I’ve been asked on a few occasions why I don’t use credit cards.
“I mean, you get points and cash back and if you pay it off, it isn’t a problem, right?”
Yes, true! I love rewards. I sign up for a lot of rewards programs to take advantage of saving money. And there are some tempting benefits to credit cards.
Credit Card Pros
- Security: Credit cards have great security. If your card number is stolen and illegal purchases were made without you knowing, all it takes is a call to the credit card company to have it taken off your account. They’ll send you a new card and you’ll still have access to your money in your bank account.
- Credit: Credit cards give you the opportunity to build credit so it’s easier to get loans if you need them.
- Rewards: Credit cards allow you to get rewards on the money you spend on a regular basis whether that is through cash back or airline points.
- Insurance: Credit cards can give you an extra layer of insurance on items you buy. Some provide some extra comprehensive insurance on a rental car, or maybe theft protection of items purchased in the last 90 days.
So why don’t I want to take advantage of these benefits? Do I just not see how I could make credit cards work for me?
I can see it. I really can. I’m so aware of my financial status, I could easily make the benefits work for me and make me more money.
Let’s get into why.
The Dreaded Cons
The credit card is a product. In 2019, the average American’s credit card balance was $6,194. And just this year, the average credit card interest rate was 15.78%.
That means the credit card companies are making billions upon billions of dollars from people who can’t afford to use credit cards.
Credit cards are heavily marketed in America. It’s pretty clear why. The companies make a ton of money off people who can’t pay them off every month.
I think everyone uses the excuse that credit cards are okay because you can just pay them off every month. But statistics show real life looks different than intentions.
Here’s Why I Don’t Use Credit Cards
I love talking money with people so much that I got training to be a financial coach from Ramsey Solutions. I want other people to enjoy the freedom of no debt.
The reason I don’t use credit cards is because I want to show people that they can live without them. Those who come to me for financial coaching are more likely to be those who need to quit using credit cards entirely to get their financial lives back in shape.
Those stats I showed above? People who need financial coaching are the ones paying over 15% in interest on their credit cards. Sure, credit cards carry some great benefits, but not for these people.
And I can’t in good conscience use credit cards while I tell other they shouldn’t. I can’t do it.
I don’t want someone who is deeply entrenched in credit card debt to say, “Well, Caleb uses credit cards and pays it off every month. I can do it too.”
I want them to say, “Caleb is proof I don’t have to use credit cards any more and he can support me in that decision.” That’s why part of Dave Ramsey’s baby steps involves cutting up the credit cards and never using them again. Credit cards are designed to make money for corporations, not you. So I want to support people who need to do this by not using credit cards myself.
Some Other Benefits to Ditching the Credit Cards
Personally, I’ve found a couple other reasons I don’t need to use a credit card.
- Debit cards have similar security measures. I am on our checking account fairly frequently. If there is a fraudulent purchase, all I have to do is inform the bank as soon as I see it and they will take care of refunding me that money and sending me a new debit card.
- I don’t need credit. I don’t like payments at all so I have committed to paying for everything with cash from here on out. Contrary to popular opinion, you actually don’t need credit to purchase a house. If you go with a company that does manual underwriting (like Churchill Mortgage), you can still obtain a mortgage with a great interest rate, no credit needed.
- I find it is far easier for me to track my finances just based on using a debit card. I never have to wonder if I have enough money in my bank account to pay for my credit card bill because every time I purchase anything, that money is take straight out of my account. Seriously. I have to legitimately live below my means because if I don’t, I run out of money. I’m much more careful that way.
I Understand Why People Like Credit Cards but…
There are some nice benefits on the surface. I just can’t justify it myself with the type of financial help I want to provide to people.
I honestly don’t have a problem with people using credit cards. People will do what people will do. That doesn’t mean I wouldn’t encourage someone to get rid of credit cards if I had the chance. In fact, if I ever coach you in your finances, you can bet I’ll encourage you to cut them up. But money is such a sensitive topic, I don’t want to push people away because I’m giving them unsolicited advice on credit card use.
And I know that not everyone is the same. Many people pay for food on credit cards because they don’t have the money to pay for it any other way. If that’s you, please please please fill out this form below so we can talk about your situation. I promise to give you hope.
Do you use credit cards? Why or why not? I want to hear from you in the comments below!