How You Can Live Without A Credit Card

[MrsPete]

For me, the dis is a perfect example of the mind set you talk about. each and every year we get the post about how the Op, can't really afford a trip (or it will be a really tight swing) but since the "kids are only little once" and we can get free dining we should go. (and sorry fellow parents, I loathe and despise that excuse. I firmly believe we use it to simply manipulate our way into getting what we want, damn the consequences)
When did an expensive( and disney is always costly) vacation become a requirement for childhood.?

You're right. If you're spending money you don't have, the "they're just little once" or "we NEED a Florida vacation" is just a rationalization, a justification. We all need downtime, a break from work. And we should build memories with our children. But that doesn't mean they need to see Mickey Mouse.

I think it's just that those of us that use CC's and pay them off each month just don't really see it as debt. Since we pay in full each month and have the money sitting in the bank until we send the payment in, it's no different than using a months worth of electricity, water, etc. and then paying the utility bill.

Exactly right. The credit card is just the vehicle through which I pay for my groceries, gas, and other necessities. It's faster and more convenient than cash, and I get rewards for it. If I pay the bill in full when it comes, then I don't see it as debt. It's just another bill.

If you see it as debt, then consider this: You've used electricity and water this month . . . and the bill won't come 'til the end of the month. Do you consider yourself "in debt" to the electric company or the water company? Of course not! You know the bill will arrive at the end of the month, and you'll pay it then -- WHEN you owe it. Right this minute (assuming you have no outstanding bill), you're not in debt to them.

There's paying monthly bills, and then there's debt. They're related but not the same. Debt is a bill you can't pay in full, a bill that -- either by choice or by chance -- you've chosen to allow pay in installments.

 

[pamlet]

really?? Tell me how much I've paid on all those FREE hotel nights I've gotten...including 6 this year?

Trust me, they've never gotten an annual fee or interest from me. It's FREE!!!

I've gotten those free nights too - from the number of nights I've spent through the hotel's reward program...

You are one of the few that can manage your credit card - and you are to be commended ..

At one point we played the "pay it all off" game .. then hubby lost his job, I had to have major surgery and BAM .. suddenly we were scrambling paying minimum payments and charges were racking up .. it only takes a couple months to get behind into a hole that's difficult to get out of .. especially if you are depending on a credit card to be the emergency back up (even after savings).

I think folks who can "play the cc game" are great ... clever .. but for US it doesn't make sense. I'd rather spend money I HAVE .. then and now and not be owing ANYONE .. Actually it takes much more discipline to live this way .. lots of planning of meals, planning when we're going to go out to eat .. choosing our vactions carefully .. budgeting .. but I don't have the bills that I did .. and THAT makes me very happy!!

 

[MrsPete]

I realize that a credit history is not being built - but I think it's a mindset that you HAVE to have credit history .. for OUR lifestyle we don't really need one. Our home is paid for - we don't plan on moving .. we purchase vehicles used .. we only purchase what we NEED ..

The only danger w/debit cards I can think of is fraud access to our accounts .. but even then there are steps in place w/our credit union and bank that protect us.

I'm with you on that one. All the emphasis on credit scores is misplaced. Focusing on the score is like focusing on your actual weight. You don't really care what your weight is -- you care that you look good and are healthy. The number is irrelevant. It's just a representation of what really matters.

With finances, what really matters is that you're striving for financial security. If you're building your savings, borrowing only when absolutely necessary and working towards avoiding that as you grow older, investing for retirement, etc. . . . you're going to build financial security.

A credit score JUST tells whether you're a good credit risk. It tells whether you're likely to pay your bills if you borrow. Everyone's goal SHOULD BE to get out of debt and avoid borrowing. Why, then, do people run around trying to prove that they're good credit risks?

Ironically, when we paid off our mortgage, our credit score went down. Since then -- with more monthly paycheck left over -- we've been saving more aggressively. We've bought two cars since then, both paid with cash. Yet our credit score implies that we are LESS financially stable, LESS well-off than when we were years ago. Exactly the opposite is true!

I also have had no problems related to jobs, insurance, etc. because of my decreasing score. But then, I don't have other red-flags in my financial history: No moving around frequently, no changing jobs often, no garnishment of wages or problems with the IRS. No changes to my long-standing credit cards, etc.

 

[MrsPete]

You are one of the few that can manage your credit card - and you are to be commended ... especially if you are depending on a credit card to be the emergency back up (even after savings).

I think more than a few people can manage their credit cards well. The key is not to spend more than you can afford to pay off.

And no one should count on credit cards as an emergency back-up. Credit cards as a tool for paying for things is fine -- counting on them being your safety net in an emergency is a mistake. They are not a replacement for a savings account, and I think too many people rely upon them instead of being prepared for an emergency, cutting back when times are lean, and so forth.

I'd rather spend money I HAVE .. then and now and not be owing ANYONE .. Actually it takes much more discipline to live this way .. lots of planning of meals, planning when we're going to go out to eat .. choosing our vactions carefully .. budgeting .. but I don't have the bills that I did .. and THAT makes me very happy!!

And that's exactly what everyone should do: spend the money they HAVE. That's exactly what I do. If I didn't have the cash to buy an item, I wouldn't buy it on the credit card. I don't lose track of how much I can spend, I don't forego a budget. I spend exactly as I would IF I were paying cash . . . except that it's more convenient, and I get rewards for it.

I have exactly the same bills I would have if I paid cash for everything. It's just that instead of paying a little here to the grocery store and a little here to the gas station and a little here at CVS, I pay one big bill at the end of the month.

 

[princesspeach]

To answer the ops question no I could not survive without a credit card. I would never buy anything online,pay for a hotel , make a big purchase with a debit card. If theres any problem its harder to dispute it. If they overcharge you the cash is taken right from you bank account you may have to wait days to get the cash back. No thanks I'm too much of a control freak. I have a hard time understanding why there is always so may debates on this board between cc users and non cc users. To each there own.

 

[pamlet]

I think it's hard to say how many people handle their credit cards well or not ..

I think we get skewed ideas from reading discussion boards .. Kind of like when we read these boards it seems like EVERYONE stays concierge at the Poly or Grand Floridian twice a year w/"free dining" ..

Everyone has their own methods of dealing with money - and if you want to pay your bills once a month more power to you .. I think it's great .. for US it doesn't make sense .. BUT those of us that choose to "pay as we go" are no less clever than those who choose to utilize credit cards .. both of us (hopefully) know our limitations..

 

[bellarella]

I think folks who can "play the cc game" are great ... clever .. but for US it doesn't make sense. I'd rather spend money I HAVE .. then and now and not be owing ANYONE .. Actually it takes much more discipline to live this way .. lots of planning of meals, planning when we're going to go out to eat .. choosing our vactions carefully .. budgeting .. but I don't have the bills that I did .. and THAT makes me very happy!!

This is where I think there is just a huge misunderstanding about credit cards.

I rarely use cash and I only use my debit card to get cash out of an ATM. Everything else is on credit card. YET.....

I *never* spend money I don't have. (With the exception of my mortgage.)

Credit cards aren't a game -- people who see them as such are the ones the get into trouble. It doesn't require more discipline to live on a cash/debit only system. (I could argue that it takes much less -- I have literally tens of thousands of dollars of credit I could tap at any moment if I wanted to. Discipline, not the lack of availability, is what keeps me spending only money I have.) Living within a budget is what takes discipline.

I understand that not everyone can live responsibly with available credit. And I applaud people who have figured this out and find something that works for them.

I also understand that some people don't use credit cards because they don't want to support the companies that offer them. I'm a big believer in boycott as a form of protest.

But, this notion that using credit cards means you are "in debt" is just wrong -- unless, as has been mentioned, you feel that you are "in debt" to the utility company because you don't have a direct feed between your meter and your bank account.

If you choose not to use credit cards, that's a personal decision, and one that is completely valid. However, that decision should get made after weighing the pros and cons of credit -- not by denying the pros.

Among the pros you give up by not having a credit card:

1. Ability to keep money in an interest bearing account throughout the month.
2. Points for rebates (though some debt cards offer this).
3. Never having to get your money "back" after a fraudulent purchase on the card.
4. Easier access to car rentals and certain other transactions.
5. Building a credit history.
6. Having quick access to emergency funds. (I'm not saying using a credit card as an emergency fund -- however, I have been in a situation where I needed more money than I would have been able to withdraw via an ATM/Debit card (due to limits for fraud protection) and it was over a weekend. I was able to use my credit card without a problem, where as I would have had a big problem if I didn't have it.)

It's fine not place a value on those things. But denying that there aren't advantages to credit cards isn't honest and I think devalues the rest of people's arguments.

 

[Mellie2162]

Wow, this has been a really interesting debate and Ive enjoyed reading both sides. For us we are cash only, but this is because we were in the past irresponsible with cards. I think for those of you who use CC and pay them off each month and get rewards for doing so is great, just not something I think I could do and not get into trouble. Now we have very little debt (IRS) and are building our emergency fund. I like not having the plastic temptation in my life anymore, its very freeing. To those of you who do and pay them off, I give you a lot of credit (no pun intended) for doing a good job.

I guess what it boils down to in the end is a personal preference over how you like to pay your bills. Different strokes for different folks and all.

Having had past credit card debt one of our main goals for us now is to teach our kids fully about how to budget and be responsible. Im hoping that their having witnessed us getting out of debt will have taught them something.

Also, a few posters mentioned having to pay for common sense advice from Dave Ramsey or other sources.. we followed a lot his advice as well as from Crown Financial and didnt pay a cent for any of it. We used the library for a lot of resources and enjoyed using their books absolutely free of charge.

 

[bettymae1121]

6. Having quick access to emergency funds. (I'm not saying using a credit card as an emergency fund -- however, I have been in a situation where I needed more money than I would have been able to withdraw via an ATM/Debit card (due to limits for fraud protection) and it was over a weekend. I was able to use my credit card without a problem, where as I would have had a big problem if I didn't have it.)

And this is something I think more cash only people should give some forethought to. If you have a years worth of cash in the bank for emergencies, that's fantastic...but it doesn't do you any good if the emergency cost more than your available funds and it happens when the bank is closed for a few days and you can't access it! Not everyone takes checks or IOU's.

A great example is being stranded while traveling. Let's say you fly down to WDW for a week. I'ts a Sunday and your vacation is over and you head to the airport to fly home, only to discover the Blizard of the Century is raging to the north and not only has your flight been canceled, but all the flights for the rest of the day. Now, you could stay an extra night (at your own expense as airlines don't pay for your hotel when the cancelation is due to weather) but your wife needs to be back at work tomorrow or lose her job and anyway the kids really need to be back in school. You find out that another airline has four seats left on their last flight of the day, which hasn't been canceled. But again, because the cancelation is due to weather, the airline you are on won't pay for the new tickets, you have to pay out of pocket. The tickets are $300 each, or $1200 to get the four of you home. After spending most of the money you have available on your debit card for the vacation, you only have $200 in your checking account. You've got plenty of money in savings...but the ATM only lets you take out a max of $300 a day and since it's the weekend, any transfer from savings to checking so you can use your debit card won't post until Monday morning. How do you pay for the tickets home?

Of course there are ways around this that don't include have a CC as a back up plan (keeping lots of money in checking, for example) but if you don't take the time to think up of various senarios that may require you need a large amount of money available at some weird hours of the day or night, you could find your self with plenty of money yet no way to actually pay for anything.

 

[tlbwriter]

Interesting post, bettymae. You bring up a good point. One could avoid this type of problem by having a large emergency fund that can be accessed by a debit card, but that also makes your large emergency fund a lot more vulnerable! People without CCs, what would you do in this scenario? What am I missing?

 

[pamlet]

Interesting post, bettymae. You bring up a good point. One could avoid this type of problem by having a large emergency fund that can be accessed by a debit card, but that also makes your large emergency fund a lot more vulnerable! People without CCs, what would you do in this scenario? What am I missing?

When on the road I do keep a large amount in checking .. I had made a point when my transmission went out .. I was able to rent a car, continue on my vacation and pay for the transmission .. putting it all on my debit card ..

These days debit cards are widely accepted - to include renting cars .. admittedly a few years back this was NOT the case ..

We can find all sorts of horror scenarios - in fact I lived one .. lost my wallet while on the road .. had to make home with money hubby was able to Western Union .. (a hint - you can Western Union money from Home Depot .. and pick it up there.. laugh).. Having a credit card would NOT have helped .. it would have been in my wallet!!

Bottom line - for ANY disaster scenario - be prepared .. whether your're using credit or cash/debit.

 

[NicoleLovesDisney]

And this is something I think more cash only people should give some forethought to. If you have a years worth of cash in the bank for emergencies, that's fantastic...but it doesn't do you any good if the emergency cost more than your available funds and it happens when the bank is closed for a few days and you can't access it! Not everyone takes checks or IOU's.

A great example is being stranded while traveling. Let's say you fly down to WDW for a week. I'ts a Sunday and your vacation is over and you head to the airport to fly home, only to discover the Blizard of the Century is raging to the north and not only has your flight been canceled, but all the flights for the rest of the day. Now, you could stay an extra night (at your own expense as airlines don't pay for your hotel when the cancelation is due to weather) but your wife needs to be back at work tomorrow or lose her job and anyway the kids really need to be back in school. You find out that another airline has four seats left on their last flight of the day, which hasn't been canceled. But again, because the cancelation is due to weather, the airline you are on won't pay for the new tickets, you have to pay out of pocket. The tickets are $300 each, or $1200 to get the four of you home. After spending most of the money you have available on your debit card for the vacation, you only have $200 in your checking account. You've got plenty of money in savings...but the ATM only lets you take out a max of $300 a day and since it's the weekend, any transfer from savings to checking so you can use your debit card won't post until Monday morning. How do you pay for the tickets home?

Of course there are ways around this that don't include have a CC as a back up plan (keeping lots of money in checking, for example) but if you don't take the time to think up of various senarios that may require you need a large amount of money available at some weird hours of the day or night, you could find your self with plenty of money yet no way to actually pay for anything.

Well we are cash only family and when something like this happens. We log onto our bank account from our phones and transfer the money from our savings account to our checking account and then use our debit card. We have bank of america accounts and I have never had a problem w/ this. Transfers between 2 bank of america accounts is instant 24/7

 

[pamlet]

Well we are cash only family and when something like this happens. We log onto our bank account from our phones and transfer the money from our savings account to our checking account and then use our debit card. We have bank of america accounts and I have never had a problem w/ this. Transfers between 2 bank of america accounts is instant 24/7

Yep - same for our two accounts..

 

[MrsPete]

Interesting post, bettymae. You bring up a good point. One could avoid this type of problem by having a large emergency fund that can be accessed by a debit card, but that also makes your large emergency fund a lot more vulnerable! People without CCs, what would you do in this scenario? What am I missing?

We don't have ATM cards or debit cards for our emergency savings account or our short-term savings accounts. We've literally never drawn from our emergency account, and our "rule" is that we have to agree together upon drawing money out of short-term savings, so it's not something we'd do on the spur of the moment.

As such, if we had an emergency such as another poster suggested: You're out of town and your transmission falls out, etc., we would definitely use a credit card to pay those bills.

HOWEVER, contrary to what some posters seem to think, that doesn't mean we'd then be looking at revolving credit payments for months to come. We have emergency and short-term savings for problems like this. When we got home, we'd wait for the credit card bill to arrive (probably weeks), and then we'd pull the money out of the emergency savings account to pay the credit card bill.

We don't need to actually be able to put our hands on the actual emergency money at the moment of the emergency. The credit card is just a way of handling it immediately . . . and then we'd actually pay it off from the short-term or emergency savings.

Since everyone takes credit cards, this is easy and more certain than trying to access a little-used account out of town, trying to get someone to wire you money, or trying to write an out-of-town check.

 

[princesspeach]

Well we are cash only family and when something like this happens. We log onto our bank account from our phones and transfer the money from our savings account to our checking account and then use our debit card. We have bank of america accounts and I have never had a problem w/ this. Transfers between 2 bank of america accounts is instant 24/7

I'm sure most cc users could do this to, but it's so much easier to swipe your card and pay it off when you get home. I've never had debt that I didn't have the money to back it up with. I'm guessing most people that have a fear of cc ie Dave Ramsey have gotten themselves in trouble in the past. I have family members going through their second bankrukptcy and really used cc irresponsibly. They would run up there cc and then pay it off with yearly bonus. Works great until economy takes a dive and bonus doesn't come and then you lose your job. So yes there is some people that should not use credit cards. I'm glad I'm not a spending addict because I really like the convenience of using a credit card.

 

[MrsPete]

We can find all sorts of horror scenarios - in fact I lived one .. lost my wallet while on the road .. had to make home with money hubby was able to Western Union .. (a hint - you can Western Union money from Home Depot .. and pick it up there.. laugh).. Having a credit card would NOT have helped .. it would have been in my wallet!!

Yeah, that's actually why we have a total of three cards: One card that's a shared account; it's our go-to card that we use for EVERYTHING because it gives the best rewards. However, in addition to that "everyday card", DH and I each have another card -- separate accounts, the only financial things we don't share with one another. Occasionally it's handy to have those cards -- occasionally you get a discount for using a specific card, and sometimes you find merchants that accept VISA but not Discover (or vice-versa.

None of them have a balance, so none of them cost us a penny.

The big point here is that IF we were traveling and one of us lost a wallet, we'd have to cancel our joint credit card . . . but the other spouse would still have that separate credit card available, so we wouldn't be stranded without access to funds.

We did have our "main card" number stolen about a year ago. I can't say enough good things about Discover. They discovered the problem before we did, called us, and set the fix-it solution into motion. They cancelled our card and got us a new one in about five days. I really don't know if they ever caught the criminals or not (hope they did), but they removed all the charges from our bill. Again, I can't say enough good things about how easy they were to work with.

 

[MrsPete]

I have family members going through their second bankrukptcy and really used cc irresponsibly. They would run up there cc and then pay it off with yearly bonus. Works great until economy takes a dive and bonus doesn't come and then you lose your job. So yes there is some people that should not use credit cards.

While I'm a big fan of the convenience and safety of using credit cards, I totally agree that not everyone uses them wisely. What you're describing is the epitome of bad credit card usage!

 

[Colleen27]

Too weak willed to manage my own finances?????? If I am too weak willed to manage my own finances, I wonder how I managed to pay cash last year for a brand new car. I wonder how I pulled that off? I am 35, married, and have 2 teenage daughter and the only debt this family carries is a mortgage. I am not weak willed, I am smart with my money! I chose not to have credit cards, that does not make me weak willed. Everybody has the right to carry credit cards if they please. I feel credit card companies are out to rip off the consumer and nickel and dime them in every way possible. That is why I chose not to have credit cards.

We don't have any credit cards because we simply see no need. It isn't a question of self control at all, just a personal preference. We manage our own finances just fine without one - even paid cash for our house last summer. We have a 1% rewards debit we use exclusively for phone/online purchases and a less attractive rewards debit (1/2%, but with stronger account protections) attached to our everyday account, so we aren't even missing out on the perks of credit, and we don't have any of the headaches of changing rules and fees and limits that come with credit cards these days.

The thing is, while paying off cards in full seems like it is the norm on the budget board, in real life it isn't. These types of articles aren't aimed at your average budget boarder, who has a higher-than-average income and education level and is very financially aware. They're aimed at Joe & Jane Blow, carrying 4 credit cards a piece with an average balance of $1200 on each one. America's total revolving consumer debt didn't get to be $950B because of people who just use their cards for the rewards and pay them in full every month.

 

[wvjules]

Boy I wish we started out this way but unfortunately we had a ton of credit card debt. But last year we started debt snowballing and we are now down to just 3 credit cards. After we pay off a card we cancel it and it has help us so much. The only card that we have is the Disney visa which we add money to each week and never have a balance on it.

You have a credit card that you keep a CREDIT balance on regularly? Careful that doesn't get you looked at a little closer by the card issuer and possibly cancelled.

It's actual illegal for the merchant to pass that cost on to the consumer. They can offer a "cash discount" but cannot legally pass that fee along to you.

It is not against the law. It goes against Visa/MC's terms of service with the vendor but they aren't breaking any law. (Unless that is part of the new cc laws.)

 

[Colleen27]

For those of you who use CC:
1. You say you pay the balance each month (terrific!) does that mean you have an emergency fund in place or would you just rely on your CC for emergencies?
2. Do you ever fear that you might lose a job and have a balance on your cc that you wouldnt be able to pay?

For those who only use cash:
1. Why do you feel that CC are bad even if the person pays them off monthly?
2. If you ran through your cash due to a huge emergency or illness and needed essentials (food, gas) would you then use a CC to get them?

For us, #2 on the pro-credit side is one of the reasons we've never been comfortable with credit cards. DH is self employed and our income can vary wildly. I'd rather not have a CC balance that needs paid (even if it is only a few days old and not yet accruing interest) in case we have to chase down funds from a bounced check or weather delays job completion and thus final payment or whatever. I'd probably be more comfortable with the approach of charging everything and paying it off as soon as the bill comes if our income came as a more or less fixed paycheck at fixed intervals.

Personally, I don't care for the way the credit card industry does business and I like the fact that they don't get ours. I don't think they're bad for everyone. That's not for me to decide. But as an industry, they make most of their money off of irresponsibility and for many years they've specifically targets demographics that are likely to be irresponsible or short-sighted in their spending habits.

No, a credit card wouldn't be an option for us if we ran through our savings. There's no reason to keep digging when you're already in a hole. We would find other ways to cope.