Do You Really Need A Credit Card?

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I have a very interesting question from a reader this week, John basically described his personal finance snapshot and asked me whether I thought he needed a credit card:

I have a question regarding credit cards. I am a 25 yr old college graduate, I am an actor and work in online advertising. Now I am unique among most of my peers in that 1. I was able to go to a great school and come out in 4 years with out a single student loan and thus no debt. 2. I own a co-op in NYC.

Now I have accomplished this by saving and working hard and also help from my family, but most importantly I have done this with out a credit card. You may be having the same reaction all my other friends seem to have when I disclose this information, “How the hell do you not have a credit card?!?!?!?!” And the only answer I have is that my family also told me it was better to simply save and buy the things I want with the money I have, not use a credit card with money I “might” have and get into debt.

But now I am starting to wonder, have been living in a little financial fantasy world? Do I really need a credit card?

Now, can you guess my response?

I actually wouldn’t react that way, I think a credit card is just like any other tool. If you don’t need a hammer, why get a hammer right? I think that credit cards are great if you can use them responsibly because when you spend money you can get cashback. That cashback, at a minimum 1%, is great but that might not be a good reason if you don’t think you can be responsible with it, you know?

Since you already own a co-op, I think the other main benefit of a credit card, building a credit history, is irrelevant because your
co-op (if you have a mortgage) will handle that.

The only other reason left is whether you have enough cash on hand to deal with sudden emergencies, if so then forget the credit card, you don’t need one.

If I were John though, I’d probably get a card just to have a card for emergencies. You don’t have to use it ever but John seems responsible enough to only pull it out in emergency situations.

What do you all think?

{ 18 comments, please add your thoughts now! }

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18 Responses to “Do You Really Need A Credit Card?”

  1. Ben says:

    If he ever has to travel and rent a car, his life will be much easier with a credit card. The same goes for hotel reservations. Business travel is one of the few areas I’d say an individual would “need” a credit card…

  2. Chris says:

    I agree that business cards are a necessity.

    For personal finance, I don’t think credit cards are necessary at all. They are definitely convenient and I do use one on a regular basis, but I pay it off each month in full…so technically I am still paying “cash” when our monthly budget cycle comes to a close. I think if you “need” a credit card, this implies that you are spending more than what you have in cash, and so you’re using it irresponsibly.

    I know that there are tricks to make some money off of carrying balances, but for the majority of families I think that the only time you should have a credit card is when you don’t really need it.

  3. Bellen says:

    I agree with Dave Ramsey’s take on credit cards. No, you do not need one. For purposes where a credit card is needed, like renting a car, a debit card will suffice.

  4. Chris says:

    Ah, horse spit. I’ve made it ten full years without a card and traveled extensively – both business and personal. It turns out that if you have cash on hand, check cards work just as well, with the same “protection” offered by Visa, etc. Check their website(s)…

  5. Chris says:

    Unless something has changed I do not believe debit cards work the same as credit when securing deposits for rentals, etc. The debit cards withdrawal the money from the account and then must be refunded, and the transactions can take up to a week or more. With a credit card they can secure the deposit without actually putting the amount onto the balance. Is this not the case?

  6. Aimee says:

    He doesn’t need a credit card at all. And for times when you do, you can always use a debit card that has Visa or MC backing (like for renting a car). I have been listening to Dave Ramsey more and read one of his books, and he said that you don’t even need one for a mortgage!!

    Now, the world would have you believe otherwise, but I think that if you can live your life without one, you are going to be so much better off.

  7. Moneymonk says:

    You don’t need a credit card.

    He is doing very well already without one. He manage to buy a co op.

    I would have also told him if he has a nice savings amount, he in fact do not need a credit card.

    Because it all is money. I rather get the money from savings for a sudden emergency than to go into debt.

    This society force you into thinking that you need a credit card for an emergency in reality savings is all you need. Forget the reward points, just another trick.

    I have been living for 10 years without a credit card, I have a house and car. No need to build credit.

  8. Rick Morley says:

    You fanatics are so crazy, how fervent you are defending your positions.

    I think you guys have made your point that one doesn’t *need* a credit card. There is, however, a difference between a need and a good idea. While one doesn’t need a credit card, it can still often be a good idea. All the reasons you state for not having a credit card, such as paying fees and not controlling your spending, are not the fault of the credit card. They are your own fault. I have not paid credit card fees in many years. You just simply read the terms and conditions, and adjust your habits to follow and not pay any fees. If you can’t control your spending, I would look first at yourself, and not the credit cards in your wallet. Besides, if you have a $10,000 checking account to cover the “credit limit”, what’s the difference? You’d still be susceptible to your own overspending habits.

    Someone mentioned that fraud liabilities are the same for credit cards and debit cards. This is not actually true. By law, credit cards have a much lower consumer liability in the case of fraud. In practical terms, however, many banks give their customers a 0 liability in case of fraud. So yes, it’s possible to get these things. But if you can’t even read the terms and conditions to determine the fees, why would you spend the time to determine what you’re liable for in case of fraud.

    So yes, you’re completely correct that you don’t *need* a credit card. But here are all the practical benefits why I choose to use credit cards over debit cards:
    – Generally decreased liability for fraud
    – Rewards, generally between 1% and 5% cashback
    – I earn interest on the float. I use cards with 12 months 0% interest on purchases, so the float can last 11 months before I have to pay it off.

    There are many, many more benefits of using a credit card versus paying in cash or check, but those are just limited to a comparison versus using a debit card. Contrary to people may think, using a credit card is NOT dangerous to your financial future. A credit card is simply a tool. It is no more dangerous than getting into a car and driving across town.

  9. jim says:

    When I said the credit card is useful for an emergency, I meant an emergency that required you to get instant access to money that you didn’t physically have. For example, if you need to buy an airline ticket or something and didn’t have the cash on you, you may not have access to the funds immediately.

  10. Rick Morley says:

    I forgot one more reason why I use credit cards. I frequently get 15% off major purchases by signing up for store credit cards. Sure, this hurts my credit score, but I would be willing to bet that for you followers of Dave Ramsey and his “I love debt score”, having a high credit score is not a huge concern.

  11. Joshua says:

    I use credit cards for everything. If your going to buy groceries, why not get reward points for it, or cash back even? I pay my balance in full each month. Why in god’s name would I not want to be rewarded for shopping, and spending money that I would have spent anyway? I think he should get a card with no fees, that gives rewards i.e. American Express Blue cards. If you are the type of person that can’t control your spending, don’t get a card. If your the type of person that likes to get rewarding for paying you car insurance on a credit card each month in which you would have paid through a check anyway, get a credit card.

  12. Joshua says:

    This article is not about saving money on car insurance. It’s about having a credit card.

  13. plonkee says:

    I agree that it might be a good idea for him to have a credit card. I wouldn’t be without mine for charging business expenses, and I find it comforting to know that I can access money in a real emergency straight away without worrying about how to get it out of my savings account at short notice.

  14. Pat says:

    I had a credit card for 17 years. I decided to get rid of it a year ago after having not used it for over five years. I am not a fanatic Mr. Morley. I have an emergency fund and am able to write a check against it if I need the money right away. I no longer have the need to travel or rent cars and I don’t care about getting “rewarded” for using a credit card.
    Having said all that, I do think that MOST people are better off without one but some people do “need” credit cards for business and travel. The key is knowing how to use them responsibly.
    I honestly don’t think that John needs a credit card.

  15. Khyron says:


    Need: no.

    Duh! Simple eh?

    Now, potentially useful? Yes. Especially if building credit for other purposes is important to you. Such as RE investing or even taking a business loan. A credit card represents credit diversity, which increases your credit score(s) in the various models the bureaus use.

    Are most people better off without them? Yes. Hell, mine is still encased in ice in the freezer. But if I really needed it for some reason, its there. I have the MC and an AmEx. Do I need either? No. Do they have uses? Yes. It all depends on your goals.

    I guess that is lost on people here. *sigh*

  16. Meg says:

    Unless he has 6 months or more of his net income in cash, he should probably have a credit card. He should actually probably have one anyway, even if he doesn’t use it much. No, he doesn’t “need” one, but there are many times when it is easier, preferable, cheaper, or just mandatory that one pay with a credit card rather than cash/debit card.

    Sometimes emergencies come up that cost more than you have in your checking account at any given moment (or savings or whatever). Perhaps you think you can just get a personal loan or HELOC, but those take time–and are not always available in certain market environments. And even if you have stocks or other investments, you pay fees/commissions to sell, and you also might be forced to sell at a loss. Why not just have a credit card on hand to use if you’re short on cash at that moment in time (or if you’re not sure if you are)?

    I have plenty of cash savings (money market fund), but I don’t have a debit card connected to that account. Instead, I use my credit card when I need/want to purchase something that’s not in my monthly budget or if I’m low on cash but I know my paycheck is coming in 2 days. Then I can transfer money from savings at the end of the month to pay the bill before I accrue any interest (assuming I haven’t paid it already with excess in my budget).

  17. FICO Who? says:

    I think if you’ve gotten along without credit cards ( if it ain’t broke why fix it) why start now? Credit cards only get you into trouble and most people are not smart enought to know when to stop using them. Just remember, if you have a credit card and you owe money, they are the first to call you when you miss a pmt!! And you can use your debit (visa/matercard) just like any credit card. Don’t fall in that credit card trap.

  18. Eileen says:

    A credit card is not needed. Also it is NOT A GOOD IDEA, its a very very bad one. Dave Ramsay makes a heck of a lot of sense.

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