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Do You Need a Credit Card?

Some things in our culture we rarely question. You go to the grocery store to buy food, you keep your money at a bank, and in your wallet is at least one credit card. Cash is quickly going the way of a land line and laser disk player but should it?

If you’re like me, you pay everything with your credit card. I keep $50 in my wallet to cover purchases at farmers markets, concession stands, and valet tips that come with business lunches. (Florida loves their valets) Short of those types of expenses, everything I buy goes to my credit card but maybe I’m an example of the type of person who relies on their credit card too much.

Credit cards are as controversial in the financial circles as healthcare in the political circles but do we really need a credit card as some people believe or should we go the way of Dave Ramsey who hasn’t given up his love affair with cash?

Dave Ramsey

Dave Ramsey and Suze Orman might be the best known personal finance gurus in the mainstream media. Dave Ramsey is well known for his stance that credit cards are one of the largest wealth destroyers in our daily lives. Articles like this [3] illustrate his old school ways of managing your cash using an envelope system but just because its old school doesn’t make it out of date.

Ramsey believes that using cash to pay expenses makes us more mindful of where our money is going because we physically have to hand it over where credit cards don’t provide that same tactile element. If his hundreds of success stories are any proof, he might be right.

They Don’t Take Cash

I read about Ramsey years ago and as a 20 something I instantly thought of my online purchases where I got a killer deal on Amazon but had to have a credit card for that, and most of my other online purchases. It doesn’t seem like a good idea to pay more for something (plus pay sales tax) when I could use a credit card online and pay less.

Ramsey believes that using a debit card for those purchases makes financial sense but even debit cards allow you to overspend in ways that don’t happen as much when using cash.

What About Building Credit?

A credit card is the only way to build a credit history, right? That’s not true, according to this article [4]. Do you have a gym membership? How about student loans? An apartment? A credit card isn’t the only way to build a credit history and even some prepaid cards report your activity to credit bureaus.

The hard core anti-credit crowd will make waves by asking you this: What are you building credit for, anyway? To buy a car you can’t afford? To purchase a home that is out of your price range? To finance an education? It’s nearly impossible for most Americans to purchase a home by saving money but short of that, they may have a point. In a country where trillions of dollars in collective wealth was lost just four years ago, these people aren’t finding much of an audience but it’s worth reevaluating are thoughts on buying what we can’t actually afford.

Cut and Dry?

I’m one of those who pay their credit card in full every month but it wasn’t always that way and although I have the ability to pay in full, that doesn’t keep me from overspending a lot of months. For people who have financial emergencies in their lives, the credit card may be the only option to make it to the next check.

We might live in the same country but financially, we live in different worlds. Saying that credit cards aren’t a necessity might be too much of a general statement but one thing is clear: Credit cards are a tool and when used responsibly, they can hold financial value. (I love my rewards points) When used irresponsibly, they get the bad name they deserve and even if you’re paying your balance in full, you might still be using your credit irresponsibly.