s scary how quickly the tide can turn, isn’t it? Although personal credit card debt figures took a nose dive earlier this year, the trend certainly didn’t stick around for long. Once again, we’re racking up those balances with wild abandon and living the dream. Isn’t it grand? <insert sarcasm here>
Of course it’s not. Most people who have lived it will tell you that it isn’t grand at all — especially when you realize what it takes to pay those balances off. The cycle can be painful — the realization that you’re in credit card debt again, the struggle to pay it off, the elation at your success. The mere fact we see the cycle repeating again shows that any change was, at best, momentary.
That’s the part many people just don’t seem to get.
Drop the Cards and Break the Cycle
Still, there is a way to avoid the credit card debt cycle if you are an avid spender, says CFP Practitioner Katie Ward Brewer of YourRichestLifePlanning.com.
As a Certified Financial Planner, Brewer works with people to develop long-term financial plans that help them meet their goals. And since credit card debt goes against the grain of what most people are trying to accomplish, many of her clients found that, over the years, any benefits they got from the use of credit cards were soon overshadowed by the elephant in the room — their revolving debt load.
“Many of my clients that struggle with spending will choose to stop using credit cards altogether,” Ward admitted.
But she doesn’t see that as a sign of failure or an indication that something is wrong. According to Ward, life without credit is just better for some people.
“There are two groups that may want to consider discontinuing the use of credit cards,” says Ward. “The first group includes anyone trying to pay down existing credit card debt. Second is anyone who could better control his or her spending without the use of credit cards.”
Does Credit Make You Spend More?
Several studies indicate that credit cards enable people to spend more than they planned, and Dave Ramsey constantly drives this point home on the radio and on his website. According to Ramsey, using credit for everyday spending is an all-around bad idea.
“There is no positive side to credit card use. You will spend more if you use credit cards. Even by paying the bills on time, you are not beating the system!”
-Dave Ramsey
That might be a harsh stance to take, but many (many) people would agree, including my friend Brian Fourman, a father and writer who blogs about his own financial journey at Luke1428.com. He and his wife stopped using credit cards altogether several years ago when they realized that their credit cards made it easier for them to overspend.
“It seemed like every other month, in order to pay our credit cards off on time, we were forced to remove money from our savings account,” said Brian. “Consequently, we never developed an adequate savings fund to handle life’s emergencies.”
The cycle went on for some time until Brian and his wife decided to drop the credit cards altogether. It was then that they learned why credit cards were problematic for them from the get-go.
“There are no warning signs with credit cards. No real limitations that you bump up against each month that make you take notice,” Brian told me. “You can spend as much as you want up to the credit limit of the card, whether or not you make that much in monthly income.”
Debit to the Rescue
Fortunately, the move away from credit cards proved successful for Fourman and his family. Once they removed credit cards from the equation, he says, their financial situation improved dramatically. All of the mystery surrounding their overspending disappeared almost instantly, and a new sense of purpose took its place.
Instead of credit, the Fourmans turned to debit cards instead, a move which forced them to keep a close eye on their bank account day in and day out.
“A debit card served as the restrictor plate on my spending. It forced me to slow down, which in turn limited the amount of financial damage I could do to myself,” he says.
Is Credit the Culprit? The Jury is Out.
Is easy credit the reason Americans continue to rack up bills they can’t afford to pay? I suppose the jury is out on that one. However, it is hard to argue how a person can get into credit card debt if they don’t have a credit card in the first place.
Still, I think the issue runs deeper. Sure, some people get into credit card debt because they have a job loss, illness, or emergency situation that necessitates it. But for every person with an emergency, there’s someone whose “emergency situation” is the new iPhone coming out or a seriously awesome trip to Cabo they’ve been planning. For most people, getting out of debt (and staying out of debt) requires much more than a stack of cards and a pair of scissors; it requires a different mindset too.
Still, if the goal is less dependence on credit cards, we have to make decisions that will set us up for success. Foregoing credit card use altogether is just one option on the table. And if your spending is a problem, foregoing credit, at least for the time being, might be just the solution you’ve been seeking.
Could you survive without a credit card? Do you think credit cards cause us to spend more? Have you broken the cycle of amassing credit card debt and paying it off? How did you break the cycle and how do you handle credit wisely now?
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There are 50 comments to "Is living without credit cards the best way to stay out of debt?".
I think for most people they are better off without them in the long run. For undisciplined folks, it is just a path toward financial ruin.
Very interesting post, thorough and well presented. Personally since the credit crunch I have cut up all my credit cards and paid off all my debts. If I want something then I’ll try to find ways to earn more money. If I need something urgently I have my emergency fund. Living life without debt is so liberating. These statistics from Gallup are very promising and it seems more people are taking charge of their personal finances as opposed to brushing it under the carpet.
Here is our the credit cards post: http://nicoleandmaggie.wordpress.com/2011/03/14/the-do-you-use-credit-cards-post/
Credit Cards are handy when traveling or paying a bill when you do not have your check book.
I completely agree that for some folks, credit cards represent endless temptation. My experience has been different though and I’ve actually never had any credit card debt. We use our cards for everything we buy because we love accruing credit card rewards and bonuses.
We pay our cards off in full every month and, the key is that we never buy anything with a credit card that we couldn’t pay cash for that very day. For us, it’s a choice to be really conscientious about paying our cards off every month in order to enjoy the rewards and cash back we get in return.
Completely agree. I use it for everything and have been enjoying the rewards for years. It is a matter of discipline, though, and not everyone can handle it.
I’d be curious in the Gallup poll what the average credit card debt would be if you also removed people who pay off their balance every month. I suspect we’re bringing down that average balance.
I’ve never had credit card debt but I admit to using my debit card most of the time in recent months because I think I spend less that way. I’m curious to see how my experiment works out.
A 2014 Experian report showed the following difference (which I think is a reliable source than a Gallup poll based on telephone interviews where the people may or may not know what their overall balance to be)
$1,098, per card that doesn’t carry a balance.
$7,743, per card that usually carries a balance.
Thanks! Averages are tricky things.
We keep a few credit cards, and we do use them on occasion to buy large items for rewards. In the past, we have used them to pre-finance large purchases with next month’s dollars, but this has been a slippery slope.
We have a pile of debt on cards from previous misdeeds that I’m uncomfortable with at this point, but it is financed at 0% for another year and a half so we have budgeted the paydown to make it in ten months. Assuming a normal bonus this year, it will actually come out to only 5 months, but who is counting.
We swapped to a cash budget and have been much happier. We are a single income family, and the cash budget made finances more transparent and equitable.
I agree the real issue is there is no indicator that you are heading for a problem until it is way too late. Unless you are constantly monitoring or have set your own triggers, you just get a rude awakening when the bill comes because we “forget” we did use the card for this or that and gee, those five twenty dollar purchases were an extra hundred.
The other issue is people are bad at projecting and modifying habits when they aren’t pressured to. Say you normally use your card for groceries, gas, and occasional small purchases. Then the car needs a big repair just after your billing cycle ends. The bill comes to $1000 and you put it on the card. How long do most people keep in mind they just dropped that $1000? A week, maybe two, before it’s old news. Do they also modify their habits to spend less? I would suggest most don’t. But before the end of the month is out the washing machine goes kaput, another $600. Now it’s been a few weeks since you “paid” the car bill. You kinda, sorta, recall that it’s coming, but in your mind the bill is paid and you’ve got your $1000 emergency fund to cover the washing machine bill because it hasn’t been spent yet. So mentally and emotionally you think you’re still good, even if you aren’t. Then the bill comes and it isn’t $1000 above what you were anticipating, it’s $1600 above because, lucky you, the washing machine bill made the last day of the billing cycle. Now you either dip into savings or you start carrying debt.
Point is with a credit card unless you are constantly monitoring it most people are always playing a game of “oh, forgot about that” when they see their bill and struggle to pay off items they forgot about. They don’t modify their habits because there is no pressure to do so. They “paid” the bill in the past and yet “see” no impact to their current accounts, hence no pressure until the bill hits them.
Maybe just my perspective, but big/uncommon purchases like a new fridge or car repair stays in my mind for months. However, those little expenses like dinners out are easy to forget about and can add up.
Credit cards are slippery slope regardless of how well you handle them and how disciplined you are. I personally have always paid off my balance, am very conscientous of my purchases but even so I find myself spending more with credit than I ever would for cash particularly for things like eating out. I am not much of a consumer of stuff, but eating out adds quickly and I would likely eat out less if I didn’t use credit. Mentally, pulling bills out 1 by 1 is a reminder of the money, regardless that we can afford it.
My wife is horrible with credit, we have tried with her on multiple occasions to use it but she always ends up abusing it. So other than a Kohls card and a emergency card she really doesn’t use credit.
There are so many ways and reasons for why people have debt and I doubt that living without a credit card will stop that.
I do however believe that it is possible to decrease over consumption by not carrying a credit card.
From Comment #3: “We pay our cards off in full every month and, the key is that we never buy anything with a credit card that we couldn’t pay cash for that very day”.
If you can do this, then good on you!
I never could.
My mindset will literally change with a credit card in hand. With the credit card I’m thinking: I’ll figure out how to pay for it later…the statement won’t come in for a few more weeks anyway, etc.
With debit/cash I’m thinking: “If I buy this will I have enough cash left in my checking account to pay my bills/savings accounts?”
I’m not terribly responsible with a credit card I’m afraid. Getting rid of the ones I had changed my financial world around for the better, even though I never carried any credit card debt when I owned one.
We use our credit card to pay for pretty much everything. But I treat it in my finances as if it was cash or debit. I deduct every expense from my checking balance in Quicken when the purchase is made.
It is hard to believe that people don’t have some kind of system for accounting for credit card purchases.
I agree completely. I’ve always kept credit card receipts in an envelope with a log of the running balance for the current billing period. I have a monthly dollar amount that I know is pretty normal. As I approach this amount I carefully consider any new purchases. This has worked well for me for 40 yars. I’ve never carried balance forward to the next month.
I agree with this as well. And not only that, I could tell you to within a dime what our balance is at any moment.
There is nothing wrong with using credit if you’re disciplined. I really tire of one-size-fits-all “credit cards are the devil, nobody should use them ever” posts.
Especially when later they turn around to whine about how their lack of credit history means that no one will lend to them when they do need it.
After being part of literally every credit card system breach in our area in the past two years, we switched to using our household credit card for our everyday purchases. We treat it the same as our debit card, and it is linked in our Quicken so we always know how much is on it, and what it was spent on. We pay it off every month, and I feel better knowing that when another store gets hacked, they won’t be able to drain our accounts.
At a time when we had contractors in our house, suddenly, somebody started using fake duplicate cards for both our credit card and debit card. The credit card was easy to resolve quickly, but the debit card counted as pulling money out of our checking account and the bank did not put the money back until after we filed our police report and their auditor person looked it over. While we froze that bank account immediately, the bank left us hanging for about a week as to when they would return the money already taken out for prior fraudulent charges. While we had a significant cushion in our checking account, if we had not, we would have been on the hook for any insufficient fees for outstanding checks we had written, regardless of the fact that our bank account was lower until the bank resolved the fraud issue.
In sum, debit cards have a significant drawback when fraud is at issue. Based on advice from the police department’s fraud unit, we don’t use our debit card for gas stations, outdoor ATMs, or restaurants where wait staff takes the card outside out presence and can easily create fake debit cards tied to our account.
I don’t know if it’s just my slow internet or some GRS webhosting problem but I’ve been getting a lot of “Failure To Connect To Web Server” messages instead of loading the website since yesterday.
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re: the headline question. Short answer: for me, yes. I live much better on a cash basis, and this includes a stash for “emergencies” of all sorts.
We use credit cards for everyday spending. Ever since we got the ability to pay for bills online from our bank however, I have paid the bill weekly. I add up all the charges from the previous week and put them into our budgeting spreadsheet. So I know exactly how much we are spreading week to week and on what.
Once in a while we will have a large purchase (planned) which we have money in the savings account for but I don’t use the money from the savings. The purchase goes on the card but with the weekly payment scheme, you can carry a balance without actually carrying a balance. This allows us to try to pay for the purchase with our income over a month or two and leave the money in the savings account. If I get into trouble, I can always fall back to using the budgeted money from the savings.
I sense some of you are skeptical about how this works. Suppose your everyday expenses are about $500/week and you are all caught up, meaning you spend $500/week and send $500/week for a zero. That means each billing cycle you are paying $2000. You have a large planned purchase, say $1000 that you put on the credit card. You start paying an extra $50 a week to try to pay for the purchase without using your savings.
Week 1: Balance $1500, pay $550 -> $950
Week 2: Balance $1450, pay $550 -> $900
Week 3: Balance $1400, bill is issued, due in three weeks
Now the trick is that you will send in 3 X $550 over the next three weeks, paying off the balance as far as the credit card company is concerned:
Week 3: Balance $1400, pay $550 -> $850
Week 4: Balance $850 + $500, pay $550 -> $300 + $500
Week 5: Balance $300 + $1000, pay $550 -> $0 + $750
Here the first part of the balance represents the balance from the last billing cycle while the second part represents new purchases in the current billing cycle.
Sometimes I pay ahead creating a negative balance BEFORE I am planning on making a purchase. Sometimes I’ll use this to pay for things which were budgeted but somewhat large, like paying the auto or homeowners insurance for the year. I have automatic transfers into saving which pay for things like that, so if I manage to pay for them from my disposable income that means I’ve saved that money.
OK, I’ve got my flame-retardant pants on, let me have it.
No facepunches, just seems like a lot of extra effort/thought. Why not just save $500/week (either in a savings account or just as a buffer in your checking accout), then pay it in one lump sum?
@bdoubleu,
Checking in with the balance once a week via the CC web sites is what helps me ensure we are staying on our budget and not stretching ourselves too thin. If I waited until the end of the month to go through the credit card statement and enter the expenses into my budgeting spreadsheet it would be a big job and might not get done.
What would I gain by holding the $500/week and then paying at the end of the month? My checking account doesn’t earn any interest worth even thinking about. If I transfer it to a savings account then I’m doing a transaction every week (just like before) AND then two additional transactions every month plus worrying about the timing (got to make sure the transfer clears in time for me to have enough time to pay the credit card before the due date). That seems like more work and risk than my current scheme all for maybe a dollar in interest.
I pay bills and balance my checkbook once a week in any case. It is not a lot of additional effort to schedule a payment to the CC company while I am already logged into my banks web site. Back before everything was electronic we did it the monthly way because we had no choice. So if had a big purchase we had to remember it was on the upcoming CC statement and try not to add another one on there. I never had a good feeling for how much the bill was going to be. This way I check in once a week and I know if we are paying down a big purchase or getting ahead and things are much more manageable.
TL;DR – it works for me, YMMV.
We love our credit card and put everything we can on there. We also pay off our balance every month.
We could live without a credit card each month, especially if we were able to use a debit card. I find that we tend to spend more if we have physical cash in our pocket. It seems more like fun money and we need to find something to buy.
For people who have had issues managing credit card debt, getting rid of credit cards would is an awesome choice.
I guess if you’re weak to indulgences, credit cards might be bad. I have no issues with credit cards and use them to my advantage (cash rewards, promos). My credit card replaced my debit card years ago. Not only does it have more consumer protections than a debit card, but I get 1-10% cash back depending on the purchase.
For me, the opposite is true about spending levels and credit cards. I spend MORE with CASH. I can’t mentally or visually track cash spending as easily as Mint pulls credit card transactions automatically and updates my various monthly budgets. It’s much easier to forget to manually enter how I spent $40 I took out from the ATM. I have a side job that pays cash and I run to that drive thru ATM to deposit it as soon as possible.
I agree, it’s very easy to forget about that cash purchase once it is made. Especially if I forget to get a receipt or misplace it before entering it into Mint manually.
For years we had no credit card debt and the only debt being our home and car. We paid off the car a year ago but just recently needed to purchase a new car.
The one thing that hurt us was not having a credit card because we had no ongoing credit except for our home. So we did get a couple credit cards only to build our credit back up. We only use them when we need to and pay it off every month.
It is too bad that a lack of debt works against you when making a big purchase.
I feel your pain Tina. I know this has been hashed out before but I too didn’t have a CC and the financial industry singled me out as a loser because I didn’t believe in being in debt. I’ve ranted on it before that Wall Street is a den of thieves, and the Big Banks are vipers at the bottom of that pit.
Lucky for me it was ingrained from the time I could walk that credit and debt are bad and banks ARE NOT YOUR FRIEND! One of the best ways banks were ever described to me when I was young is to remember that banks are not GIVING you a loan. Banks are SELLING you money. Even if you pay off CC every month they will try to weasel some kind of fee or surcharge out of you.
Like Tina I also had to get a CC to show that I had “credit”. I had no “credit” with 3 bank loans that I had paid off early by the age of 27. Can you see the irony? I could but the banks couldn’t. So I got two CC and did the song and dance with them and know I have “credit”.
To me; using money is the way to go. It is made by the FED so its accepted nation wide and it has no fees or restrictions. I know when I spend a Buck that its gone and my spending power is restricted, and keeping track of spending can be done with receipts.
With all this hatred of CC I still have two cards. Why? It harms your “credit” if you drop them and I do use them for large purchases like Christmas gifts and when traveling for gas and hotels. To bad CC were ever invented, they have screwed up a lot of peoples lives.
I think credit cards merely facilitate a financially unhealthy predisposition toward living beyond one’s means and instant gratification. They’re not evil, per se, but those who have a demonstrated history of overspending should avoid them, or at least have a very low credit limit.
I think the best way to stay out of debt is to plan (have a budget), keep a generous emergency fund, and live far below your means. I know–easier said than done! 🙂
I am right now in the process of paying off a bit of debt. Getting divorced and going to one income with the house, kids, etc and going a little crazy on overcompensating for their dads absence, has racked me up with about $10,000 in credit card debt. I am on schedule to pay this off by March (even after my ex decided not to pay child support anymore). When the courts finally make him pay again, that money will go straight on my credit cards since I am using them now to help support the kids.
However I do have one credit card that has a limit of $450 (I refuse to let them them raise it) and this is what I use every month to put my monthly expenses on (vanpool, groceries, drs, fuel, etc). So in my monthly expenses (I get paid once a month) this is a set debt. This way I have a limit and I don’t let myself go over it.
I think one of the major problems with credit cards is that they are allowed to charge insane interest rates. If a typical rate was 7 or 9 percent, credit card debt wouldn’t squash people financially. That being said, I agree for those who have trouble with temptation, a wallet full of cards can be a big problem. You have to know yourself.
I’m much, MUCH better about keeping track of every penny I spend when I use my credit card. When I have cash on hand, I spend it without even knowing where it goes. Also, having lived in a rough neighborhood during grad school, I learned the hard way that if your cash gets stolen, it’s gone for good. Credit and debit cards come with much more protection. Also, with my card I get 1.5% cash back and incur no foreign transaction fees, which add up since I leave the country a few times a year. Yes, it takes discipline not to overspend, but I much prefer credit cards and have never had a problem keeping my spending in check with them. For me, cash is my kryptonite.
Credit is a tool. Like all tools, there is an appropriate way and an inappropriate way to use it. Using a tool inappropriately can cause bad things to happen. Does this mean we should never use potentially dangerous tools, or does it mean that we need to take an active role in policing our behavior?
I would say that the latter is my view, but I also don’t want to encourage people either way. The key word in “personal finance” is “personal”; if avoiding credit cards helps you to better meet your goals, then more power to you. Just be sure to place the blame where it belongs: on poor impulse control, or on the factors that force someone to use credit for basic necessities. Just like a table saw, credit should be used cautiously and only by those who have the proper understanding of how to use it properly.
I am always amazed at how often ‘credit cards’ are blamed for those who are incapable of living within their means.
I agree that if you have trouble with the basic proposition, are easily tempted and don’t like to plan your spending, then you shouldn’t have them, or use them.
I’ve been that person – and the credit cards made it worse.
However it was ME that was doing the spending. If I hadn’t HAD the credit – well, who knows what I would have done? I know people who have trouble and then start refinancing their home. I know people who borrow so much from their 401k they will never be able to get ‘right’ with themselves [but I’m paying MYSELF back! Woohoo!]
Then I grew up and got hold of my choices and my money. I never once stopped using credit cards. It helps me tremendously to see where my money is going when I forget to track immediately. It keeps me ON budget rather than over it, because I don’t keep forgetting things.
I spend money as planned in my budget, on my credit cards. The money is there to pay it off as time goes on because it’s money I’ve budgeted – I haven’t carried a balance in years.
But if I weren’t tracking my spending and planning what I’d be doing it would be the same mess again.
Me? I’ll keep using mine 🙂
Ever since paying off my credit cards a couple years ago, I have sworn them off. I consider myself to be in AA for credit cards, I won’t go near them because they will only cause harm. The Dave Ramsey don’t give a drunk a drink phrase would apply here.
I only use my credit card for the rewards. Unfortunately, I now get charged a penalty for using my card because I am no longer based in the States. I only use the CC when I have to make a big payment, otherwise I stick to my debit card.
I think that credit cards are good for people who are disciplined enough not to buy indiscriminately.
All it takes to use a credit card correctly is a budget. If you don’t have a realistic spending plan for your money, you can’t gauge how much to spend on the CC. This leads to overspending because you can spend and forget. However, if you plan out your spending based on your income, and then use the CC within those spending limits, you are guaranteed to have enough cash to pay off the balance you racked up.
I carried debt while getting divorced because attorney. Once it was paid off I swore never to go into debt again, and I haven’t — even though I recently downsized my income:
https://www.getrichslowly.org/voluntarily-slashed-salary/
I, too, have (no-fee) rewards cards — and those rewards points are coming in handy for Christmas gifts.
If you don’t trust yourself with credit cards, don’t use them. But I’d strongly suggest finding ways to live with smart credit usage. If you were to have to make a sudden trip due to a family emergency, getting yourself there could be an issue without a credit card. I wouldn’t want to be the one saying, “Tell Mom ‘hi’ and tell her I’m sorry she’s dying, but I don’t have enough in checking to fly there.”
Credit Cards have nothing to do with going into debt. The culprit is not having a budget that lets you control where your money goes. To me, money is money , no matter how I spend it – check , cash, card , it all affects my budget the same.
So it’s not how you spend your money, it’s what you spend your money on. Do you budget money for living expenses and savings before discretionary items? Do you spend less than you make? Do you have an emergency fund?
It’s how you answer these questions that determine the likelihood that you are going into debt or not.
Hey, do you know that fire is dangerous? Perhaps we should start a coalition to ban all fire, because it’s so easy to get burned.
Yeah, that’s about as infantile as the premise of this article.
If you can’t manage your money, then the culprit is YOU, not the credit card or the CC issuer. Sorry, lack of self-discipline is the true issue here. Master that, and life is just so much easier. Rail against the CC companies and you’re just whistling in the wind.
Having at least one credit card is necessary, for emergencies, renting a car, etc. There are other advantages to credit cards, assuming you pay off the balance each month. I have a card with rewards points, and I charge everything I can on that card. With the points, I’ve been able to get an iPad, airline tickets, hotel stays, etc. over the last few years.
My wife and I have not owned a credit card in 5 years. Since we gave them up and decided to be debt free, our net worth has increased dramatically. We do not miss them, we are quite content with using our debit cards and cash.
It’s important to have self-control and discipline when it comes to credit cards. I use my credit card for essentials such as grocery shopping, gas, phone bill etc. and pay off the full balance every month. I collect travel points on my card and got $600 off my last vacation trip!!! It’s important to remember that you are always bigger than the information that you receive, this will help you stay in control of your finances.
TOP 3 RULES I USE: no impulse purchases, stick to buying essentials and pay off the balance every month.
I just started using a rewards credit card for all my purchases. It does 1% cash back toward the principle on my mortgage, and for the first 6 months, I get 5% on gas, groceries and pharmacy purchases. I’m really nervous about accidentally over-spending, but what I’ve been doing so far is transferring the cash from my main bank account over to a savings account I opened for just this purpose. This way, I can see how much money I have left to spend. I’m hoping this way I can get my rewards points but still manage to stay within my budget.
Hi Holly
Nice Article.
Credit card in today`s word is necessity. Usage of it depends entirely on you. In case of any emergency, you require it the most.
But yes, you have to use it with caution.
I got my first credit card in my freshman year, that’s over 10 years ago. I have been using my credit card whenever it’s accepted to get the most rewards on my purchases. I have excellent credit and do not have any bad debts. Credit card is an awesome tool to build credit and get rewards when used wisely and responsibly.
I use credit cards mostly to purchase food and essentials. Every purchases still go through careful budgeting. Every month I pay them off. Got lots of points on it and never fell into any debt.
We cut up our credit cards 18 years ago. Only thing we carry is a debit card. We have managed to build a home, pay off each and every car and boat we have bought early but only amassing one debt at a time. The home was built paycheck to paycheck. Today we have a car loan, that’s it. Other than utilities, no other bills. The downside is being able to rent a car, etc. Because in todays society, it is a shame to have an IRA , stock and money in the bank and no credit card. Being punished for being a responsible adult!