Do You Really Need a Credit Card?

Photo (cc) by 401(K) 2013

A friend of mine recently told me he does something that’s a little unusual in our society: He doesn’t carry a credit card.

In fact, he’s 30 and he’s never had one. Instead, he uses a debit card to make purchases.

This brings up an interesting question: Do we really need credit cards or can we get along without them?

At first, it doesn’t seem like a bad idea. You’d have one less bill to worry about each month and your finances might be in better shape. But there are some big disadvantages to a credit card-free existence. If you’re considering skipping credit cards, you’ll have to consider both the pros and cons.

Advantages

  • No credit card debt. If you have cards with large credit limits, it can be tempting to spend more than you can afford to pay off. Even if you carry only a small balance each month, this might eventually snowball into bigger debt. When you pay for everything with cash or a debit card, you buy only what you can afford to pay for right now.
  • Better purchasing decisions. Credit card users can shop based on wants, not cost, and may end up spending more money on single purchases. When you shop with cash, you’re more likely to consider the cost of an item first.
  • Less worry. My friend doesn’t carry credit cards simply because they would be one more thing to worry about. There’s some truth to that. When you carry plastic, you have to worry about keeping your balance low, paying off the debt and making payments on time — as well as keeping that card safe from scammers and thieves.

Disadvantages

Living without a credit card got easier when debit cards came around. Now, you can simply use your debit card like a credit card to pay for purchases in most cases. But that doesn’t mean credit cards are obsolete. Not having one still has disadvantages. (See: “Not Using Credit Card Rewards? You’re Leaving Money on the Table.”)

  • Travel hassles. Many hotels and car rental services require that you have a credit card to book a reservation. Cruise lines also link their own version of spending cards to your credit card, and some airlines ask for a credit card for in-flight purchases. You may be able to find a travel business willing to take a debit card instead, but making a reservation with a debit card can result in a hold of several hundred dollars being placed on the card. If you don’t have a lot of money in your account, this could be a problem.
  • Credit history. Credit card use is a major factor in many people’s credit reports. If you’re not building a history of responsible credit use and a solid credit score, you will have difficulty qualifying for loans for bigger purchases like a home or a car. If you can get approved, you’ll end up having to put more money down or pay higher interest than consumers with better credit histories.
  • Emergency fund. Having a credit card tucked away can give you a sense of security because you’ll be able to use your available credit limit to cover necessities if you lose your job or have to make a necessary but unexpected purchase.
  • Protection from fraud. While both credit and debit cards generally come with limited liability in case your card is stolen and used for fraudulent purchases, a credit card has extra security. If the product you purchased with your credit card isn’t what was advertised, you don’t have to worry about getting your money back, as you would with a debit card transaction. And if a crook quickly drains your checking account after stealing your debit card, that could create problems as bills come due. Theft of a credit card does not pose that problem.

Making the plunge

If you do decide to forgo credit cards, a few steps can make your life easier:

  • Build an emergency fund. Aim to have three to six months’ worth of expenses in your savings account so you’ll be covered for life’s surprises.
  • Look for credit elsewhere. Eschewing credit cards doesn’t automatically mean you’ll have a bad credit score. Look for other credit products – like retail cards or small personal loans – to help you build credit.
  • Use a debit card instead of cash. Debit cards offer more protection in case your wallet is stolen. If someone steals your cash, you’re out of luck.

Karen Datko contributed to this post.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
How to Avoid Being Surprised by 7 Nasty Expenses
How to Avoid Being Surprised by 7 Nasty Expenses

Major expenses are difficult to predict, but there are ways to make sure you’re protected.

7 Income Tax Breaks That Retirees Often Overlook
7 Income Tax Breaks That Retirees Often Overlook

Did you realize all these tax credits and deductions exist — or that they apply to retirees?

5 Simple Steps to an Awesome Retirement
5 Simple Steps to an Awesome Retirement

The path to your dream retirement begins with these five steps. How many have you already taken?

The 9 Best Home Insurers for Customer Satisfaction
The 9 Best Home Insurers for Customer Satisfaction

These are the only homeowners insurance companies to earn above-average scores for customer satisfaction.

9 Things You Should Never Pay For With a Debit Card
9 Things You Should Never Pay For With a Debit Card

Use your debit card for one of these expenses, and you could risk your bank account balance, your credit score or even identity fraud.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

How to Buy Gas At Costco Without a Membership
How to Buy Gas At Costco Without a Membership

The warehouse club often has some of the cheapest gas in town. Here’s how you can get it as a nonmember.

10 Things to Stop Buying If You Want a Clutter-Free Home
10 Things to Stop Buying If You Want a Clutter-Free Home

If you like to keep things simple, avoid these purchases.

Prices Are Soaring on These 7 Items
Prices Are Soaring on These 7 Items

Some surprise price jumps are making life more difficult for consumers.

A Simple Way to Silence Robocalls Today
A Simple Way to Silence Robocalls Today

A few steps can keep your phone from ringing when a spammer calls.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

This iconic dinnerware is prized for everyday use as well as reselling for profit.

This Company Makes the Best Tires in America
This Company Makes the Best Tires in America

Driver satisfaction with tires is at an all-time high, but one brand stands out.

7 Home Improvements That Cost a Lot More in 2021
7 Home Improvements That Cost a Lot More in 2021

These projects will take a bigger bite out of your budget than in the recent past.

This Health Issue Can Hint at Dementia Years in Advance
This Health Issue Can Hint at Dementia Years in Advance

One type of pain is especially associated with cognitive decline.

Can I Switch to Spousal Social Security Benefits When My Ex Dies?
Can I Switch to Spousal Social Security Benefits When My Ex Dies?

Knowing when to claim can help you maximize benefits.

Medicare Will Not Cover These 6 Medical Costs
Medicare Will Not Cover These 6 Medical Costs

Don’t let these health care expenses catch you off guard in retirement.

8 Things You Should Always Buy on Amazon
8 Things You Should Always Buy on Amazon

The giant retailer shines when it comes to these things, from basics to hard-to-find specialty goods.

Beware This Hidden Ingredient in Rotisserie Chicken
Beware This Hidden Ingredient in Rotisserie Chicken

Something foul may lurk in those delicious, ready-to-eat birds.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

5 Ways to Fill Your Pantry With Free Food
5 Ways to Fill Your Pantry With Free Food

Anyone can take advantage of these resources.

Never Buy These 10 Things on Amazon
Never Buy These 10 Things on Amazon

Just because you can purchase something on Amazon doesn’t mean that you should.

7 Big Purchases You Should Never Make
7 Big Purchases You Should Never Make

Sometimes a big-ticket purchase is nothing more than a big waste of money.

5 States With the Worst Health Care for Retirees
5 States With the Worst Health Care for Retirees

All of these states are located in the same region of the nation.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.