dcsimg

Why should I have a credit card at all? What if I never want to use one?

By , CardRatings Contributor

Our credit card articles, reviews and ratings maintain strict editorial integrity; however we may be compensated when you click on or are approved for offers (terms apply) from our partners. How we make money.

Great question. Now that prepaid debit cards give you many of the same features and benefits as credit cards, but without the threat of finance charges, you can make the case for living without credit cards at all. However, I can think of a few reasons why you might want to keep a rewards credit card in your wallet.

Years ago, banking executives complained loudly about consumers who carried their credit cards without running up a monthly balance. Then, personal lending flipped itself upside down. Today, many credit card product managers believe they'll make as much money from transaction charges as they will from late fees and interest payments. That's changed the dynamic for rewards credit cards and cash back credit cards, designed to entice consumers to float their purchases for 20 or 30 days.

Here's why I think you should carry at least one rewards credit card:

  • Purchase protection. Cash, checks, and most debit cards won't help you get your money back when your flight gets cancelled or your new gadget busts. Federal laws and bank policies favor credit card holders in most disputes. Even during a charge-back investigation, it's the bank's money on the line, not yours.
  • Credit report impact. Contrary to popular belief, credit scores don't measure how much debt you're in. They report how well you manage your accounts. If you don't have a credit card to maintain, there's nothing to score. That can cause problems when employers and insurance companies use credit scores to evaluate you for jobs or policies.
  • Rebates and bonuses. Retail industry lobbyists complain about high transaction rates, but there's no indication that making purchasing platforms cheaper will trickle down to the consumer. Cash back credit cards offer discounts of up to 6 percent on purchases you make in person. Stack special rebates of up to 20 percent when you shop from your credit card company's website, and you can enjoy some serious savings.

Depending on your lifestyle and your spending habits, you might even consider a travel rewards card that offers bonus miles, room upgrades, or free baggage check. Just pretend your credit card's a debit card, and set aside the cash you'll need to pay your balance each month. That way, you won't risk running up a pile of debt you can't handle.

2 Comments

  1. Ray August 27, 2012 - 3:17 pm
    I don't have a credit card and I don't want one. It seems like the system is rigged in the favor of credit companies. If you don't let us shave some percentage for your purchases we are going to punish you with a lower credit score. While in reality I am probably more financially sound than most.

    Enjoyed your article though.
      Reply »  
  2. Dan August 27, 2012 - 12:51 pm
    Joe Taylor JR Must work for a bank, or at least earns based off of the industry.

    How can you justify your article. Please tell me where you do your research so that I can avoid the same mistakes.

    Purchase Protection: You get the same rewards and protection as a credit card with most debit cards and dont have to worry about borrowing money from the bank at 10-24% Interest.

    Credit Report Impact: How can you say it is not a rating of your debt? If you have no Debt you have no score, you said so in your article. It is a rating of how well you manage your debt, I will agree to that.

    If you have no debt and you have no credit score, but you have managed your money well, your checking and savings accounts will speak volumes over any possible credit score, add to that a paid off mortgage and no car payment? If you would not hire me, I would'nt work for you anyway.

    Rebates and Bonuses: Just the same as I started out, a majority of the banks offer similar or same rewards programs for the use of the Debit Card. Besides, what good does the reward at 6% do if you are paying 10% or more in the end anyway?
      Reply »  
FIND THE
BEST CARD
FOR YOU
Select Your Credit Score:
(Ok to Guess)
Excellent
(720-850)
Good
(690-719)
Fair
(630-689)
Bad
(350-629)
None/Limited I don't Know

Featured Partner Cards

loading
  How is your credit?
Oops! Your credit does not qualify you for this card. Applying and being rejected for this card could possibly hurt your credit
We are redirecting you to offers you are qualified for based on your credit.
720-850
Excellent
660-719
Good
600-659
Fair
350-599
Poor
X
CardRatings is excited to announce the launch of the
100% Free CardRatings Email Course to Learn How to Maximize Travel Rewards.

Created in partnership with ChooseFI

We partnered with ChooseFI to combine CardRatings’ offer expertise with ChooseFI’s tried and true travel rewards strategies. Get to know ChooseFI: they have changed tens of thousands of lives and recently won Podcast of the Year at FinCon.
You may think you are a rewards travel expert, but rewards strategies are changing (e.g., the days of card churning and manufactured spending are numbered). Learn powerful, sustainable strategies (a couple of which even you die-hard travel experts might not know). You'll be so glad you did.
We're planning more courses for the future; this is just the beginning of our journey.
BROUGHT TO YOU BY: