Do You Really Need a Credit Card?

credit cards vs. cashBy Jill Krasny

Lately a lot of consumers have been asking whether they really need to carry a credit card.

It seems just as easy to get by on cash, and all the identity theft and shady lender practices making headlines aren't reassuring.

Also, the outcry against big banks and practices like debit card fees and swipe fees put off consumers who felt taken advantage of.

We tapped two of our favorite credit experts, Bethy Hardeman of and John Ulzheimer of, to weigh in on the pros and cons of carrying plastic.

Do you really need a card? Here's what they had to say:

Why You Need a Card
  • Travel arrangements. "It's hard to travel with cash all the time," said Ulzheimer. Reserving a room a car rental are tough enough with one and using a debit card instead can be a recipe for theft. There's also a certain kind of relief that comes with knowing you can travel anywhere in the world and still be protected if there's an emergency.
  • Protection and security. You'll get a lot more security with a credit card than you will with cash or a debit card. Once the cash is gone, it's gone. And debit cards, which are linked to your banking account, can easily help a crook to your wallet if the card is lost or stolen. As Ulzheimer pointed out, with a credit card, all it takes is a simple phone call to prevent further loss and identity theft.
  • Financing a home or a car. It's getting tougher and tougher to take out a mortgage these days, and like it or not, lenders will be checking your credit report. If you haven't got a card, there won't be a credit history to speak of, and you'll have a much harder time proving to lenders you're responsible with money.

Why You Don't Need a Card
  • Because you think you should have it. "You shouldn't get one just to get one," said Hardeman, who added that "it's worse to get an auto loan just to get an auto loan. Taking out a lot of debt, even if you have the cash to pay out of pocketm isn't a good idea because you'll likely be paying interest on it."
  • You're not planning to buy a home (or a car). "It's really up for the individual to decide," Hardeman said. "But if at some point you're going to need these things, the credit card is the best way to do it."
  • You impulse shop. "Clearly, if you're irresponsible or undisciplined, you can find yourself getting into a lot of debt quickly unless you can write a big fat check," said Ulzheimer, but "there comes a point in your life where you do need the convenience of plastic."

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I had to get credit cards because I couldn't find a bank that would give me a line of credit for my landscaping business. This site got me approved for a couple of different cards (one for 10 k, and another for 5k):
Moral of the story is, if you are a new business owner, and not just out looking to buy handbags, yes, you have to have credit cards.

August 28 2012 at 9:04 PM Report abuse rate up rate down Reply

Here's my $0.02 - I've studied finance for many years and am now financially independent, but you should certainly do your own research rather than take my (or anyone else's!) word for anything.

A credit card-branded debit card will do everything that a credit card will do - using the same financial network - including up to 2% cash back (try, for example, Perk Street) and fraud protection services. A debit card won't allow you to drift into debt, however, which is a very nice feature.

Building your FICO score so you can buy a depreciating consumer item such as a car on credit is financially inadvisable; depreciating items should *always* be bought with cash, and if you don't have enough cash to buy it, you can't afford it. (Your principle residence is still considered an appreciating asset, despite the past 5 years' troubles, though it's financially beneficial to buy your house with cash if you can.)

Rather than using a credit card for "emergencies", why not save up a few months of expenses and *earn* interest instead of paying it? (Not paying interest looks suspiciously like earning it, by the way.)

Now, using a credit card to rent a car will let you avoid a modest hold on your bank account (usually a couple of hundred dollars - which, with an emergency fund, shouldn't affect you at all), and a high FICO will make it easier to get a mortgage than using traditional manual underwriting, or to rent an apartment with fewer references or a smaller deposit. Insurance rates are sometimes lower with a high FICO. Certain jobs, particularly those that require a security clearance or in the financial industry, may be affected by not having a FICO score (which is bizarre - would you prefer your banker to be a debt-free millionaire or a debt-laden bailout just waiting to happen?).

However, Dr. Thomas Stanley ("The Millionaire Next Door" among other books) found that the second most common trait among self-made millionaires (after extreme integrity) is debt avoidance. If you want to be one, you might consider adopting the strategies that worked for them.

Anyway, just a few random things I've learned that I hope may lead you to some new thoughts about money.

May 28 2012 at 10:12 AM Report abuse rate up rate down Reply

Cards are trouble.

May 28 2012 at 9:56 AM Report abuse rate up rate down Reply

I love my credit card, I need it to rent a car threw alamo. Or to pre-pay for trips, then before I go on them its all paid for. And then that one emergency that you have in between paychecks. I pay off my card every month, and I might leave 25.00 left to pay off ever month, or even sometimes I dont even use it. And its is paid off. I have to credit cards, one is 300 and the other is 500.00 So it is nice to know if something does happened as an emergency I can either fly home or help my parents with something.

If you don't act smart with them just like cash you will never be able to save or even worse you back in debt again...I learned the hard way, early 20s I became in debt, by my 28th b-day I paid it all back.

May 28 2012 at 9:34 AM Report abuse rate up rate down Reply

Just for the record, if your ATM/Debit card has a Visa or Mastercard logo on it, you have the same fraud protection as a "credit card". Had a family member whose debit card number was stolen. The bank notified them immediately of "unusual activity", blocked the card, issued a new one and reversed all fees and charges associated with the episode as well as putting-back all the cash. All this within 48 hrs. Over the years, I've talked with a number of old-timers who went through the Great Depression of the 1930's. They all told me "If you can't pay cash, then you can't afford it."

I used to laugh at this. Now I'm beginning to think they had a point. As long as we depend on bank credit to live our lives, the Banks own us. Also, remember that every time your card is swiped, someone somewhere is tracking you. Who you are, where you are and what you're buying. It is a known fact that credit reporting agencies have lowered credit scores over what someone has bought. Doesn't it seem funny that people who spend so much time and money to stop online spying and tracking on their computers are willing to allow total strangers to monitor their finances ?

May 28 2012 at 1:00 AM Report abuse rate up rate down Reply

Deal in cash, can you be serious? Not establish credit for the time when you will need a new car and can qualify for 0% financing? Or get 1-2% rebates every month on your necessities? I use cash for tips, and hardly anything else.

Of course you need a credit card -- just make sure you pay it off in full every month. So-called "temptation" is not hard to resist. Also, your bill will show you exactly where your money went, to the penny.

May 27 2012 at 10:38 PM Report abuse rate up rate down Reply

The need for your industry serving credit card report is indicative that the public has grown wise. Yes you do need one on occassion but it should be used sparingly.

May 27 2012 at 1:06 PM Report abuse rate up rate down Reply

What about purchases over the internet? I have family all over the United States and when holiday time comes around, for instance, there is no way I can do all the gift purchasing and mailing. One-stop shopping on the internet does it for me, including the mailing. I use one credit card, that's it, so I can easily track the charges on-line, usually pay the bill in full monthly, and anything out of the ordinary I report immediately. That hasn't occurred, however, in at least ten years and it was remedied immediately.

May 26 2012 at 7:44 PM Report abuse rate up rate down Reply

We got rid of all credit cards... now work in cash.... were tired of being robbed by big banks for the "convenience". Cash is traceability for IRS or other money leaches.

May 26 2012 at 1:11 AM Report abuse -1 rate up rate down Reply