Is a credit card a necessary evil? - Mothering Forums

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#1 of 39 Old 12-29-2010, 09:22 AM - Thread Starter
 
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I got dinged with super super high fees when my credit card was maxed and things crashed and I immediately closed the account and eventually got it paid off.  It's been paid off for 6 months and I have no credit card.  I only had one to begin with anyway.  I don't want to allow myself to get into that "free money" trap like I did when I was younger racking up $5K of credit card debt that's impossible to pay off when you are a single parent making $8 an hour and your fees are 29.99%.    Should I get another credit card?  How necessary are they?  When the poo hit the fan my credit score tanked from 720 to 620 and it's slowly climbing now that I'm debt-free but I don't want to allow myself to ever let that happen again.  Do I NEED a credit card to fix my credit and keep it good or can I just keep on keeping on without one?


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#2 of 39 Old 12-29-2010, 09:47 AM
 
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I don't feel like credit cards are inherently evil, but more like french fries. I can't eat french fries responsibly-- it's better for me to just not keep them around. It seems like you've had trouble with cc's in the past, and your credit score is rising without one. If you can't stay out of debt with a cc, I'd definitely not keep one just for your credit score.

 

There are other ways to build your credit eventually-- if I was just trying to get my score up, I'd rather do it with secure debt instead of a credit card.


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#3 of 39 Old 12-29-2010, 10:16 AM
 
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We have credit cards but I don't think they are something you have to have.  We keep ours in our safe, so we have to make a conscious effort to get them/use them.  We only use them for things we have the cash for but using the card gets us a discount (like a coupon that we need to use the store card for, things like that) and then we pay it off right away.


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#4 of 39 Old 12-29-2010, 10:33 AM
 
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I have paid off cards time and time again and closed them.  Then opened them thinking I needed them and that I would do better this next time.  We are done with that.  You are better off with not having them if you know you can't trust yourself with them.  When that "emergency" arises that really is only an emergency in your head, they are very easy to use.  My husband and I are finally realizing this and we are done with them. I would not get one.

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#5 of 39 Old 12-29-2010, 10:36 AM
 
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I don't think they are necessary. They might be convenient, but not necessary.

 

Your credit score is only important if you want credit. But I have to say that the fact that your score is climbing from 620 proves, by itself, that you don't need a credit card. 620 was a hit for you, sure, but it's actually not awful. if you get back in the 700s you'll have good credit already.

 

Do you have an emergency fund? Some people think of their credit cards as an emergency fund, which is not a good idea. But it's also not a good idea to have no emergency fund and no credit either. If you needed major engine work on your car, could you swing that? If not, make it a priority to build up that fund. If you don't feel any need for a credit card, I'd say you were in good shape :)


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#6 of 39 Old 12-29-2010, 10:38 AM
 
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Depends on your goals.  If your intent and desire is to live debt free for the rest of your life, and you are *intense* about that, no I do not believe they are necessary.  You don't need a credit score if you save up and pay cash for *everything*.

 

Also, I know people say that bank debit cards cannot be used in certain situations, but we have used ours for *years*, as has my dad, and they go through like credit, no problem.  This includes hotel reservations, online purchases, airplane tickets, and the like.

 

As others mentioned, other things affect credit score besides revolving card debt, so you don't necessarily need them even for that.

 

If they are a danger to you and your financial help, I'd not use them.  Building up your score at a slower pace is worth not having a financial meltdown, IMO.

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#7 of 39 Old 12-29-2010, 10:49 AM
 
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I would say that you need some type of credit if you have no emergency savings. No, it isn't a good idea to count on the  credit as your sole backup- but what if the furnace dies in January? You need 5k and you need it now.

 

But even that scenario doesn't mean you truly have to have a Visa- it means you have to have some kind of resource to cover a large, unexpected expense.

 

There are a number of benefits to credit cards that debit cards don't have, but I don't think you need them.


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#8 of 39 Old 12-29-2010, 11:58 AM
 
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Quote:
Originally Posted by jeminijad View Post

I would say that you need some type of credit if you have no emergency savings. No, it isn't a good idea to count on the  credit as your sole backup- but what if the furnace dies in January? You need 5k and you need it now.

 

But even that scenario doesn't mean you truly have to have a Visa- it means you have to have some kind of resource to cover a large, unexpected expense.

 

There are a number of benefits to credit cards that debit cards don't have, but I don't think you need them.

 

 

But what if simply having the card keeps you from having the emergency savings? I'd rather owe the furnace guy, or take out a loan against the house than owe a credit card at 28% interest.
 


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#9 of 39 Old 12-29-2010, 12:53 PM
 
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I don't think they are necessary or evil.

 

For our family, they are a convenient resource.  If they are not that for you, don't use them.

Dar likes this.

 

 

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#10 of 39 Old 12-29-2010, 01:07 PM - Thread Starter
 
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Well, I dont' have a savings acct right now.  My kids and I are literally climbing out of a time when we had to scrounge pennies for toilet paper and choose which bill to pay based on what was getting cut off that month.  I have $200 set aside for a savings acct right now but tha'ts it.  Nothing else.  I'm very very new to being financially responsible and "free."  I'm not sure what my next step would be aside from a savings acct for emergencies.  I recently had a discussion with a co-worker about debt and said that I didn't own a credit card and she was horrified.  She's also debt-free but she's convinced that you HAVE TO have a credit card.  That surprised me so I had wondered if I really needed one or if I could get by and repair my credit without one.  I think I won't get one at this point because I don't yet trust myself. 


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#11 of 39 Old 12-29-2010, 02:02 PM
 
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So, no, I don't think you need one but I'd definitely make it a priority to build up the savings.

 

A lot of people are very motivated by Dave Ramsey's Total Money Makeover. It's a popular book, so it will be at your library (or requestable via intralibrary loan). His big thing is getting out of debt, and it sounds like you have already done this - that puts you in an elite category already :) So your challenge is to build up savings and sinking funds, save for retirement and (optionally, as far as I'm concerned) save for your kids education.

 

It sounds like things are really tight, and Dave won't have any advice for that specifically. Well, he says that you either have to spend less or earn more. But I think his clients and the people who call in his radio show must be bleeding money because he says, for example, that saving up $1000 for your basic emergency fund should be a step that takes less than a month. Yeah, it's that easy for some people, and for other people, not so much. So you can see he caters mostly to people who just blow all their money on lattes and just need to get a little discipline. However, you may still find his book just purely motivating.

 

I like using www.mint.com to track my spending and budgets. We are very frugal naturally but even so, we might blow a dollar on a fast food sundae for DD or buy too many cans of beans when they are on sale (trying to stock up but I also have to be careful not to go crazy on it). So it really keeps me right in line. You probably know of all the ways to cut things here and there - using rags instead of paper towels, make your own laundry soap, hang the wash instead of using the dryer (I have a clothesline in my living room for the winter). If you have your own washing machine, you could even use family cloth just to wipe pee, it's no big deal (it's no worse than washing clothes or sheets if your kid wets the bed - in fact it's a lot cleaner than that!) and save a fair amount on toilet paper, though I have to admit I would not likely do this if I had to use a laundromat (just because it's a pain, not because I'm worried about the pee). Well, you probably know all this stuff, even if you don't do it all but you are probably aware of your options. But the point is, as you probably already understand, your issue isn't that you don't have a credit card but that you don't have savings.


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#12 of 39 Old 12-29-2010, 02:19 PM
 
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A bit about sinking funds. We are not in as tight a situation as you are, since all bills are getting paid - yet it's an enormous struggle for us to scrape up enough to save (despite not having any of the luxuries like tv or netflix or entertainment or clothing budget or haircuts, plus we only spend $8/month for a phone... Internet not negotiable since 100% of our income is from the Internet... anyway...).

 

What I am doing is simultaneously building up emergency savings plus sinking funds. The reason I chose to do this is because I would feel really demoralized by frequently having to hit the emergency savings for day-to-day life. Sinking funds are the savings categories for items I KNOW we will have to spend. We don't spend them every month, but they will get spent. Examples:

 

- Travel (to visit my parents)

- Heating fuel (oil or wood)

- Auto (repairs, maintenance, swapping snow tires, etc)

- Gifts (Christmas or whatever)

- Life insurance (we have an annual premium)

- City water and sewer (quarterly bills)

- Medical (goal is to save $1000, which covers the deductible for 1 person)

and so on.

 

At current, our sinking funds are partly but not fully funded. So when we have to get brake work done in March ($350 is our quote) I think we'll hvae about $200 saved up but we'll have to scrape up the $150 somewhere. However, I feel good about it because I can come up with $150 more easily than $350. Likewise, when the water/sewer bill comes in March as well, I'll probably have $25 saved up out of $70, which is not enough but it will lessen the blow. Obviously the goal is to fully fund these things so there is no blow at all.

 

But I am funding these at the same time as the emergency savings so that I'm not touching the ermergency savings for anything except an emergency. And the water bill really shouldn't be an emergency. (I know it IS for a lot of people though).

 

This is hardly scientific but what I've done is to write the ideal amount to save for each fund each month (say, I'd ideally like to put away $100 a month for auto). I used to worry about what I could possibly save, but now I don't. Even if I can only save $95 on one month and my list totals $850, I don't worry about it. Then I just calculate the percentages (a total pain if you're doing it manually but I'm a spreadsheet nerd). So every month, each fund gets something, even if only $2 for our trash.

 

Then, when you need it, you've at least partly saved up for it. If your fund is only partly funded, or you just got started, try not to dip into it if you can get away with that and still pay all your bills. I foresee a time in the future when we'll be a little better off because the sinking funds will be there and thus I will have extra money to put into the emergency savings account. For exmaple, last year when the life insurance premium came due, we had to come up with it, and couldn't save anything that month. Next year, we won't be scrambling - we'll pay the premium and still put some away into savings the same month. Whew!


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#13 of 39 Old 12-29-2010, 02:27 PM
 
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Not necessary, and not an evil. Just a tool that can be used responsiblity for benefit or irresponsibly for detriment.

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#14 of 39 Old 12-30-2010, 04:48 AM
 
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I would get a credit card and JUST use it for gas. I just paid my card off and will try to only use it for gas.The problem starts when you use it at the store for food that went a bit over your cash amount...instead of putting food back! Then the pets need food or you pay for an oil change with your cc.Before you know it your balance is over $300. If you can do just for gas and pay off then you are going to help your credit.

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#15 of 39 Old 12-30-2010, 06:02 AM
 
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No, I don't think cc's are necessary.  They are designed to exploit those who have the least ability to pay.  As a single mom, you will be faced with numerous situations where using a cc will be extremely tempting.  New shoes, eyeglasses, dr's appointments, etc, etc, etc.  I think about all the times I have pulled my card out to buy something that I should have waited on.  

 

But, I do think you need to be building credit of some sort.  As obnoxious as they are, credit scores are now used to determine a person's ability to work and live.  Landlords pull credit scores, car dealerships do as well, I have even heard of employers using credit scores as part of hiring someone.  

 

 

 

So, how can you build credit without using a cc.  

 

Manage a bank account responsibly.  This means always having a positive balance -- no late fees, no overage charges watch your money like a hawk! 

Pay utilities on time.  Missing payments or even being late a single day will ding a credit score.  

Build some savings.

 

If it was me -- I would spend 12-18 months of being uber responsible with money.  And only then would I get a credit card or small installment loan (like for a used car).  If you can, use a credit union as your bank -- they tend to be very conservative and helpful with teaching responsible money management.  

 


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#16 of 39 Old 12-30-2010, 12:01 PM
 
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We each have a credit card for credit but we don't use them a whole lot. I'll use it for groceries or gas and pay it off that same day so I'm not having o pay interest.

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#17 of 39 Old 12-30-2010, 12:30 PM
 
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For us, credit cards aren't necessary at all. We haven't had one for like 8 years, and pay cash when we want/need something. As far as rebuilding your credit, I like the idea of a gas only card and paying it off every month, but something bigger like a modest car loan (a cheap used car or putting down most of the amount on a new car and financing the rest), is a good way to increase your credit score. We are getting ready to pay cash for a newer vehicle, but will then sell I or trade it in a year down the line towards something more expensive in order to have something reported to the credit bureaus. I know many jobs check credit, so it might be important to most people, but unless you plan to buy a house in the near future it certainly isn't a necessity to have revolving credit and high fico scores.

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#18 of 39 Old 12-30-2010, 12:51 PM
 
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Yes to this. Sometimes I think we'd like one, but then we think better of it.

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For us, credit cards aren't necessary at all. We haven't had one for like 8 years, and pay cash when we want/need something.  

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#19 of 39 Old 12-30-2010, 01:10 PM
 
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my dh just got his first card (He had no credit at all, good or bad despite paying all our bills/his for the last 10 years). so we got him a secured card at our credit union and it rocks. he just uses it for gas, pays it off every month, and now he is on the board- credit wise! so nice, we didn't have to pay a deposit on our apartment, we can soon qualify for a home loan etc.

 

i totally think of credit as a game, you have to play by their rules to get the most out of it. but some folks don't have the discipline and get into a rough spot. i have never been turned down with my credit and i only had the secured card for 2ish years -i think the limit was 250 when i started.


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#20 of 39 Old 12-30-2010, 01:31 PM
 
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I don't feel like credit cards are inherently evil, but more like french fries. I can't eat french fries responsibly-- it's better for me to just not keep them around. It seems like you've had trouble with cc's in the past, and your credit score is rising without one. If you can't stay out of debt with a cc, I'd definitely not keep one just for your credit score.

 

There are other ways to build your credit eventually-- if I was just trying to get my score up, I'd rather do it with secure debt instead of a credit card.


Well said.  I am in the same boat.  The only thing we actually miss a cc for is maybe renting a car.  Can still do it with a debit card, just takes a security hold on the account.  Not enough of an issue to go out and get one though. 


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#21 of 39 Old 12-30-2010, 01:44 PM
 
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I think credit cards are mostly a convenience. I also think they are an absolutely necessary safety tool. As soon as DD is old enough to be exploring the city on her own she will have a credit card in her pocket. Car breaks down and need a tow? Date gets obnoxious and you need a cab home instead of feeling pressure to have him drive you home? Freak snow storm hits and you need a place to stay? Sure you could always have a few hundred in your wallet, but I prefer to carry minimal cash.

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#22 of 39 Old 12-30-2010, 02:14 PM
 
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I don't think of them as "evil" but I do find them necessary for our particular lifestyle. In our case the debit cards are also credit cards and we have one "emergency" real credit card with some kind of insane limit ($50K).

 

Couple examples:

 

  • We have family that is far away that we visit a couple times of year.  Sometimes this involves renting a car, booking a flight or staying at a hotel. You need a credit card for the car, to get the best deal on hotels and flights you need to order on line and a CC makes that easier. Even if you book over the phone to guarantee a late arrival at most hotels you need a CC.  Now we don't actually use the CC to pay for the car or the hotel room, we pay cash but the CC secures it.  For the flights I use the credit feature of the debit card and it comes right out of our checking. 

 

  • My son often need things for his SID that I can not find in local stores or are just way too expensive to buy locally. Using snail mail to send a check takes way too long.

 

  • I am bargain hunter  and will research the best deals, etc. These are often found online. When I see an amazing deal I don't want to lose out. Being able to grab it when I see it online is great.

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#23 of 39 Old 12-30-2010, 02:18 PM
 
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We have rented cars, tons of hotel rooms (two different ones last week), and bought airline tickets all with a debit card. Just mentioning that b/c I've read it on here several times that you can't do these things w/o a credit card, and it's simply not true. We've never even had a hold or deposit taken out. I also shop online on a weekly basis (95% of our Christmas shopping was done online).

Now, I do totally see how credit cards would be helpful in emergencies... but they certainly aren't necessary, and I have zero desire to have one myself.

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#24 of 39 Old 12-30-2010, 02:27 PM
 
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We haven't had credit cards in  over 7 years, and our credit scores are fine.  (DH's is darned near perfect, actually!)  We do both have Visa-branded debit cards linked to our checking acct, and have used those with no problems to rent cars, hotel rooms, and plane tickets with no hassle.

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#25 of 39 Old 12-30-2010, 02:53 PM
 
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No, we haven't had a credit card ever.  We've been married almost 13 years.  Even big things, there are always ways around buying them RIGHT NOW.  Items can be hand washed or taken to the laundromat or a friend or family's house.  Items can be air-dryed.  We can get by with 1 car, but prefer not to (it is rough, I start work at 630, hubby starts at 8:30).

 

We always have enough for gas and basic groceries, I can't imagine anything I "need" more than the items I've mentioned above.  Most families 30 years ago made do or bought with cash.  I remember the first time my parents used credit (besides their house) was to buy our first color TV.  They swore they'd never do that again, once they figured out how much they paid and didn't again for a long time. 

 

In this house, it's cash or not at all.


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#26 of 39 Old 12-30-2010, 06:07 PM
 
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I use my credit card constantly. It earns cash rewards. I love it.

BUT, my parents went CC free after years of not managing to use them responsibly, and they have had absolutely no problems using their debit card for travel, online purchases, etc. So I would call credit cards unnecessary and a bad idea for anybody who is not confident in their ability not to charge more than they can pay off each month. It's my feeling that most reformed overspenders gain that confidence eventually.
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#27 of 39 Old 01-12-2011, 11:49 PM
 
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No, we haven't had a credit card ever.  We've been married almost 13 years.  Even big things, there are always ways around buying them RIGHT NOW.  Items can be hand washed or taken to the laundromat or a friend or family's house.  Items can be air-dryed.  We can get by with 1 car, but prefer not to (it is rough, I start work at 630, hubby starts at 8:30).

 

We always have enough for gas and basic groceries, I can't imagine anything I "need" more than the items I've mentioned above.  Most families 30 years ago made do or bought with cash.  I remember the first time my parents used credit (besides their house) was to buy our first color TV.  They swore they'd never do that again, once they figured out how much they paid and didn't again for a long time. 

 

In this house, it's cash or not at all.

 

Yeah that.  My husband and I have been together for 13 years, and he hasn't had a credit card since we've been together, and I haven't had one EVER.  We use our debit cards when necessary (things that can't be done with cash) but otherwise we use cash for everything else.  If we don't have the cash on us, we can't afford it so we don't buy it. Plain and simple.  If needed, we go home and get the money and come back or we figure out how much it will cost before we leave and take the necessary amount with us.  We have enough medical debt, we don't need credit card debt on top of it.  No sense spending money we don't have.  It doesn't seem right to me.     
 


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#28 of 39 Old 01-13-2011, 04:03 AM
 
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They're necessary for us, but not evil at all.  We've never carried a balance on our credit cards in 30+ years of using them.  We've never been late once for a payment, nor have we ever had a balance carry over.  Not even for one month.

 

However we put EVERYTHING on the credit card.  At least everything we can possibly put on there, including utility bills.  The points we earn pay for dd's school uniforms every year.  That's a $300 savings every year in and of itself.  I also have several small kitchen appliances that I got for free using the points.  The convenience shaves off hours of financial planning, etc.

 

We travel and have lived abroad A LOT.  We've had issues using our debit cards abroad in the past and a CC was absolutely necessary in several European and Middle Eastern countries.  Debit cards just wouldn't go through, even as a credit card.  We just had this happen a couple of months ago when we were in Italy.  I was making a purchase at a grocery store and I had left my wallet with dh and only had my debit card and Euros with me.  I couldn't use my debit card - it wouldn't go through and I had to use the cash (which was fine, I just didn't want to have to go do another ATM withdrawal).

 

If we have a major purchase, we save ahead for it, but we still put it on the credit card, then pay the balance.  That way we get our points.

 

I also like the fact that you can dispute charges and it doesn't affect your bank balance when you use CC.  We had a credit card number stolen once and they had spent almost thousands in a single day (charges in Dubai and Moscow, airline tickets purchased, etc.).  The charges were flagged by the company and the charges didn't go through and we were out no money at any point.  I can't imagine how that would have panned out if we were using our debit card and they got that number.  We NEVER use the debit card online.  Never.  And we try to not use it as a credit card, if we possibly can avoid it.  The safety factor is just one reason.

 

For us, the CC is absolutely necessary.  It is in no way evil, though, because we're good money managers.  I think if people have a hard time using the cc wisely, then it's not good to carry around.  I think they are still necessary, but can be kept, as a pp mentioned, in a safe or frozen in a block of ice or something like that.

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#29 of 39 Old 01-14-2011, 07:16 PM
 
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Originally Posted by JessicaRenee View Post

We each have a credit card for credit but we don't use them a whole lot. I'll use it for groceries or gas and pay it off that same day so I'm not having o pay interest.



I just wanted to address this.  You don't have to pay it off the same day to avoid interest.  As long as you are not carrying a balance, you are not charged interest.  So, I charge a multitude of things and then once a month get a credit card bill.  That bill has a due date (generally a couple weeks in the future).  If the balance is paid in full by that date no interest is charged.  So, I pay our credit cards once a month and never pay interest.


 

 

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#30 of 39 Old 01-14-2011, 07:56 PM
 
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like velochic, our entire lives are on our credit cards. utilities, bills, everything. we love it. i think it's just as easy to be financially irresponsible with cash (except then you literally don't have any money for food or bills at the end of the month). good money managers don't have financial crises no matter what method of payment they prefer, poor money managers are going to come up short no matter what. our cc limit is so high we could practically buy a car with it, but it has never even crossed our minds not to pay off the balance each month. plus, the financial rewards are pretty high when you use a credit card for everything... we are taking a weekend trip in a few weeks and is mostly being paid for with points.

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