Credit cards: Necessary Evil or Useful Tool

PROBLEM #13: To use credit cards, or not?

Credit cards collage

I’ve been following and reading several financial blogs recently, and many of them have confessed (well . . . stated, but I’m not sure how confident they actually were) that they use credit cards as a part of their financial plan. The plan goes like this: You use a credit card to buy some necessities such as maybe gas, furniture, or clothing. But, you pay the balance in full every month. They state benefits such as rewards and airline miles (looking at you Capital One – “What’s in your wallet?”). They also tout high credit scores and other “perks” such as “no interest loans” or “readily available rental cars and hotel rooms”. From my perspective this is living dangerously and can create PROBLEMS.

For the first 10 years of our marriage, my wife and I used credit cards exactly like these financial bloggers. Our budget always seemed to be a struggle to master. We needed a SOLUTION. So . . . we recently cut up our credit cards. I’ll give you 3 good reasons why we gave up our credit cards, and you should too.


Reason #1: What if you can’t pay off your balance in full each month.

This is major tenant in the you need credit cards group. “Always pay your balance in full each month.” But if for some reason you don’t pay your balance in full each month – you will get charged interest (we all know this). Interest on things you should never pay interest on – like groceries, gas, or light bulbs.

“Well, I’ve always paid my balance in full each month so far. What would ever change?”

You may say, “Well, I’ve always paid my balance in full each month so far. What would ever change?” Just a word of warning . . . If you think like this – you haven’t been alive long enough. Life has a way of causing negative things to happen. Eventually, you will need a new transmission in your car, a new roof, or refrigerator. Maybe even in the same month. Hopefully you have some sort of emergency or rainy-day fund to cover those things as they come up. But if you don’t, what do you do? Charge them, and worry about it later? This reasoning/planning sets you up for disaster. We all know how bad credit cards can be if you don’t pay them off each month. (compounding interest can work against you too) This bring me to reason #2.

Reason #2: Credit cards should not be your financial safety net.

If you have an Credit cards are not a safety net!emergency/rainy-day fund, then why do you need a credit card? Many people say, “I only have it in case of an emergency.” I can’t emphasize this enough. Don’t use credit for an emergency! This is the absolute worst time to ever turn to credit cards. Imagine in the middle of a crisis – the stress of the emergency – and you have to charge it. Now you have the stress of paying the credit card off too. An emergency fund takes care of this. The stress of the emergency is stress enough. Why add to it?

Reason #3: Contrary to popular belief – you don’t actually need credit cards to live.

Granted, I don’t have as much personal experience with this one. I haven’t been credit card free for a lengthy amount of time. But our debit card can be used as a “credit” card in places you would normally need a credit card (online, rentals, and hotels).

Another reason people give about why they use credit cards is for the perceived safety and security of your transactions online. “What if someone gets your information? They could wipe out your checking account!” This is simply not true. We have the same disputing Online security when credit cards or debit cards are usedfeatures from our local bank as the major credit cards. Any transaction that we did not initiate – we have the opportunity to dispute and remove. Most banks offer this – you just have to ask them about it. Also – the majority of your money should not be in your checking account. If, in the remote chance, it does get wiped out, you won’t lose everything.

Bonus Reason: When you use plastic (credit or debit) to purchase items – you tend to spend more.

This one is very dependent on the specific person. For instance, one person might go into a store with 2 particular items in mind to buy. They walk in – purchase those 2 items – and walk out. Others may struggle more with impulse purchases, and walk out with those 2 items and 2 extras. Retail stores are masters of snagging the weak-minded (financially speaking), and they thrive on getting you to purchase more than you originally intended. But, if you use cash (as we do for groceries), you can only spend the cash you have. It limits the amount of impulse buying opportunities. There’s just something different about handing over your hard-earned cash.

Check out even more reasons to not use credit cards here.

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  1. We use a high cashback credit card for purchases and immediately after using the card, we transfer the money spent to an account set up specifically to hold funds to pay off the card balance. We’ve made thousands of dollars off of the cashback rewards from that credit card. That sounds more like multiplying the talents instead of hiding one in the dirt…. ☺️

    • I get that. But how many people actually have the discipline to setup and maintain a separate “holding” account only for credit card purchases? Also with all credit/borrowing comes some level of risk – un-secured loans typically carry the highest risk. I tend to be risk averse – as you know.

      • It’s just not spendable money unless it’s in the “everyday checking” account so it’s not even a consideration to spend money from other accounts (the credit card balance account.) It’s just the way we’ve found to make credit cards work for us. And I’ll say this, I have never not paid the balance on a credit card -because purchases only happen when the actual cash is there to buy it – even on a car! It’s paying cash for products, but running it through a system that will give me an additional return. That’s a low risk investment with easy ROI.

  2. Interesting post! I personally use credit cards and find them very beneficial. I’ve never paid interest or missed a payment. I love the travel rewards. It definitely takes discipline but I’ve found some great benefits. I just them just as I would cash and then write down what I spent in my daily budget (yes I track every single dollar I spend). I don’t spend money I don’t have.

  3. Chris-
    I love the stance and the passion with which you defend it. I also appreciate the fact that you’ve seen the credit card issue from both sides, but… and I’m not saying it’s for everyone, there are many indirect benefits that come with using the hated plastic (lower interest rates on big loans like a house, the ability to get a job, rent an apartment, plus the additional cash rewards for just using the cards in the first place). If you work ahead of your budget and take the stance that no purchase goes on the card that you don’t already have the cash for in the bank then I would claim your risk falls so close to 0%.

    This is the first article of yours that I’ve read but I’m looking forward to checking out more. I appreciate the perspective and I think we probably agree on more than we don’t. Glad I found your site. Cheers

    • Thanks for the feedback Mike, I appreciate it. As you said, I have experienced both sides. I also benefited from the “perks” of great credit (great rate on a mortgage). I just felt like we were playing with fire. As others have said too: with discipline it can work. I totally get it.

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