The advent of technology is responsible for all sorts of societal changes. The shift to a cashless society is one of them. These days, consumers view cash as more of a hassle than a convenience, instead preferring the purchasing power and ease of use that plastic affords.
There’s nothing wrong with using credit cards to make purchases, as long as one is disciplined about it. If not, a world of problems can ensue. After all, the average U.S. household that carries revolving credit card debt has nearly $7,000 of it. To avoid digging a hole and living beyond your means, think twice about reaching for plastic.
Here are four reasons you don’t need a credit card:
You Can’t Get into Bad Debt without a Credit Card
Some financial experts hold the opinion that all debt is bad debt. However, if debt helps someone obtain something that solves a need or helps them earn more money long-term (like an auto to get to work or a student loan to progress in a career path), then taking on debt makes a little more sense.
Nothing is redeeming about credit card debt, though. At average monthly interest rates of 15 percent, and plenty of cards charging as high as 25 percent, carrying credit card debt is akin to throwing money away. If you need reassurance as to how stressful bad debt can get, read Freedom Debt Relief reviews, which paint a clear picture of debtors’ mental states before they sought debt settlement.
Rewards Points and Welcome Bonuses Invite You to Spend More
It’s no secret that Americans like to pay with credit. Financial institutions capitalize on this by offering generous welcome bonuses and rewards points or cash back for spending in specific categories. These rewards are advantageous if the bill is paid each month and the rewards don’t entice additional expenditures.
The problem is that most credit card holders just pay the minimum, and countless others spend more to get more back. This results in extra money paid in interest and excessive spending. It also voids the rewards and welcome bonuses that card issuers offer!
We Feel the Spending When We Use Cash
The psychological differences between using plastic and physical tender cannot be overlooked. When we spend with plastic, the total doesn’t feel as real. But when we have to hand over cash, we’re forced to stop and think about the money leaving our hands. Start carrying cash with you and I promise you’ll pause and say no to a few purchases you wouldn’t have thought twice about if you were using a credit card.
Credit Scores Are Only Important If You Want to Borrow (Easily)
Our financial society is designed around the almighty FICO score. Our credit score is pulled for everything from housing and loans to jobs and credit cards. But what many people don’t realize is that not having a credit score isn’t the end of the world, it just makes things a bit more difficult. Difficult, but far from impossible.
When we terminate our lines of credit, we’re no longer easy to judge in a creditor’s mind. But the beauty of electing a cash lifestyle is that you don’t need to be “scorable” to lenders. You might be saying, “but what if I want to buy a house? I can’t afford to pay for it in cash.”
Contrary to popular belief, you don’t need a credit score to get a mortgage. According to Dave Ramsey, you can get a 15-year fixed-rate mortgage from a company that does real underwriting.
The more you can demonstrate your reliability, the better. This includes keeping a record of payments you’ve made on-time over the last few years, as well as showing proof of income over that duration. Additionally, you’ll help yourself even more if you’ve been in your career field for a few years, have a good down payment, no other credit, and aren’t seeking too big of a loan.
The key to building wealth is to avoid debt and be intentional about how every dollar is spent. If you can control your spending, then there’s certainly a case to be made for using credit cards. But if you can’t, or you have doubts on your ability to do so, leave the credit cards and temptations behind. Cash is king and debit cards fill in the gaps when we need to purchase something online. That’s all there is to it.