If you know me personally or you have been reading this blog for a while, you probably will say: “Well, that’s easy! You are one of those people, you know the Dave Ramsey people.” And while I do indeed follow Dave Ramsey’s principles for money management, that is not the entire story.
In reality more than 5 years ago, I made the lifestyle choice of living without credit cards. I made the choice based on careful study of time tested financial principles and I have not looked back. This of course, puts me in the minority as the use of credit cards is still the norm for most Americans.
You may very well be one of those Americans that use credit cards and you might be doing fine. But today, I wanted to give you a different perspective on things. Here is the rest of the story on why I don’t use credit cards:
- Credit Cards Can Become a Crutch: Early in my adult life I bought into the idea that I needed to build credit to make it in this world. So I promptly got my first two credit cards when I was 21 years old. In my mind, I was finally a grown-up, I had a financial identity. Of course, I did not stop with those first two cards and at one point I had 9 active credit cards. This gave me the false security that I could tackle emergencies and large purchases with my available credit lines. The credit cards were a crutch that kept me from walking on my own financial strength. Not anymore. I chose instead to learn to save money for emergencies and to delay purchases until I have the money to pay for them.
- Credit Cards Are Risky: Remember those 9 credit cards? Well, at one point I had available credit of around $53K, and I thought I was doing really well. The reality is that I had that $53K worth of risk. I could have very easily maxed out those credit cards purchasing all kinds of things, although I never did. I also faced the constant risk of increased interest rates which were under the sole control of the banks. I chose to live without that risk.
- Credit Cards Are Not Necessary: The conventional wisdom says that you need a credit card for convenience and for security. However, over the last 5 years I have been able to complete on-line purchases and travel (including air fare/hotel/car reservations) with the use of my debit card just as easily as I would have done it with a credit card. In terms of risk, debit card transactions are really secure. I did run into a situation with a couple of fraudulent transactions. However, just like with a credit card, my bank promptly restored the money when I made the report until they could validate the transactions and no money was lost. I chose to go against the grain and chose to live without credit cards.
When I gave up on the use of credit cards, I chose a different path towards financial wellness. I decided to build on the solid foundation of saving money, reducing risk, and taking control of my money. Anyone can choose to do the same. How about you?