My $.02 on credit cards and the credit game

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by Tsh

Tsh is the founder of this blog and is currently traveling around the world with her husband and 3 kids. Her latest book is Notes From a Blue Bike, and believes a passport is one of the world's greatest textbooks.

On Friday, Crystal guest posted about a topic that in the four years of writing Simple Mom, I haven’t dared touch with a ten-foot pole: credit cards.

But she was willing, and I love and share most of her sentiments, so I’m honored that she tackled the somewhat eggshell-walking topic. And after reading the many comments, it sounds like it is indeed a tricky subject.

Those of you who shun credit cards do so vehemently, and sincerely want others to see your perspective. Those who do use credit cards—and pay them off in full each month—might feel the need to justify their perspective. And those who feel up to their ears in credit card debt probably feel uncomfortable saying anything. So they stay silent.

So I thought I’d tiptoe around my opinion on the matter, without going in to too many details.

Why we don’t use credit cards

Unlike Crystal and her family, we formerly used credit cards. And we, too, planned to pay them off in full every month. But then things got tight. So one month, we didn’t. And though we never had a high balance, it felt like it took years to get afloat. Late charges, a high interest rate, and what felt like random extra charges (it’s snowing—let’s ding them with a Snow Fee!) made credit cards a ball and chain, not a useful tool.

We finally paid them off before moving overseas, but it was a miserable experience. It’s no fun watching your hard-earned money pay for things in your past, instead of saving it for the future or expensing your present. Once they were paid off, we closed our accounts (yes, completely closed them), wiped our hands, and never looked back.

Since then, Kyle and I have vowed never to use credit cards again. We’ve been debt-free for over three years, and there’s no feeling like it.

But I pay mine off in full.

I know many people do, and that’s great you can. As Crystal said, I don’t think credit cards are evil. But they are a game, and if you don’t plan your moves extremely well, you could easily lose.

Yes, you can get miles, or cash back, or points, or whatever. But you must believe that credit card companies are in the business of making money. They’re not a charity. They’re not happy when they don’t make money off you. They will find a way to make money. They’ve been known to randomly change payment due dates at any given time, and not warn you in advance. Most are legally allowed.

I know some of you mentioned you’ve had one for 17 years and never had to pay a dime in interest. For me, however, there’s a peace of mind that comes from knowing I’m in control of our money; I haven’t given over the keys to a multi-billion dollar industry. When I pay for something, it simply comes directly out of our bank account, not via a credit company.

When you open yourself to them, they can “get” you financially at any second. There’s so much fine print in credit card agreements—money management shouldn’t be that complicated. It’s not worth it to me to play the game. It’s just not. I’ll collect airline points the good old-fashioned way.


Photo by Manolo for the Home

But what about buying a house?

We’re dealing with this right now, in fact. Kyle and I are in the early stages of looking at fixer-uppers (we still want to live overseas again, so we don’t want a big house), and we’ve already been told by a number of lenders that “we’re screwed” because we don’t have credit scores (one even told us this literally!).

It makes us laugh, really. We have plenty of cash saved, we make decent money (at least, more than enough to afford a fixer-upper), and we’re mocked because we don’t want to play the game. Fine.

But here’s what we’ve found. There are a few lenders out there that still do manual underwriting—they take a long, hard look at your bill-paying history and your overall financial health with a non-traditional credit report. There aren’t many, and you really have to ask around, but they do exist. We’re in the beginning stages of working with them.

We still don’t know the outcome. If the interest rate offered is too high, or if for whatever reason it doesn’t work out, we’ll be fine. We’d honest-to-goodness rather wait to pay 100% cash for a house than to play the game. Really. It’s not worth it to us to open up a few lines of credit only to increase our FICO score. (We paid cash for our vehicle, in case you were mentally asking.)

Crystal’s family did it—they paid for their house with 100% cash. Yes, neither of us are lawyers, like Crystal’s husband (writer and non-profit ministry director, anyone?), but with sacrifice, and patience, it can be done.

How do you pay for hotels, car rentals, and other online stuff?

With our debit cards. Except for a few items in our envelope system, we pay for everything with our debit cards. I’ve never had any problem with an airline ticket, car reservation, hotel stay, or online purchase, both here in the States or in any other country. And I travel a lot.


Photo by Vinoth Chandar

If you use credit cards and feel like you can handle them, and you have peace of mind, then I’m not here to judge. That’s great. I have many wonderful, responsible friends and family members who do. I’m just telling you how we do things in our household.

My purpose in writing this is to give a voice to those of you swimming upstream from the culture like us. There are people out there not willing to play the credit score game. It’s hard, because our world doesn’t function this way. But for me and my family, it’s worth it.

I welcome any comments if you’d like to share what works for you. I won’t, however, tolerate snarkyness or any form of a judgmental attitude. No ad hominem—comments like these will be deleted. But please…. I’d love to hear how you handle credit.

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Comments

  1. Raising hand and saying, “Us, too.” Years ago I mocked those who touted debt-free living… until one month when we couldn’t pay it all off. We were unemployed and 16K in the hole after we added up loans and credit cards. It was a sobering moment. And in the pit, we decided to stop using the credit altogether which “seems” like the crazy time to stop.

    And, like you, it seemed like “forever” to pay it off. 18 months later we had eaten a lot of rice and beans, moved cross-country, had a 6th child, and paid off all our debts, plus an extra $2K acquired in fees. It seems impossible, but it’s not.

    Today we have no debts except a rental prop in our former city. The freedom is indescribable.

    • You said the key word FishMama…Freedom! That’s what it’s all about:)

    • I have been toying with the notion of getting a credit card since I currently don’t have one. Prior to graduating college, I never wanted one because I saw what it did to my parents, but now that I am also in the market for a house I’m worried I may not be able to get one in the time I need too. Unfortunately I can’t pay in full, but I’ve actually calculated that for me and my fiance, buying a small house will be cheaper in the long run than renting, not to mention end up being a source of income when we move as I plan on turning it into a rental property. I know for many people that sounds crazy, but over the course of 5 years, we will end up paying triple what we would for a house if we continue renting (we live in the city) and that includes any needed repairs (my dad is a handy man/home builder so anything small can be fixed quickly and large items will be discounted).

      I’m still flip flopping back and forth. I don’t want to play the game, but if I do, I plan on only putting 1 tank of gas on my card each month and putting the money aside before hand to pay the bill off immediately. It makes me feel a lot better knowing that I don’t HAVE to play and that there are still people willing to take the long route to purchase a home.

      I know a lot of people have the cards for the rewards, but there are debit cards with rewards too. I have a separate checking account through Perks Street (online bank with the BEST debit card rewards program) that I put gas on every week or so, and in the past few months I’ve already been awarded some $20 in rewards and I don’t have to worry about paying it off because its a debit card. This may be a great alternative to those seeking rewards.

      Thank you for your wonderful post. It is very encouraging and comforting at the same time.

      • My husband and I are in the same boat as you guys, except I have a credit card already, and I’ve had it for about 6 years. I don’t put a lot on it because I don’t like “feeling” in debt even for a couple of weeks. But I have noticed a big difference – I have a good credit score, and my husband, who doesn’t have a credit card, does not.

        I do understand it’s a game to make money, but at the same time – for our family – it doesn’t make sense to stay renting an apartment when our house payments (after at least a 20% down payment) would be less. We’re currently in the stages of saving for the down payment, and it will be awhile yet before we get the 20%.

        But, for us, having a credit score just makes sense. We’d be losing more money in the long run staying in a rental. (I also have notifications sent, and I pay our credit card bill the DAY the bill comes out..so there’s no chance a moving due date could sneak up on us.)

        • I agree with you Melanie. I was always hesitant to get a credit card but I have learned that (unfortunately) it’s absolutely necessary to open a few lines of credit to improve my credit score. I have a really hard time imagining myself and my husband saving up 200-400K in cash to buy a house, and in the meanwhile dumping money into a rental place. We currently own a small condo, which i believe is due to my excellent credit score because I’ve had a few credit cards that I pay off in full every month. Credit cards are a fantastic way to build credit while earning cash back points, AS LONG AS you know how to be disciplined and responsible about it. Credit cards must be treated like a debit card. You wouldn’t spend more money than what you actually have in the bank.

    • We have credit cards but are transitioning to a mostly cash budget (with the exception of things like gas where we’re unlikely to overspend). My husband has never had an issue with using credit cards wisely and we’ve never carried a balance since we’ve been married.

      But.

      When I was single I learned my lesson the hard way. I had $8K in credit card debt when I made $11K a year (I do think there’s an argument to be had that I should not have had that much credit available to me but it was ultimately my responsibility rather than Citibank’s). That kind of sucked. And it severely limited choices I could make. It was a feeling of being trapped like none I’ve every experienced. I managed to dig my way out of that hole but I have so much sympathy and respect for those of you who got yourselves in deep when you were married and had children to care for. I can’t imagine what that must have felt like.

      You know how Dave Ramsey talks about the bizarre loyalty people have to the first credit card they get? I’m like that but for a different reason. Although I closed my other 7 accounts I still have the very first card I got. The one with the highest balance at the peak of my debt. I still use it sporadically but haven’t carried a balance on it in nine years now. I hang on to it because I want to remember what it felt like to have it charged up. But I’ve been thinking about closing the account to finally close the door on that part of my life.

      So yes, I think there is a very strong argument for no credit cards at all.

  2. One thing to keep in mind– credit card companies charge merchants a fee for the privilege of letting the merchant accept your credit card. That’s why some business owners will give you a discount for paying in real cash, they save a little money (or break even).

    We have a credit card and use it for large purchases and then transfer the money to an earmarked account waiting for the bill to come due. We get cash back rewards.

    I also see how we could be overspending by doing it this way. You can’t overspend if you are paying cash, but it’s easier if you are swiping debit or credit.

  3. Oh and our due date changes at whim! If we didn’t earmark the money, we could potentially overspend from our debit account and have to tap savings to cover the bill. Not cool.

    I do think we will keep our card, but we have to be very mindful.

    • That is so weird. I don’t recall our due dates changing on us – or at least not drastically to cause us problems. ?? It’s usually not the same exact date each month due to longer or shorter months, or holidays, etc.
      I’m curious now – and will have to watch my bills and see. :)

    • Our due date always changes too, always between the 12th-16th, and often its on a weekend date. I’ve paid late because of that quite a few times. Always a disappointment to realize that since I usually pay the balance at the end of the month. :(

  4. My husband and I live by the ‘pay up front’ rule, but we do use credit cards as well. We have one credit card with a fairly low limit that we use for reserving things on the phone and online. We’ve asked the credit card company to keep our limit low because I think it will minimize our liability. We each have a second credit card because we’d always had one, frankly. However, we seldom use them and if we do, we pay them off immediately, not even waiting for the billing date. In other words, we treat them as cash.

    I have been in debt before (my first husband was an emotional spender) and I have to say that the way we live now is much less stressful. It took a lot of commitment for me to get out of debt. I totalled up my minimum monthly payments for the various debts, and made myself two promises. First, I committed to paying that amount every month no matter what, and second, I wouldn’t incur more debt. When one card was paid off, I transferred the amount I was paying on it to another card, which had the effect of paying that one off faster. I always paid the same amount every month. It took time, but it worked. Then, since I was used to paying that amount, when I was free, I put it into savings. The amount of money that I had been putting towards past purchases was now going into future purchases (I got this idea from a website years ago, but I regret that I cannot remember what it was called).

    Times are difficult, I know. I just wanted to share what worked for me.

    • Your method is exactly what we are doing to pay off our debt. My fiance does have a credit card (unfortunately he had to get one due to extraneous circumstances well before we met) and it is the next thing we are paying off. We should have it paid off in June and once its paid, all of the money we are using for its payment is going to the next item in our list. I’m hoping in 5 years, we’ll be almost entirely debt free!

  5. We are cash only over here too! It’s been about 2 years now and for me I have personally regained the awareness of the value of my dollar. It was too easy to get caught up in things when everything wether a pack of gum or a new vacuum could just be purchased with a swipe! That’s just what is working for us and where we are at!

  6. Interesting! I had never thought of this perspective. My husband and I have never used credit cards except to get the miles, we pay any balance in full as soon as we get the statement and to us it is just a game (to get a good credit score! :D), but I never realized the temptation one might face just by having the credit at their disposal. Thank you! I will be careful not to advise others to even play that game if they might be tempted.

    • For us, it’s not about temptation (though I know it could be with some people). It’s simply a matter of not wanting to play the game of “borrowing” money (even if it is just for a day, or until we paid the credit card) because we don’t like the risk involved. We simply don’t like leaving ourselves open to credit companies like that. After being in debt, I would be incredibly surprised if we ever used credit cards again, even if we had them. The temptation is just not there. :)

      • What a great approach and perspective!

      • We do have one card that we use for travel or other large purchases, but literally turn right around and transfer the money as soon as the purchase pops up on our statement.

        I think what happened for us was that we finally started seeing our money in a different way. Even when we put a purchase on the card, we must have that money earmarked somewhere. We don’t make a purchase on the card and just “know” the money will be there at the end of the month, it must be there before we even make the purchase. We just see our money as ours in our pocket, not as a tool to be used, not as a way to possibly generate more income, just to be used for what we need. It took us a long time to come to this conclusion, but we got there.

        I totally get the argument that people use cards for cash back or rewards, but I would love to see a side by side comparison of what someone would spend in a month with a card versus what they would spend with cash. For our family, I can guarantee you it would be more with the card.

        Two other reasons we don’t use them: I’m in charge of our budget for the most part and paying with cash is just simpler. I don’t have to worry about missing a due date or forgetting to pay something. Plus, as the 2nd reason, I HATE paying for things that we already have and have been using. It feels like wasted money.

        Great post, by the way. I’ve seen this “argument” come up a lot lately. I’m assuming because so many people are trying to get their finances in order for the new year? People are definitely one way or the other about it, I’ve noticed.

  7. Fascinating! I hate debt and we’ve never had credit card debt (only buying houses in expensive-cities-we-live-in debt), but this post opened my eyes to the potential pitfalls of using credit cards. I am scratching my head over why I hadn’t considered using only our bank debit card for local purchases. At the same time I can say we are very happy that we have an American credit card with American billing address for those purchases that require one, like one of my daughter’s online homeschooling courses.

    • I’m guessing you live overseas? Before we moved overseas, we simply called our bank to let them know we would be living there, so they wouldn’t be concerned when they saw purchases from there. We never had one issue using our debit card. :)

  8. I can totally see why you’ve chosen to not have credit cards; you make a compelling case. With that said, my husband and I do have peace about having a cc and paying it off monthly. Part of that is that neither he nor I have ever had credit card debt and both have a highly frugal gene in us, which limits are spending. And I do like getting cash back for purchases. But mostly I think we have them b/c we have historically lived in very high cost-of-living areas and paying for a house upfront would never have been an option for us. (Prices routinely were ~$650K for 1200sf. No, that wasn’t a fixer, but it would likely have been >=450K for that. Things are lower now that the real estate bubble burst, but they still aren’t easy. I think renting for the number of years it would have taken to build that house nest egg would have made it somewhat prohibitive for us, although I never did run those numbers.) Regardless, though, managing money and teaching our kids how to do so is really important to us, so I appreciate your thoughts!

    • ooh, that was supposed to be “limits our spending”. ah, proofing.

      • Excellent points—I do think you have to consider the cost of living where you are; in some cases, it’s not reasonable to save up 100% for a house. If that were the case for us (and who knows, it might be one day), we might reconsider. Sounds like you’re doing a good job with yours!

  9. Hmmm – food for thought!

    We keep our credit cards (two) … with what we feel is good reason … but I could definitely question the sanity.

    One is in MY name, so that I have individual credit all by my lonesome … just to protect myself. The other is in both of our names and we feel it protects us a bit having a U.S. address (since we live overseas and don’t own a home in the States). We don’t have a checking/savings account that attaches to an address either, so …. it just felt like the smart thing to do.

    We have had horrible, scary moments where we let balances get out of hand, but are comfortably paying everything off each month on both …

    Thanks for the reminder to keep ourselves in check!

  10. My husband and I are debt-free of credit cards, car loan, school loans, etc…the only debts we have are our mortgages (in addition to our primary residence, we own rental property w/positive cash flow).

    We do have 1 credit card, that we pay off every month, for a number of reasons:
    – We can easily track our purchases to see spending trend.
    – Better accountability between my husband and I with what we agree to spend our money on.
    – I actually spend more w/cash on small incidental purchases
    (ie. I would withdrawal money for gas, and spend the extra couple bucks on who knows what).
    – Easier to lose or misplace actual cash (how many times have you gone through old purses or jeans to find money you had forgotten about?)
    – Having great FICO scores, the current economic downturn has saved us TREMENDOUS amount of money being able to re-finance our mortages at such low interest rates!
    – And with having our rental properties, it gives us peace of mind.

    Shortly after we bought our triplex in Portland, we wound up having to re-rent all 3 units at the same time with MAJOR repairs needed that security deposits didn’t begin to cover: new appliances throughout all units, carpet, doors, drywall repair, painting, etc. We bought a great triplex at a discount (but inherited really bad tenants). Even with my husband doing 95% of the work saving us a TON in labor costs, we still quickly blew through our emergency savings and had to use our credit card to complete repairs to get our units re-rented asap. We both worked 2nd jobs for a year (I worked in SW Sales full-time and took an evening babysitting job, and my husband is a Computer Programmer full-time and took an evening/weekend job at Target) to pay off the balance asap. I always complete thorough tenant screening, so have had minimal issues with any of the tenants I’ve selected – thank goodness!

    We are now working on accelerated payment/debt snowball for our mortgages and recently paid off one of our mortgages (applying the amount we paid to the next in line).

    It’s definitely a great feeling to be debt-free, and can’t wait till we completely are!

    • Thanks for sharing! One thing I would add, more for other readers out there than anything, is that one of the reasons Kyle and I prefer our debit cards over cash is for the same reason—instant online tracking and accountability with each other. We can do this with our banking, and it’s tremendously helpful. In fact, there are many budgeting software programs that will automatically download any transactions from the previous 24 hours in your account and label them with categories you’ve created. It’s pretty great.

      So, I just wanted to say that you can do the same thing with debit cards. :) And in fact, in almost all ways, debit cards behave similarly to credit cards in their transactions. It’s just a matter of where the money comes from.

      • Mind if I ask what budgeting software you prefer? Any advice on apps that help would also be greatly appreciated. We are a family with young children, and trying to get organized about getting our of debt and save for a home. We have my husbands school loans and a good amount of medical bills, so I have been looking into as many ways to save as possible! Thanks

      • I actually LOVE using my credit cards! :) But – I am one of those weird people who loved saving, counting money, doing budgets, telling my family “no” to some purchases (ok – I didn’t love doing that), not getting into debt, and would meticulously hunt for hours for that missing penny in my budget if it was “off”. :)
        I have used Quicken for years and years – using it like the envelope or category method I first used after digesting my Larry Burkett Bible! :) (yes – i used to do it all on paper, adding, subtracting, etc – even did our taxes by hand for years – till I agreed to spend the extra money to try out this “great software” everyone said made doing taxes easier. WOW! I was done in 2 hours – instead of 2 weeks! Haven’t gone back to doing it by hand ever since!)
        I have my Quicken set up so that I know how much I have in each category (like an envelope – put money in and take it out) – and I automatically download the CC transactions for the day/week as I spend them . . . just like a checking account – and they come out of the categories. This way I can see exactly how much I have left to spend for the month (even though the CC statement hasn’t come in yet and my checking account technically says I have a lot of money in it. :) ). We pay off our CC bills each month to avoid any late fees or finance charges.
        By using CC’s this last year – I was able to get $200 off a free airline ticket (could have used the points I also got for a free ticket – but wanted to save the points towards an anniversary trip this year instead), plus around $1000 in gift cards throughout the year (AWESOME for C-mas and b-days)!
        I have always been a cash-only gal – only buying things when I actually had the money for them. My hubby would be a “buy-what-you-need-when-you-need-it-and-figure-out-the-payment-of-it-later” kind of guy if I let him. :) (Occasionally I have – and he’s felt the effect. No fun.)

        So I totally appreciate your story – what works for you – and what has helped you and your family live in financial peace! Thank you for sharing! I love hearing how other people do things . . . being happy with our own methods – but always open and willing to find something new that might work better! :)

        Abundant blessings!
        L :)

        • oops -obviously I didn’t mean $200 off a “FREE” airline ticket! :) $200 of an airline ticket – and enough points to get another FREE one later! :)

          Oh – we also, actually used our CC with our initial adoption costs. Somehow I got an offer from my CC to get a cash advance with absolutely no fees (I’ve never seen another offer like this again – no transaction fees) and 0% interest for a year. I cashed out the whole amount I could ($10k) and put it in a money market account that would bear interest (the rates were a little better than now . . . but not a whole lot). (It was like getting a free loan) I paid a little on it each month from the 10k I borrowed. This helped us until we got our tax refunds and some other money back to pay the rest off.
          For someone who isn’t as anal and careful about keeping track of things like that as I was then – I would never advise this . . . but it worked for us at that time. I made a little extra interest on it in the MM – so that went towards our adoption as well.
          I would say that was my most “riskiest” thing I’ve done with our CC’s – but it was a God-send at the time when we needed it! :)

      • I fully agree with you on these points, except in the event that card gets “skimmed” and fraudulent charges come out of your DEBIT account, rather than on a credit card when it wasn’t your money anyway. My husband and I have been living on cash and paying down debt for the last year. My debit card was skimmed and over $4000 of fraudulent charges were attempted. Recouping everything has been a nightmare. I will be going back to using cash as much as possible!

    • You said:
      “- I actually spend more w/cash on small incidental purchases
      (ie. I would withdrawal money for gas, and spend the extra couple bucks on who knows what).
      – Easier to lose or misplace actual cash (how many times have you gone through old purses or jeans to find money you had forgotten about?)”

      and I say YES YES YES YES YES YES YES!!!

      I actually spend more when I have cash on me and prefer to use the credit card all the time.

      Besides, I thought I heard that merchants pay more for debit transactions than credit transactions. Is that true?

      • I just wanted to chime and say the same thing! If I have cash, it will get spent, not on good things. We too use credit cards and we are really working to be more frugal about our money.

        • I’m relieved to read I’m not the only one who spends those small bills on too many “incidentals”! I thought I must be the only one…because supposedly cash is “more painful” to use but for me, it’s actually not. Or at least not when it’s $1s and $5s…the grocery store or thrift shops see too much of those from me, and then when I have to pay for a haircut or tank of gas I’m a little short. It’s not bad and I’m still spending cash and never credit, at least, but it does happen often. I’m still going to keep using cash, however. Credit cards are disastrous for my husband and me.

          • This was me exactly. Now we use a debit card for pretty much all purchases. It helps me because I know I’ll have to see that transaction (and my husband will too) and find a place to put it in our budget. Credit cards are disastrous for me too, but debit cards are a budget-saver!

      • When you are on a 100% cash system, cash is no longer treated like “blow money.” That’s a common objection to the cash system – “If I have cash on me, it’s basically already spent!” But things totally change when you’ve got the envelopes and cash is your ONLY option, and when it’s gone it’s gone. Your mindset on cash shifts, but only if that’s truly all you’re using. Otherwise, yes, cash will always be just “blow money.”

  11. I keep credit cards for one main reason – travel. We paid almost everything off and tried not using them – so much so that I didn’t even carry them. I went to a conference in San Diego last year and was floored when I went to rent a car and had to put down a $700 deposit because I had a debit card and not a credit card. I also then had to pay for the hotel room with my debit card, even though it was being paid for by my sponsor – to cover incidentals. It took a whopping $2400 to cover this because I was using a debit card and not a credit card. It took weeks to recover these deposits. While this didn’t break me, the thought of having this much money in limbo made me nervous. Since that trip, I now carry a credit card when I travel.

    I am however annoyed because we used to each have a personal credit card and one joint card but they closed by husbands personal for non use. No explanation, no letter, nothing. He had it for over 7 years but since he didn’t use it for a year they closed it. Since then we have tried to use ours atleast once every few months and pay it off.

    • I just wanted to reiterate this person. Unfortunately a credit card is essential for travel (if you do it a lot). I travel about every other week for my job. Many times I add on a personal excursion/trip. I walked down the long line of car rental places, stopping at each one and letting them run my bank card and was denied each time. (I had over 5K in the bank.) I was just sobbing but the 5th place I got to because I had no idea how I was going to get to my cousins wedding! (They finally accepted my debit card…some no-name car rental company.) If I had a credit card, it would have worked at any of those places.

      I just recently stayed at a hotel where the incidentals were $400 from my bank card! It went back in to my bank a few days later but still!

      So for that reason, we keep 1 cc.

      • This happened to me, too, so the next time I traveled I did some research upfront and found a rental car company (National) that accepts debit cards. As long as you have proof of your round-trip airline ticket, you are good to go. I carry a printout of my airline itinerary with me when I travel anyway, so I didn’t need to do anything extra.

  12. we are in the midst of getting out of debt, and i really loved reading crystal’s post. it was very encouraging, because we cannot wait until we get to that point. like you, we used to be able to pay our credit card in full, but then i lost my job (this was over 10 years ago) and we could no longer pay our balance in full. the debt piled up (in addition to a car loan along with a couple of other little credit cards we had) and it’s been an uphill battle to try and stay afloat. but we are making headway, and once we are debt free we will never, ever open another credit card again. ever.

    i agree with you on the debit card use. with airline tickets, hotels, etc. a debit card is pretty much like a credit card, except the money comes directly out of your account.

    this is a great post. thanks for sharing your perspective. we cannot wait to get to the finish line :).

  13. avatar
    Lindsay Sledge says:

    We have one cc with a $1000 limit. We are paying it off with our income tax and cancelling it. It is too easy for me to rely on it being there. We have said it was just for emergencies and then before you know it we are going out to eat becuase we are broke and so on. I will feel much better knowing we don’t owe someone money.

  14. Interesting post – while we use our credit cards responsibly, there have been times where it’s been harder to pay off those balances and it would have been much easier to just pay by cash. I will say that I totally admire your philosophy on staying out of debt though – I couldn’t agree more!

  15. That’s a good point about debit cards providing all the downloadable budget data that a credit card can provide.

    Regarding credit scores, NPR mentioned the other day that Suze Orman is teaming up with one of the credit bureaus (TransUnion?) in a pilot project to use debit card data to build an automated credit score.

  16. We’ve just paid off a very large amount of debt, some of which was credit card debt. We continue to use our cards very sparingly. Mostly for travel and online purchases.

    We pay for most of our purchases using a cash back debit card. I love having the $$ come directly from our checking account while still earning cash back.

  17. Just popping in to say, we are a credit card free family too!! We have been since we went jumped on to the Dave Ramsey bandwagon in 2007. 18 months of stringent living and hard work, we paid of our cc debt, student loans, and car payment. It was hard and we looked weird, but life is so much easier to live without those extra Payments in it. Instead we can do this crazy thing called *saving*, which frees us from the future possibility of debt even more.

  18. Tsh, I 100% agree with you!! It just took one 6 month unemployment scare for us to learn our lesson. Now we are Dave Ramsey baby step followers and have total peace of mind.

  19. So funny you write about this. I just saw a thing about Susie Ormand(sp*) creating her own style of debit card and hopes for a movement that cash and debit cards will count towards your FICO in the next couple years, which makes total sense.

    • Yes, I heard about it, too! It totally makes sense.

    • I heard the same story on Marketplace (NPR) and I have to say I really wonder what kind of fees will be charged on the Suze-branded card. It sounds like she’s touting how fees are openly disclosed on “her” card, but I do wonder just what fees, how much, etc. The fact is, she’s probably not doing this out of the goodness of her heart, though it may be more well-intended than many similar products–like any financial product, there is money to be made…

  20. We have a credit card that we pay off in full every month. We live overseas currently, so we use it to make necessary purchases in the US. Where we live now is very much a cash-based society, so for us debt isn’t as much of a concern. We have tried applying for a credit card, but were declined for two reasons: 1) We don’t make enough money, and 2) we don’t spend enough money. Ironic, huh? Compared to the US where we get credit card offers left and right that say we’re “qualified” for a new credit card. Most things in this country we can use our debit cards for, so that makes up for it!

    • I should also add that my hubby checks our accounts dutifully 2 or 3 times a month… including our credit card to see where we’re at with the budget to make certain we’re not overspending. :) He also has automated payments set up on our credit card so it goes through whether we like it or not!

      • Just curious—are you not able to make your US-based purchases on your debit card? I know transactions work differently in different countries, but we were always able to make debit card purchases on online American-based sites.

        And that is very funny about not qualifying for a credit card there! :) In the US, children and dogs get credit card offers…

        • Tsh, I don’t think it’s necessarily a location-based question so much as a bank or credit card company’s policy. One of our US cards is ALWAYS blocked in Germany no matter what (even when our address is a German one)… unless we call them. Other cards haven’t been an issue.

  21. I should also note that I worked two part time jobs during that unemployment to keep us from having to add to our credit balance. It was the amount we paid off each month (that we no longer could do ) that was the problem. BTW- we are in the process of looking for a 15 year mortgage. Another great way to manage the house vs debt issue!!

  22. We have 2 credit cards in our family. One which we use to purchase most everything on for the airline points we get. For us, we have created a routine of not only paying the balance every month, but transferring the money throughout the month as we use the card, to avoid paying any late charges. And we haven’t. But we also know we aren’t the norm. We personally play the game because it suits our personalities.

    And for us (and not everyone) the pay off has been worth it. We were able to travel overseas twice in business class for free and once took our family to Disney for free.

    BUT this doesn’t work for everyone and we have lots of friends and family members who it doesn’t work for. We are diligent about debt, don’t buy things on whim and only have two debts (house and one car). If we know we don’t have extra money that pay, we don’t buy more than our grocery and bill allotment.

    The key to debt I think is figure out what works for your family.

  23. My husband and I don’t have credit cards, but we didn’t have any problems buying a house. We both had very good credit scores simply from paying bills on time, etc. Not sure how that worked out, but it was nice!

    • Fascinating! For us, it’s not that our credit scores are bad, it’s that…. we hardly have credit scores. It’s almost like we don’t exist according to the credit bureaus…

      • My brother was like this, too. Never had a credit card, lived with roommates after college (so didn’t have a lot of billing history), and drove an old car that never had a loan. When he went to buy a condo, he was in a mess. He ended up opening up a credit card and putting everything on it for 3-6 months (always paying in full), just to establish credit and get a good interest rate on the mortgage.

        Clearly he had to play the game – and he was super annoyed by it – but it worked out for him because he’s so incredibly frugal and conscientious. I think he canceled the card after securing the loan!

  24. I really appreciate your opinion on this, Tsh. We used to have a nagging amount of credit card debt, and I don’t have to tell you how liberating it was to finally pay it off. We did not cancel our cards after that, we just let them sit for a while as we continued to shore up our finances. Now that we feel (slightly) more secure, we use one credit card for large purchases in order to gather “points” but we always pay it off immediately. As in, the money necessary to pay for any purchase is always sitting in our checking account and we immediately transfer it over to the credit card account. It takes a lot of discipline to do that, but we feel capable at this point. We’ve learned that if we don’t have the cash on hand, then we can’t really afford it. We recently saved for and bought a car with cash, and that was an awesome feeling. Would love to do the same thing for a house!

  25. avatar
    Jennifer Ott says:

    Funny; we have no credit cards, although my husband did before we were married, but we’ve bought 2 houses with no problems. Similarly to another comment, we’ve always payed bills on time, etc. Now, our houses were inexpensive ones, but we even had multiple lending agencies offering us loans. And we were recently approved for another mortgage. It can be done!

  26. My husband and I are 23 & have been married for 3 years…we paid cash for both of our college degrees to avoid school debt and cash for both of our cars. However, two years ago we decided we wanted to start the house-buying process and the rate for two young people who had NO credit history and hardly any bill-paying history was outrageous. The house we wanted was a foreclosure we could live in indefinitely that we were getting for half its appraised value and the mortgage payment would be MUCH less than the rent we were paying. It was a good financial decision even though we would be using all our savings and would need to boost our credit score. We both got a credit card and use it to pay for our monthly gas and groceries only. We pay it off the day after use without waiting for a bill [yay modern online ways of paying!]. It enabled us to get the house and get a 2.5% interest rate.

    While staying away from credit cards totally and having no credit may work for some…for a young couple who is trying to set up a life and live within their means that just isn’t wise I don’t think, you limit yourself too much and the interest rates you would get for home-buying would be absurd. I think you can play the game backwards on the credit card company. Waiting for a billing statement and date is SO outdated…our credit card account is linked to our bank account and we log in and see our savings account, mortgage, debit account and credit card all in one. And we can transfer money straight from our debit account instantly to any other account. We spend $75 on groceries…we pay it onto the card the next day. We never have a statement with any amount ON it.

    Just a thought…there’s a way to work the system to your advantage and not as you say, get played by it. Thanks! I love your blog and books!

    • Thanks for sharing your experience, Emily!

    • This is the exact scenario for my son. He has had no student debt at all, but he cannot get that first credit card because he has no credit score/history. He has been working for quite a while and paying off all of his bills each month (and makes a very good salary). Can I ask from whom did you get your first credit card?

  27. avatar
    Heather in Oregon says:

    We too has a fairly low balance cc for a number of years. And then we had kids and my husband got laid off and that balance, which had never gone beyond our ability to pay it off in one to two months, was suddenly far more than we could pay all at once. Prior to my husband getting laid off we had also bought an almost new car that was well within our ability to pay for when he had the job he had at the time but not so much after being laid off. This of course meant that we ended up paying the minimum balance on the cc so that we didn’t lose the car. Long story short, we suddenly had far more debt that we had ever envisioned. And then they doubled the interest rate on the card with not even a month’s warning. In the interim my husband had found a new job but it didn’t come close to being able to pay the debt off quickly. The next tax refund we got went to paying off the card in full and then we closed it out. The next year my mom helped us pay off the car so that we could start looking for a house. We found a house within what we felt were our means (the bank was willing to lend us over $35,000 more) and with the new home buyer tax credit we received we paid my mother back for what she paid on the car. These days our only debts are my student loans and our mortgage and that’s the way it’s going to stay. We pay cash for everything and I track our spending very closely. I just feel like it’s too easy to get trapped in the debt cycle with credit cards and I also don’t want the card companies to have access to us.

  28. Finally, we can say that we use our joint credit card as cash. As soon as a purchase is made, we pay it off soon as it is seen online (a day or so later)—as the item is already budgeted for and the money has already been set aside. We NEVER wait until the month end! Those balances are kept at zero.

    It took us 6 years to get to this point with many mistakes made. The only debt we have now is our mortgage and car.

    Unfortunately, we don’t have debit cards like you do in the US here in Canada :-( Or else we would absolutely be using those instead!

    We are not tempted to overspend on our cards due to that being are huge problem in the past and the fact that now we are on one income, we simply can’t afford any debt! Or else we can’t afford me to be a SAHM! If that doesn’t keep you on track, nothing does. And checking the budget. Daily.

    All hail budgeting! And finally, thankfully, getting it right.

    • Just FYI, Sarah, Melissa (in the comments below) weighed her $.02 about debit cards in Canada, in case you want to read, and in case you’re receiving replies to your comment via email.

  29. “Amen Tsh!!!” I kept saying while reading your post. I couldn’t agree more. Every point you made is spot one. It is a all a big game! I LOVED when you said that credit card companies aren’t charities. So true! Thank you for this article. Btw…you didn’t tip toe around the topic…you pretty much laid it all out there:) And I loved it!

    • Aw… thanks! I appreciate it. Yeah, I guess in the end I didn’t tiptoe, didn’t I? I just want to go out of my way to make sure I’m not sounding preachy or like I’m out to make people feel guilty. I really want to make sure readers understand I’m only sharing what works for us, and to give a slightly stronger voice to one in the minority, culturally-speaking. :)

  30. We’re debt-free and have always lived this way. I wholeheartedly support whatever rules or plans people choose to take to set themselves free (from debt, senseless consumerism, keeping up with the status quo….).

    Because we’ve always lived within our means, we regard both credit cards and debit cards the same way: useful tools for exchanging money–always planned and within our budget–and using money we have already earned. However, both of these tools do pay “The Man” since a fee is taken from the vendor on every transaction. Credit card interest and overdraft fees are his gravy.

    It breaks my heart to see struggling families and individuals pay senseless interest and banking fees.

    I hope more readers will take inspiration from you. Financial security is golden in this shaky world.

    PS: I recently listened to all of your podcasts on iTunes while doing a major home project. I loved all of them and look forward to more.

  31. @Sarah in Canada who wrote “Unfortunately, we don’t have debit cards like you do in the US here in Canada Or else we would absolutely be using those instead!”

    I’m pretty sure Tsh is referring to a bank (or credit union) debit card (Interac) which have been available in Canada for many years and are required for you to have an account so you certainly already have one, no?

  32. We are about 1/2 way through paying off some HUGE debts. And we have not used our credit cards (even though we still have some) in over a year, except for when we have needed to travel.

    And I agree, that you CAN pay debit for travel expenses. But people should know that rental cars and hotels (and even buying gas, if you select debit) put an extra “hold” on a certain amount of money when you use debit. And the hold more if you use debit than credit. For some hotels it is a small amount for others it can be $100/night. The hold is released at some point. But, these holds do tie up money in your checking account. This might not be a big deal for some, but for us, as we are working hard to get out of debt, there is not a lot of “extra” to be able to afford holds like that.

    One could probably make the point that if we have this much debt then we shouldn’t be traveling, but there are unavoidable types of traveling that has to be done, sometimes (work, family illness & funerals when you live far away from your family, etc…).

    • That is true, yes, so thanks for pointing that out. When we travel, we make sure we have a little extra in our account for that very reason. Totally annoying, but it’s still worth it to us.

  33. My husband and I are in our 60’s…. I’m so encouraged to see young people who are understanding the value of paying cash. It does require delayed gratification and patience, things that seem to be missing in our culture. Nothing will take away your freedom like debt, and nothing will produce wealth like cash, which enables generosity and the ability to be a blessing to those who genuinely need help.

  34. Thanks for your article. I do use credit cards, but strictly for emergencies only, I agree that getting into debt is a terrible thing, it’s so hard to get back out, but I have found it useful to have a backup every now and then.

    One tip I heard years ago about having a credit card was to put it in a bowl of water then freeze the bowl. The theory is by the time the water has defrosted you’ve had time to think about whether you really need that new thing. Of course you could get desperate and put it in the microwave, and if you melt your card in the process you definitely won’t be spending on it! :)

  35. I’m right there with you Tsh! We are currently digging out from our Credit card debt and I can say whole heartedly that we will never go back to using credit cards! The convenience that creditcards offer is not worth the added stress and financial burden they can cause if you miss a payment, get behind or lose your job and really can’t pay it off!

    For us it was a discipline issue and we know it. Some may have better luck playing the credit card game but for us it’s a big “Don’t go there!”

  36. We have a credit card which we pay off in full every month, but earn cash back on. In the six years I’ve had it I was a day late on the payment one time, and earned a $36 fee. But, in that same six years, I’ve gotten about $650 back in cash. The trade-off is worth it to me!

    • If you’re just a day late the next time, I suggest calling your credit card company and asking if they can drop the charges. My husband has done that 3-4 times in the past 7 years and they’ve removed the late fee every time!

  37. “with sacrifice, and patience, it can be done” YES! although “sacrifice” and “patience” don’t seem to be part of American values anymore. I understand that many people use credit responsibly, playing the game well, paying off their debts each month. But I’d be willing to bet that a much greater majority of people use credit just like I did 10 years ago, with a mindset of “i want it now and I deserve it so I’m gonna get it and figure out how to pay for it later”. And you can bet that it’s THESE people that the creditors are counting on to pay their big annual bonuses. Those of us that shun credit or those that use it wisely can try to give wise council to others until we are blue in the face but in the end each person will decide for themself how to play this dangerous game. And some (like me) will have to make big mistakes and learn hard lessons before they decide to take the path of “sacrifice and patience”. Great Discussion!

  38. Just a note of encouragement! I am 27 with 4 kids and my husband and I needed a place to stay in October, since I am a stay at home mom with no income, and my husband was unemployed ( he just separated from the Air Force), we could not get a mortgage or most rental places don’t even want you to rent with no income! They didn’t care that we paid off all of our debt and had a considerable amount in savings, but God provided and we paid cash for our fist home last October! If the Lord provided a home for us with no income than Paying cash for a home can most definitely be done even in 2012 for your family!

  39. We too have struggled with the battle to pay them off…and with lots of work…we will never go back!
    http://www.alighterjourney.com/2012/01/21/staying-at-home-made-possible-by-a-budget-part-2/

  40. I have always been considered frugal, but the statistics say that with a credit card you are likely to spend 1/3 more than you would otherwise. So even though I spend less than some might, I STILL spend 1/3 more. A recent review of my last 5 month’s spending habits reveal this to be true–and probably true for each card I hold! It was a scary realization. Yes, I’ve paid off my cards each month, and really enjoyed the idea that I can buy stuff on Amazon with my points, but the number crunching I did and this article have given me the incentive to stop playing the game and start living entirely within my means, month to month. Thanks for braving the subject!

  41. My husband and I had credit cards when we were both working and we kept them under control until I had our first child and started staying home and then my husband, who was a car salesman for Chevrolet, quit making as much money because of the economy and then eventually lost his job altogether. Thinking that “things will be better next month” we used the credit cards to help pay a few bills until it go to be so much that we couldn’t even make our minimum payments any more. My husband ended up going back to school and so for 2 1/2 years we were barely surviving and didn’t make a single credit card payment. So now we are forced to live with bad credit and we can’t get credit cards any more and we have to pay cash for everything or live without. We can’t wait to get out of all the bad debt we incurred and be free from credit cards for forever. If you pay cash for everything then it doesn’t matter if you have good credit or bad credit. You never know what tomorrow will bring. You might charge a large amount to your credit card with the cash in your account to pay it and then lose your job and all of a sudden need that cash to live off of, not knowing when you’ll have income again, then you end up paying a ton of interest on that credit card that was suppose to be paid off at the end of the month.

  42. I just paid off my credit card balance (woohoo!), now we’ll start working on my husband’s balance which shouldn’t take very long. I totally agree with your rationale for staying away from them, Tsh. Hopefully, we’ll be able to say good-bye to credit cards as we move forward.

    However, I wanted to weigh in on what you said about home buying. Yes, buying a house with 100% cash sounds extreme, but our experiences the last few years have convinced me it should be the standard, not the exception. We bought a house–a fixer-upper–long before we were financially ready, but it seemed like a better option then “throwing our money away” by renting.

    But as it turned out, the expenses ate us alive–got us into cc debt, prevented us from saving anything meaningful, and kept us in a town years longer than we wanted. And the home improvement projects were very modest by HGTV standards (new paint, backyard fence, new windows, new kitchen cabinets and flooring, new bathroom vanity and flooring, etc.). We just barely paid off the mortgage when we finally sold it–we’ll never recoup all the thousands we put into fixing it up.

    We are now happily renting–and intend to continue to do so at least until I am a tenured professor (in grad school right now so that’s years and years away). Now we watch the HGTV real estate shows, and shudder at the kind of rationales and priorities they promote. On those shows maxing out your budget is applauded, starting out with your dream home is the norm, and buying the most expensive option (usually with the worst location) is the standard outcome. More or less, they are schooling viewers in the ways of thoughtless consumption–you may see the buyers smiling and “living the dream” a couple months later, but you never see them when they are swimming in debt a year later as I am convinced many of them must be. HGTV should be called the Realtors’ and Mortgage Industry Channel!

    Once we unloaded our house, moved closer to work and school, and started renting again, we were shocked at how quickly we were able to start paying off debt and building an emergency fund. Our current home has plenty of flaws but I will take them ANY DAY over the crushing burden of (untimely) home ownership. I’m now on a mission to rehabilitate the popular perception of renting a home as being a problem. 100% down may be weird, but normal is broke. Right? :)

    (Apologies for the looong post!)

    • Thanks so much for sharing this, Naomi! Yes, I do wish it were the norm and not the exception. And I love that… Realtor’s and Mortgage Industry Channel. Once Kyle and I had a serious and do-able financial game plan, that channel didn’t have nearly the lure like it once did.

    • avatar
      Heather in Oregon says:

      While I completely understand where you’re coming from on this, I don’t necessarily agree that it’s always the case. For us, home ownership has been a huge, huge saving grace in our life. It’s not perfect but it costs us less that what we were renting (which was smaller and was killing us with a major mold infestation). We looked for other places to rent and ones that were in better condition, would cost us anymore. We opted for a low interest, fixed rate mortgage with our credit union. We found a house that was small but met our needs and was well below how much the credit union was willing to loan us. Our house doesn’t require much in the remodel department. We have a yard that allows us to grow a garden which saves us money. We also have a major advantage in that my husband is a carpenter and has done contracting work off and on for years. Many of our friends are in the trades and when there is a situation that requires immediate attention we are able to trade wiring or plumbing expertise for carpentry. We buy materials with cash and we choose materials responsibly. We look through the habitat re-store stores and buy as much salvaged as possible (keeping in mind current safety standards). We have a yard that allows us to grow a garden which saves us money. I think that we look at it differently because we have no intention of moving from this town or this house for probably another 20yrs or more. While we of course don’t want to lose money on the house, we fully intend to have it paid off before we are even close to selling it. We pay an extra $40 a month on our mortgage, which is paid bi-weekly, and doing that will cut down the amount of time it takes us to pay it off by 10yrs and cut down what we end up paying by over $50,000. We further cut down the principle by paying 1/3 of our tax refund each year, however much that is, right back into the mortgage. There was no way, with the rental situation being what it was, that we ever could have saved enough to buy a house outright. We manage to save more owning than we ever could renting. I do however agree that if it’s at all possible, buying a house outright makes far more sense than a mortgage ever could.

      • avatar
        Heather in Oregon says:

        Please ignore the typos and the duplicate sentence about the garden. My 5 yr old was talked to me while I was trying to type this and clearly I didn’t proofread it thoroughly enough.

        • Hi, Heather,

          Yes, I see where you’re coming from and I’m happy for your success. Certainly every home buyer is working with a different set of circumstances, not to mention a different real estate market. In our situation, we also bought far less than our borrowing limit, did the Habitat Restore thing, did most of the work ourselves (my husband dug all the post holes and virtually built the backyard fence himself), found knowledgeable friends who helped us out for cheap, Googled tutorials, raised a small garden, etc. However, after buying the house our job situations changed so that we ended up both driving a 30-40 minute commute, and because of scheduling differences couldn’t even carpool together. At that point not only were we dealing with home improvement projects, but car gas was eating us alive too.

          I have no criticism for those who don’t pay 100%–who knows if we’ll actually ever do that ourselves despite my current feelings? However, I do have a problem with a _culture_ that emphasizes the benefits of homeownership (tax benefits, investment, etc.) without due recognition of the considerable risks that often come with it.

  43. Am I the only one who wondered why in the world you put two cents on a credit card? I admit that’s the whole reason I clicked and read today!

    We use an American Express for DH’s business travel expenses and so our own auto fuel also gets put on it for the rebates (which have been more than we thought by the way).

    It does lead to excess spending as that credit card has a way of sneaking out (for the rebates of course). We vowed we would pay it in full on line every day if it was a personal expense. But life gets in the way and then we’re surprised to see we spent more than we planned. We still pay it off but honestly I’ll be glad when DH’s business travel is no longer part of our lives and when we get say good by to American Express.

    I realize we could get around this using a debit card but a lot of our personal money will be tied up in a separate account to guarantee the rental cars and hotel rooms. His travel takes him to the west coast and he doesn’t want to deal with the hassles of possibly being denied for using a debit card.

  44. If you’re not familiar with PerkStreet (www.perkstreet.com) check them out. We are a no cc family, but we earned $1200 back with our debit card last year…best of both worlds!

  45. We love our debit cards. I have one for my business and one for our joint checking and savings. For us, we do have one credit card, a Target card. We use it to save the 5% on purchases there because we buy a good deal of groceries there weekly, especially during the winter months when we don’t primarily shop at the (now closed) farmers market.

    After one month of not paying off the entire balance we implemented a new system. After we do our Target run, we log into our banking acct online and transfer the money to a separate checking account we had set up to take care of online payments. That way the money is out of our main account, and it looks like we don’t have it anymore, just as if we’d used our debit card. That is the account that then gets used to pay bills online as well, and the payment is made in full at the end of the month. It’s an extra step, but to us, it’s worth the 5% we save every week, especially if we are making a larger purchase.

    For our house projects we have an all-cash rule, and we have stuck to it. We recently built a patio off the back. It took 4 years because every time the $5k was saved, we’d have medical bills to pay, but it is finally in and paid for. Our bathroom remodel was paid by saving many years’ worth of gift cards from Christmas and birthdays and other things to my husband and I until we had well over the amount needed to completely change the entire bathroom. The extra $250 was used to decorate.

    Our neighbors often ask why we don’t just pay someone to install all new windows or do the work in the bathroom, but the truth of the matter is that there are things in this life worth waiting for, and for us, that means we live debt free and work hard for what we have. It makes the reward much sweeter in the end.

    • We have the Target debit card. We still get the benefits, but it comes directly out of our bank account within a few days.

  46. We’ve never had a credit card and my parents were worried that we wouldn’t be able to get a loan when it was time to buy our house. We had no problem doing it though. Somehow we both had great credit scores even though neither of us had ever had a credit card. The only debt we’d had was for a car when we were first married, but that $$ was borrowed from family, not a bank. We too use our debit card for everything and never have any problems.

  47. My husband and I also don’t use credit cards. I think I would be too tempted to buy extra things that we really didn’t need and telling myself it is ok because I’ll be getting some benefit from it {which I’m pretty sure is what the credit card companies are hoping for!}.

    I just wanted to share that when my husband and I decided to buy a home, my husband did not have a credit score {I had a previous car loan and had a good credit score}. The mortgage broker recommended that we get letters from utility company, insurance broker, and employer stating that we paid our bills on time and that we were responsible adults with jobs. :) We have a mortgage rate of a little over 4% {this was a good rate 6 years ago} and we had no problems buying a home this way.

  48. I have had a credit card since my sophomore year of college, and with it, always debt. My credit score is great because I have mostly kept my “wants” reigned in and my bills paid off. Three years ago, however, I got divorced. My ex-husband kept the marital home but could not refinance to remove my name from the mortgage. I was able to purchase my own house two years ago at a decent rate, but cannot qualify for an auto loan (at least at my credit union where rates are better). This unresolvable situation made me take a very hard look at how I’m doing things. You can only control yourself. Now, as Dave Ramsey would say, I am gazelle intense. The credit cards are being paid off (finally! sophomore year of college was kind of a long time ago!) and my car is being maintained until I can save enough to pay cash for a replacement.

  49. We keep a credit card, for a variety of reasons. One, we like the security of knowing that if someone steals our number, they’re not stealing our actual money. We’ve known people who have had their debit cards hacked, and their bank gave them a really difficult time in getting their money back. We’ve had our credit card hacked twice, and both times, our credit company called us as soon as it happened (they noticed unusual charges) and refunded us the balance immediately. Also, it’s alot easier to replace plastic if you lose your wallet (which we have on a couple occasions) rather then cash that you had sitting in your wallet!! So ironically, although most people on here seem to feel threatened by owning a credit card, we find that it actually makes us feel safer, never to carry cash and have the worry of it getting lost or stolen.
    On the flip side, we are not in the phase of financial freedom yet. we do pay off our balance every month on our credit card, so we don’t ever have to pay interest, but we have alot of shuffling going on every month between our visa, MC, and LOC. Self-employment and the lack of a regular income leaves us a little on the bewildered side when it comes to creating a budget that works for us, and getting out of that final debt, but we find that a credit cards seem to help us more then hinder us. also, my husband is the worst for spending cash. If there’s cash lying around, it ALWAYS gets spent on frivolous things, but if there’s no cash in sight, then we think twice before putting our card out for purchases.

    • avatar
      Stephanie Broersma says:

      We always used a debit card until a friend’s debit card got hacked from an on-line purchase. They had to do a lot of work to get their money back, and then in the end did not get all of it back. That scared me enough to get a credit card especially for on-line purchases.

    • we use Youneedabudget.com budgeting software which strongly advocates for living on LAST months rent. we are self-employed as well, so this makes much more sense for us. In general as I read the comments, i wonder how many people actually budget? we use credit cards, pay off every month, but we don’t spend more than we have. we budget using YNAB and download transactions using cash to limit some categories is something we do, its not really realistic if we want to buy online or pay at the pump etc. I HATE using my debit card for all purchases, because i don’t like writing all those things into my check register (i did that for a spell and it was ridiculous in terms of time wasted) and feel its very irresponsible to go by the bank balance since that doesn’t account for checks written but not cashed. If you are in a budgeting mindset, I honestly don’t see the problem in using credit cards responsibly.

  50. We haven’t had a credit card for about 6 years and it’s been fine, actually it’s been great! If we are going to be traveling, we let our bank know and they temporarily raise our daily limit on debit card usage for the time we’ll be traveling just to make sure we don’t get stuck not being able to use our card. We’ve never had any problems!

    Just this weekend a family member asked if we were nervous about someone getting our debit card number. I told them that the bank always calls us when there is something out of the ordinary. For example, I had to make a large purchase one time at the pharmacy and within 15 minutes of leaving the pharmacy the bank had called to make sure it was actually our purchase. Most banks will let you set up notifications for purchases over a certain amount so there are still safeguards in place.

    A lot of people tell us that we should at least have store credit cards so we get their coupons and discounts. I’d venture to say people who have those cards spend more than they would if they didn’t have the card. Like you said, credit card companies and stores are out to make money. They aren’t offering you the coupons and discounts to help you!

    We’ve followed the Dave Ramsey system for just about all of our financial stuff: saving for big purchases, having an emergency fund, etc. It’s just common sense. Don’t spend more than you make and don’t have more than you can afford!

  51. We, too, use a debit card for everything. At least that’s what we pretend it is. We use a credit card for everything, but never spend a single penny that we don’t already own. One time, when we were first married, my husband was careless and didn’t get the bill paid on time, and we were slammed with a late fee. That was our fault. We learned from it and moved on.

    You presented some very good reasons for not using a credit card, but for now, I think we’ll keep enjoying the (approx) $150 cash that our credit card pays us each year.

  52. avatar
    Kimberly S. says:

    I wish we could afford to play the credit card game for two reasons

    1. Air miles. I have seen how useful they can be. My parents pay their balance off almost all the time. That is how they have flown to Mexico several times (to use deals on resorts they get other ways – so their all inclusive resort trips usually end up around $400 for a week for them both), how they flew me to Canada to meet my (then) boyfriend’s family and flew to MA last minute for family reasons. My in-laws got rooms for us all at a resort in the mountains this past December and got lift tickets for those of us who wanted to ski. So we spent a total of $27 for my husband and I to go skiing and stay at the lodge. They plan on doing that again next Christmas for whichever kids come home for a visit.

    Since my husband’s family is all over the country and world, it would be So nice to have those airmiles!

    2. I think like an investor. Sometimes it may be worth getting a loan or line of credit to build a business or buy a house. Not always, but certainly sometimes.

    All that said…I have zero credit and have refused to get a credit card to build my credit until we don’t need one. We are barely getting by financially right now, so I don’t want the temptation of leaning on a credit card. Once we are stable, caught up on debt that my husband accrued before we were married, and are no longer in need of a credit card…we may get one. And I have no desire to pay more for a car than it’s worth, so we’ll keep paying cash for those. In the meantime, we cannot play any part of the credit game right now anyway. I have none and my husband’s credit has gotten somewhat ruined due to him when he left a house behind and moving out of state to marry me. The market dropped and we had a negative cash flow with renters in it, so we are trying for a short sale before it forecloses. Either way, we will probably be forced to rely on cash for the next seven years anyway. Not necessarily a bad thing in my book!

  53. Posts like this one and Crystal’s are always intrigueing to me, and I do see the point, but I’m one of those who happily uses credit cards and I don’t feel ashamed or embarrassed about it at all. We have our budget set up in Quicken and enter receipts as soon as we spend money, so the idea that we spend more because we use credit cards (vs debit or cash) simply isn’t true. We spend what we’ve budgeted. Nothing more. No matter how we pay for something, it has to be available in our budget before we spend it. Every Friday I pay off the balances in full (we really only use 1 card) and have never had a problem doing so. The money is in checking, and is there to pay off the gas/groceries/utilities etc.. we charged. In the meantime, we have earned thousands of dollars in cash back that has paid for vacations, new appliances and unexpected expenses that have come up. Yes, credit card companies are making money off of us – everytime we swipe, they receive a small fee from the retailer that we’re buying from. But we have yet to pay a fee to them. And in the meantime, we both have 800+ credit scores which has given us an amazing interest rate on our 15 year mortgage. So while they may be “evil” for some, there is always another side to the story.

  54. Credit cards can be a trap- I have been there, done that experience from when I was in college and then after my divorce/single parent days. My husband, on the other hand, has used credit cards from age 18 and has always paid off in full each month (he’s almost 35).

    We don’t have any debt, other than our mortgage and we’re due to pay that off in <7 years (a few years early). We schedule the payment right away and it's done automatically.

    We do use cc's for accountability when we have our budget meetings each month (although I've read you can do that with debits).

    One thing I like is having a high credit score as a result of our cc's (we are both over 800). It's enabled us to refinance 3 times as mortgage rates have dropped throughout the years.

    We like getting an extra $300/year from using cc's. We have one major credit card and we also have a Kohls card, a Target card, and a JCP card.

    Yes, it's a game, but we feel we are beating the banks at their own game, so it's worth it for us! The banks are still making money from the fees they charge merchants.

    And I'm here to say that you CAN reform from being a spend thrift into a frugalista! :-)

  55. I follow Money Saving Mom on Facebook, and clicked thru to this blog post from there. I remember when Crystal posted about buying their house in cash- I was beyond impressed.
    My story: I have been using credit cards since college, following in my parents’ footsteps, where my husband never had one, following in his parents. I came into the marriage with about 2k in debt, which my husband strongly encouraged me to pay it off in full, which we did quickly- and I have not been late, paying in full, each month the 8 years since.
    My 800+ FICO score rating is certainly something I’m thankful for and proud of, but as a deal-loving-penny-pinching person, I feel like I’m getting away with murder by getting so much cash back from these credit card companies over the years. Yes there’s the possibility that I could mess up and end up paying a late-payment fee at some point- in my mind I’m comparing it to snagging all those great deals at Rite Aid and then forgetting to use my +UpRewards. It might happen, and I’ll be out some money, but think of all the freebies I’ve gotten over the years- worth it in my mind.
    That old saying, ”Nothing worth having is free” or something like that? In this case the cost is risk- tempered by responsibility (aka. remembering to use your +uprewards)- and the result is more cash in my pocket.

  56. We were like you we paid our credit cards off in full each month when the bill came in… Until my husband lost his job and there was barely enough money for the mortgage and utilities and we only paid the minimum. We thought he’d have a new job within a month or two so we didn’t worry much about it, it would be ok. And we didn’t change our lifestyle at all. Until 6 months later. He was unemployeed for 9 months, and it took us 10 years to pay off that 9 months worth of credit card debt. We do still have a couple of department store credit cards but no major credit cards, we use our debit card. The reason I still have department store ones is for extra discounts they often offer to card holders. I use my card to get the extra discount and then turn around and immediately pay the card off with cash, I don’t by anything extra discount or not if I don’t have the cash to pay for it. I am much more discplined with my money now than I was when my husband lost his job we still have some debt, but not credit card debt, we are working hard to be debt free.

  57. I have 3 credit cards which I use to always pay off as I used them, not even waiting for the end of the month. But then I went back to college and things got a little out of hand. Now I feel like I can barely keep my head above water. I am back to only buying things that I instantly pay off but the remaining debt and constantly accumulating interest is a thorn in my side. I guess there is nothing to do but tough it out until it’s over… By the way, you can make online purchases with a debit card? Do only some stores support this? I never heard of such a thing.

    • im pretty sure that debit cards with the visa/mastercard symbol can be used interchangeably with credit cards for online purchases.

  58. The cash only system has a huge flaw. If someone steals your purse while you’re out shopping, or someone picks your pocket, or you leave your wallet somewhere, that cash is gone. I have lost cash before, several hundred dollars. Carrying a debit card means that anything that thief charges to your card, you can dispute with your bank and things can work out. You never get that cash replaced.

    • I think most of us who are on cash-only don’t carry much around with us at one time. Leave most of the envelopes at home and you’re apt to spend less as it is. I’d much rather lose cash than my I.D. and debit/credit card – identify theft is more of a worry for me, even though you can recoup the money. It feels more of a violation. I keep my I.D. and cards in a separate wallet than my cash, so a nice benefit is not having to get out those cards and I.D.s all the time, making THEM less likely to be lost or taken. Yes, if I lose my whole purse, it sucks either way, but I shudder more at the thought of losing cards and I.D.s than the cash. And for the odds of theft or loss of cash, which seems rather small when you’re talking about just odds (yes it happens and has happened to me – but I’ve only actually lost a cash envelope once in about 5 years of doing it), I’m willing to take that calculated risk.

  59. I love your points Tsh. I hear both sides of the pro/against credit cards argument all the time. I agree it is a topic to steer clear of :)

    I will only add that I agree, it is a dangerous game to play and I don’t like the game.

  60. Very well thought out post. It’s really a shame that our country doesn’t honor your way of handling money, which is with utmost responsibility and respectability. My parents are from Germany and didn’t start using credit very, very sparingly for decades. Our personal family uses American Express. We do use the points (we save for bigger stuff like a free plane trip) and pay it off every month. The points are linked to my husband’s business, so we have extra there, too. In the past, I’ve gotten 2 free plane tickets to Texas, a digital camera, baby stroller and car seat combo, and some other stuff. Not bad… I do agree, though, it is way too easy to “overcharge” and then be stuck with a high bill that’s not fun to pay. Thanks for putting this out there…

  61. We use one credit card for most expenses and it works for us because we always pay it off every month. We get several hundred dollars at the end of the year and have great credit scores to show for it.

    Credit cards have never been a problem for us, and having the good credit score allowed us to refinance our home recently at a great rate.

  62. Several years ago I had a family friend who was a VP at a pretty big bank before she retired tell me that we “needed” a credit card, and she balked at the idea that we could easily purchase a house without an extensive credit history. Well, we did purchase a house with a decent interest rate for the time, and we’ve yet to have a credit card.

    Of course, it did help that we’ve had a couple of other loans over the years (early cars and can anybody say “student loans?”) We are finally committing to finish the process as we’ve begun FPU (and wondering why we didn’t get serious before now), but we have stayed away from credit cards ever since we closed the one we had the first year of our marriage. I agree with you that the game is too complicated. It’s not worth it for us to play.

  63. Great comments here.

    With so many people saying that they pay the card off in full every month (or as soon as they use it), I wonder how these credit card companies stay in business!

    We are currently trying to eliminate our debt and have sworn off credit cards. Even debit cards mean you don’t *feel* the outflow of cash like you do when you’re forking over real bills.

    The pattern of delayed gratification and saving to make purchases is a lost art. But I’m vowing to reclaim it for my family, for my children to have a pattern to follow.

    Looking forward to the freedom of debt-free living and not playing the game.

    Thanks Tsh for your inspiration and your example.

  64. We use credit cards and love the convenience of it for airlines and other purchases like that. We have been debt-free for years, I’ve lost count of how many.

    Because we had an excellent credit history we got a great interest rate when we purchased our house. Although I’m a buck the system girl I was happy to work the system to reach that goal.

    Now however…we never want another mortgage again (too much bondage) and we’re willing to live small to make that happen. In the process of making that happen. We dream to pay cash for our next house but because we’re not a hard core penny pinchers (like our groceries, we just can’t do $400/month eating vegan in the north country) so our price range will be more in line with a yurt.

    Also, fixer uppers are a lot of work and money. Been there, done that, don’t want to go that route again. We’d rather go on adventures and live in a glorified tent (!)

    But that is a whole different topic…

  65. My husband and I only use credit cards (we are aware of perkstreet and this post is in no way against what they offer) because of the rewards and the ease of use. There are a couple of rules that must be followed to use credit cards though: 1) always pay off your balance every month. In fact we pay ours off weekly by monitoring our accounts through mint.com, this forces us to stay on top of our spending. 2) have an emergency fund set aside for bad months. This is a personal finance no-brainer and a point that ALL personal finance guru’s (http://www.daveramsey.com/new/baby-step-1/ , http://www.getrichslowly.org/blog/2006/09/08/how-to-start-an-emergency-fund/ ) advocate because emergencies happen and this buffer stopes them from ruining your financial life.

    It sounded like TSH did not have a properly funded emergency savings and therefore it was her own lack of preparation that threw her financial life into a tailspin and not that of her credit card use.

    The real “game” with credit cards is using them to make money. Here is a post form another blogger that laid out ways to make money from using credit card company’s sign up bonuses: http://www.mymoneyblog.com/credit-card-sign-up-bonus-summary-2011-over-2500-in-free-money.html#comments
    My husband and I have used the sign up bonuses to fund entire trips; it can be done. I know that there are people that have problems usgin credit and this is definatly not for them however if you have an iron grip on bugeting and your finances this is a great way to make a little extra cash.

    • There is no reason to be so harsh! Tsh is sharing her personal struggles and journey, and she is not telling you you are bad for doing it differently, and there is no reason to judge her so negatively. I’m glad it works for you, and we also have used credit cards to get their cash back without problem, but the reason she gives are real ones and it is not for everyone.

    • I would say that yes, we didn’t have an emergency fund at the time. And then we discovered Dave Ramsey’s baby steps and put everything but $1,000 towards our debt (first our cards, then our school loans). Once those were paid off and we were debt-free, we saved up for a 6-month emergency fund. It took about 4 months to save up for that.

      For us, our emergency system replaces any need for a credit card, it doesn’t act as a back-up for it.

      The reason it’s more than just “using credit cards” (at least to me) is that you’re opening your finances up to a credit company. At least with debit cards, it’s still just your money. Thanks for sharing your ideas, though!

  66. Love the discussion in here. My husband and I are 28 and have paid off all our credit card debt but have more student loan debt then we can reasonably pay off anytime soon (my husband is a vet, so his schooling for his doctorate was $40k+ a year and he makes $24k). We will never get a credit card again, the honest truth is we just can’t trust ourselves with them.

  67. I think it’s so neat to read all of the differing opinions and the circumstances of how those opinions were made. It gives you a lot to think about! I will say that what really lies at the heart of the matter though is just plain old self-control! Our society has pushed very hard to get us to be disconented, live-for-the-moment people, that think they need to have more. When all we need to do is realize that it doesn’t bring true happiness, just bondage and despair. Whether you use cash only, debit/cash, cc only, or whatever. It just boils down to having goals, living below our means and being content with it all!

  68. I use debit cards as well, and LOVE Perkstreet! They give cash back on DEBIT card purchases, so you can get the best of both worlds – rewards and no credit cards!

    http://www.perkstreet.com

    Dr. Laura

  69. avatar
    JulietsButterfly says:

    We’re slowly trying to climb out of credit card debt. Luckily, for us, we only have a $3k limit that isn’t yet maxed out (I say lucky because I’ve heard of others having several thousand in credit debt). We paid down a lot of the balance last year with some extra money and we’ve been paying a little more than double the minimum for at least two years now. When we get it paid down, I want to freeze it in a block of ice. Actually, at one point, the physical card had expired, but the account was still going. This worked in my favor as I was forced to pay it down and wait for a new card to arrive.
    We live paycheck to paycheck and we’re working to get out of that trap. Being in that position, when something comes up, as it did this month, we do have something on the credit card to fall back on. It’s not the best option, but it’s better than my family starving because we won’t be able to afford groceries until the end of the month. We’ve already planned to dedicate a large portion of our tax return to the credit card.
    For us it has become “the money we have to spend but don’t have,” like when my student loan was about to go into default when it popped out of deferrment and I HAD to pay what they said every month to avoid default. I had just been laid off and we could not afford what they wanted, so we turned to the credit card. Not the best solution, but again, we needed the money in our bank account for rent, utilities and food on the table. Most of what we charged that year for the loan is paid down.
    When my children are old enough for a bank account or credit card, I will tell them all about the pitfalls my husband and I found so they can learn from our mistakes. The most I learned from my mom was that if they gave me cash, I would spend it insanely fast. If we have to carry cash, my husband holds it, because even if it’s our last $20 to our name, I don’t trust myself not to go weak and spend it on a latte.

  70. Our story is simple and oh-so-tragically typical. Lived beyond our means, despite making six figures. Downsized to live more simply, moved to be closer to family and expected to find a job, a home and a new life. Turned out to be no jobs. Continued spending. Ended up living with family (at 40!) and endured serious stress and defeat. Prayed, sought wisdom and discovered Dave Ramsay. Through an unexpected inheritance (of which we would return every cent to simply have her back) we paid off debt completely. We were free but not disciplined. You see jobs came and went (again!). We still lived with family (at 41!). The inheritance has run out and the credit card bills have again run up. Not nearly as bad as last time, but up nevertheless. Now we are working anything and everything to start over (again!). The difference now? Discipline. A healthy dose of discipline and a dogged commitment to a better, brighter future. Credit cards only work if you can play the game, pay them off every month and have the discipline to only spend what you have. I can’t play the game (again!), can’t afford to pay anything off every month and am growing in the discipline to only spend what I have (having very little helps in that regard). Thank you for this post. As Mom’s trying to live simply, we have to be honest about all areas of our lives, even our wallets. Appreciated this post as it strengthened my resolve to do it right this time. It also encouraged me that I and my family are not alone.

  71. I don’t really like the idea of a debit card. If someone steals your info there goes your money.. My credit card company was great when my credit card info was stolen and I didn’t pay anything I didn’t owe. My bank’s policy on debit cards sounds like I could pay at least $50 if someone is using my account. Also, I have to contact my bank and my credit card called me because they noticed strange behavior. I do totally get that credit cards can cause problems and I totally believe it’s easier to spend more. Any thoughts on the whole debit safety thing?

    • This is one of the main reasons we use a credit card. I’ve never heard of a debit card with good fraud protection, and cash definitely doesn’t have it!

    • We have a debit/credit card and when my husbands card had fraudulent activity we were notified immediately. There is some protection when something like this happens, and our money was reimbursed.

  72. Thank you for your thoughtful and balanced perspective. We don’t have any credit card debt, but our school loans are killing us. Of course I wouldn’t have done it differently- I got an amazing college education I could never have had without debt (my family of origin was very low income) and my husbands law school loans allowed him to more than double his income. I often feel judged for choosing to go into debt, but like I say, it really changed our lives. But the stress of debt is so much! While I know many friends who feel that student loan debt is “good” debt” and just pay the minimums, we are throwing everything we can at them. It’s probably going to take us about 10 years, at which point we will be in our 40’s with no real savings, but I think it will be worth it! Anyways, reading your story is inspiring, thank you.

  73. I’ve learnt the hard way that I cannot handle credit. Right now I’m swamped in credit card debt with no way to pay more than the minimum payment each month. Because I stay home full-time to care for my Alzheimama, I have no income other than selling an item here and there on eBay, an annual garage sale, and the like. I have no savings. I own our home and it’s paid off, but that’s about it. If my mom were to die tomorrow, I’d be hard-pressed to even find a decent paying job. I’m an RN, but because of a memory problem I really can’t return to nursing. I rely on God to keep my vehicle running and provide what I need. He is faithful to provide. I’ll never use credit cards again.

  74. While I agree with the premise of *most* of what is said here :) , I do think it is possible to treat credit cards like cash if you are careful. I used to follow the principles of Larry Burkett, who initially started the envelope system idea. It gave me a great starting point and philosophy with cash/credit. What I started doing (because I didn’t want to carry cash around and found I was spending it more easily than a credit card, quite honestly, weird as that sounds, I know, I’m a weird one. Carrying the cash made me feel “rich”, haha!). My husband now has a spreadsheet with all of our budget categories (granted, he is a computer programmer, so it is an elaborate, posh spreadsheet) :) and I’m trying to decide what I want to do. In the past, I used to carry around an envelope system- but INSTEAD of carrying the cash, each “envelope” had a little piece of paper with the total for the month with that category. When I’d shop, and want something, I’d open up the category, see the total, and then manually deduct that amount from the running total. For instance, if groceries had $200 total at the top, and I charged $25, I’d subtract that amount, leaving $175. It was just in pencil, so it wasn’t physical cash, but it worked well for me. If I didn’t have it in one category, I’d have to take it from another, and think it through wisely so that I took it from one that I would have extra in that month. Now that I have an android (my husband has to have a plan for his job, so we’re on share talk and have all the perks, so it’s kinda fun!) I am planning on adapting that somehow so I can do it all on my android. I’ve also done it where I’d take my reciepts home, immediately enter them in the spreadsheet, where it deducted the total so I’d always know how much I’d have left. I never overspent. Never. Honestly. It worked well for me and I was able to get some “perks” with our credit card. :) Also, when we had to move because of my husband’s job, renting was so much more expensive than owning. We had three children three and under and to get a decent place (2+ bedroom) in the college town we had moved to (where cost of living was MUCH higher), it was $1400+. After renting for the astronomical price for a while, we were able to get a KILLER interest rate and a crazy good deal on a large home we are thrilled to use for ministry purposes because of the fact we were able to shop at a ton of different lenders. We had numerous credit cards, ALL had been used appropriately and paid off and never late, we had established credit in numerous ways, etc. It worked well for us. That being said, our system is a bit “laborious” for a lot of people and I’m trying to figure out how to tweak it to save me more time and from manually entering so many reciepts, etc. Although, it is nice to have that to track and monitor your spending habits, as well. Kinda fun. :) But I will agree, credit card companies are definitely not looking to your best interests, so you need to be extremely vigilant when dealing with them if you choose to do that! We’ve had issues I’ve had to fight in the past with them….but I’ve also had issues with our debit cards and bank accounts, so I’m not sure. I guess you have to be vigilant with everything, but especially credit cards. :) However, when I went overseas, my credit card was critical as I did NOT want to carry cash and every time I used my debit card, it charged me a fee. That might have just been where we were in Thailand, but I was thankful I had my credit card then!

    • Wow! I never thought about carrying paper with our budget. This would really work for me. I too, have a hard time viewing cash as anything but “spending money,” but I also can’t figure out how to mentally track my monthly budget when I’m out and about. Love the idea of just writing the categories on a piece of paper (duh!!!) or putting it on our smart phones (even better!). I bet my husband and I could share a google docs spreadsheet for that, so we could both be on the same page all the time.
      Thank you Melissa!

  75. We have been credit card free for over 4 years and I love it! I thought it would be harder to give up that “security” of the high credit lines but it was much easier than I thought it would be. And that’s because we started relying on God and not the credit cards for financial security. He has been so faithful the last 4 years. We’ve survived a combined 4 layoffs between my husband and myself with no credit cards. That is something I never thought we could do but it’s because of God that we have been able to do it. I don’t miss the credit card game at all. I’m also less stressed about the finances now that we are cash only. We just live simply and within our means and that has provided us with such a sense of freedom! Thanks for writing such a great post! :)

  76. I think that some people can use credit cards wisely. My family is not one of them. We have been in and out of debt over our 30 years of marriage. This most recent time happened due to medical costs and my husband being laid of and taking a job with a $20k pay cut. I am working to find a job that can fit with our family’s needs and my health issues. My husband is quicker to pull out the CC for stuff than I am. I would love to get rid of them for good!
    Bernice

  77. I thought that people who subscribed to the Envelope System ™ didn’t use debit cards. I’m glad to read about someone who wants to carefully manage their money but is also realistic about what it takes to live in the 21st century!

    Personally, I try to use actual, physical cash as little as possible because it’s too ephemeral: too easily spent, too hard to keep track of. Receipts? Pfft – scrap paper that piles up and litters our countertops with good intentions. With a debit card, I know that every purchase is recorded and will show up on our Mint summary. I’m also less tempted to spend a dollar here, two dollars there when I have to actually use a card instead of just handing over the change in my wallet.

  78. I use my credit card like a debit card. Stay with me. I like the points – there, I said it. I love points. But I only use the credit card when I *know* I can pay for something right then and there. Then, as soon as I finish the purchase I go online and immediately move that money from my checking account onto my credit card. It doesn’t process immediately (there’s usually a two or three day delay in online banking for my credit card), but when it does post, it posts the charge and the payment at the same time (or very close). This way it’s not really so different from using my debit card. Yes, it’s an extra step for me, but for me it’s worth it. I don’t use the credit card often, but I do put big purchases on it. I want to get the points – which I use to get cash back – and I want to build up my credit score. I think the key is to not assume you’ll pay it off in full at the end of month. You have no idea what might happen between the 1st and the 30th. I pay it *right away*. No if’s, and’s or but’s. If I don’t have the money in my checking account, I don’t buy it.

    • Our credit card limits the number of payments you can make in a month so that unfortunately isn’t a viable option for all credit cards. :-(

  79. Credit cards are just a tool. It’s like weight loss – the only formula that really works long term is eat less/better + exercise. For money, the only thing that works is to spend less than you earn. This is not a new thing – even Charles Dickens knew it, and pointed it out in David Copperfield:

    “Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

    While credit cards make it easier to spend money you don’t have, they’re not the problem. The problem is that you’re spending money that you don’t have. There’s no easy solution, but it boils down to either spend less, or make more money.

  80. We’ve always had credit cards and I like getting the miles. We’ve never had a problem paying each month, but we’re moving into a season of tighter finances and I can see the need to keep our use in tighter check. We also both accumulate a lot of work expenses, so it’s nice to earn miles on those and not have to foot the bill out of our checking account (we generally get paid back before the CC bill is due.)

    I have a friend that views her credit card like her checking account. They literally do not use debit or cash for ANYTHING. Groceries, utilities, ice cream, movie tickets, etc, etc all go on the credit card. They just track the balance against their budget and paychecks, so they can always pay in full. It works for them because all their family is in another state and they are able to fly free to visit 1-2 times per year. Again, not a system that works for everyone, but it’s a choice they’ve made that works for their family.

  81. Hi Tsh, I hate to pay one cent to a credit company and don’t like to owe money but my husband has a totally different mind set. We have gone to financial classes together and he still thinks it is no big deal to charge and pay interest once in a while.
    I think about what I can buy with the interest money I would pay but he doesn’t. We are teachers.
    Any advice on getting husband on board? I would love for him to embrace following a budget and enjoying saving!

  82. SO interesting. I never once thought about using debit for everything–I think I am too nervous about entering that online.
    We use the “bullseye” credit card because it’s 5% off every shopping trip there…they make their money off me by becoming a more frequent shopping place instead of through fees, etc., but I live so close to them, they are my go-to store anyway. The other card I use gives me a great printout to see where my money goes every month and I have found it to be a very useful tool.
    The ideas here are very useful; my husband and I have always been “pay them off every month” people and have only carried balances for a month or two at most, ever (and those were extenuating circumstances, more like missing payments due to deaths in the family than actually not being able to cover it), so these tools that lure in the not-as-careful were truly just conveniences for us. But I am trying to do less business with big banks and credit cards are a sensible next step in that. Thanks for the food for thought!

  83. avatar
    Eliza Hinckley says:

    Gosh, I am so glad you told me I can make hotels and car reservations just with my debit card. We have no debt, payed for our car with cash and never use a credit card but we have one in a drawer just to use for hotel reservations and car rental which we pay cash for at check-out. I truly believed it was necessary to rent cars or make hotel reservations. Guess what is getting cut up tonight!!!!

  84. I am sorry Tsh that you found my comment on your last post snarky, I thought I posted a valid question and wanted to see what your advice would be regarding credit scores. Which you have answered with your above blog post.
    It was not meant as a snarky comment!

    • Oh no, not snarky at all! I’ve been wanting to write about this for years because people have continually asked about it. I just thought I’d piggy-back on Crystal’s post, since we were already talking about it.

      No worries! :)

  85. THe hardest thing we did was getting rid of all of our credit cards. It was one of the best things we ever did. When you live with what you can afford, you are forced to talk about tour expenditures. I can’t go buy something I want and him do the same thing without talking to each other. Before if we wanted it, we charged it and went on. We also had stress about the mail as we had to “fess up” to our charges. We have common goals now and we work for each other’s goals. To us, the intangibles of living with out cards far outweigh the temporary benefit of having what I want now. Another benefit has been wee evaluate our needs vs. wants. I am amazed at what we have learned about ourselves in this process. Our marriage is richer for this move as well. I wil be the first to say, it’s hard sometimes watching your neighbor go on a cruise or another friend always having the latest fashions. But when we get to go on a vacation and it’s paid for before we ever leave the house I feel totally at peace that this is the right decision for our family. For those of you struggling, pray about it. I have marveled at the provision of the Lord to help us get out of debt and now, 15 years later, to provide for our needs, encourage our savings and be content right where we are. It is a very personal family decision but as I said before one of the best decisions we ever made.

  86. Really interesting post! We do use credit cards, but it can get confusing to relate the charges with our budget categories, and for that reason, we are talking about using them less and less.

    I have been a regular reader of MSM for years (that’s actually how I found your blog), and I really appreciate stories like hers & posts like this. They give everyone a peak into what it looks like to choose a different financial path. For me at least, I turned 18 & just assumed everyone had credit cards & that you needed them, so I got them too.

  87. We currently have a bit of credit card debt and are in the middle of paying it down. Once we do so, we will keep the card but move to a cash only system.

    In the past, having a credit card has been useful. Our debt card has a $1000.00 a day limit and when we had to purchase plane tickets to attend a funeral. We found out our loved own had passed at 2:00 am, booked our tickets and were on a flight to be near our family to mourn by 6:00 am. If we hadn’t had the credit card, we would have had to waited until the bank opened and made a call.

  88. My husband and I, both 24 right now, have owned 2 houses. 1 of them for 4 years and the other one for 3. We had never had a credit card and we got GREAT loan rates (3.55% on the first and 3.98% on the second). They were no fancy houses but not fix-er-up-ers either. We make just about $50,000 a year and we have 2 kids. This is not a toot my own horn session. This is proof that it can be done. We do not rent out our second home as we simply haven’t had the time to slap some paint on the walls (I had a Very rough pregnancy and was on bed rest for 3 months. Our baby was in the NICU for 5 weeks and we currently see some sort of Dr. or nurse 3-4 times a week. We are a busy family.) But I have made that one of my 2012 goals so we can have some extra income to pay off the houses. I did have to quit my job in order to take care of our baby so finances have been tight. We currently have 1 Lowes credit card because we needed to get windows put in the house. But we shred it up as soon as we got it and have already paid off $500 in the last 3 months. It is an 18 month no interest card. Paying that crazy thing off is also one of my 2012 goals. Good luck to all that are in the paying off and keeping off stages!

  89. I have to go back and read the comments, but wanted to comment my initial thoughts — first, thank you for bringing it up! I’m very interested in how people manage without credit cards. I hate that I use them, yet I’m ‘scared’ into keeping them — having heard that debit cards are not safe to use; paying with credit gives you some protection from bad deals/insurance (never used any such feature though), not having to carry around lots of cash. Oh, and then of course the airline miles, and the store cards with all the deals.
    On one hand I think relying only on cash on hand will decrease how much I spend — but in another way, I may spend more — I guess it that happens, I would find out soon enough and it would force me to start paying more attention to my spending habits. I think I may drop a few today. They seriously drive me crazy keeping up with payments……….at least down to one until I feel secure with debit again.

  90. My husband and I are a few weeks away from having a zero balance on our credit card, after having a balance for several years. Things would come up, car trouble one month, and a few months later a relative passed, etc and we wouldn’t have enough in savings to cover those costs- because we were paying credit card bills. And once we were already paying something on it, it seemed that much easier to just “put dinner onthe card, we’ll pay the extra $30 on payday” and then not. We will finally pay off our final 2 credit cards with our tax return this year, and be able to fully fund our savings. (We give our savings acct categories for things that come up regularly throughout the year so we don’t see it sitting in our checking account as ‘available’ i.e. eye exams, car maintenance, tax fees, car registration, gifts, kids neccesities etc) and every year I set up a yearly savings plan to keep those funded throughout the year.
    I can, with much conviction, say that we will never put little things on our credit card ever again. It will be for true emergencies (which hopefully by the end of next year we will have been able to save a substantial emergency fund and not need it at all). We keep our card partly to play the game, and partly as a safety net, since we don’t have the money in savings to cover a huge car repair or something equally as expensive. Yet.
    Once we are comfortable with our savings account, then yes, we will discuss going completely credit card free, since we don’t want to be players in the game anymore. We are also halfway on the Dave Ramsey bandwagon, and while we don’t use cash except for blow money (our debit cards are more convenient). We do have a monthly budget that we *now* stick to, and a debt snowball written up. We are hoping that in 3 years we will have everything paid off (our 2nd car, and my student loans) and have enough saved for a new vehicle, as his truck is probably going to need to be replaced in the next few years.

  91. avatar
    Stephanie Pease says:

    When I was in high school, my parents did the thing that a lot of people shudder over – they gave me a credit card. My name on the card, their account. Thing is, I was told to use it in emergencies only, or to please check with them first if it was for a clothing purchase. I did not have my own car, and I was naturally pretty obedient and cautious, and I did not have any problem staying within these guidelines. They explained to me that they wanted to do this in order to give me practice managing a credit card so that I would have a good credit background some day when I may want to buy a home.

    Post college, when I started having an income, I got my own credit account apart from theirs. I (and my siblings) have always paid our card off every single month, and my husband and I only use the card for large purchases – airline tickets, large medical deductibles. We are blessed to have been raised with good money sense, acquired marketable skills that pay well, and reasonably good health.

    Interestingly enough, my health is starting to get a little bit complicated, and we’ve had a year of a lot of high expenses, and I can see how easy it is for a person like me to suddenly find themselves on the horrific side of the debt equation. If my health problems continue, we will be unable to replace the money currently in our (already lower than we’d like) emergency fund. It only takes one difficult year to chop emergency savings in half. It is possible that we may find ourselves in the position of needing to go into debt in order to pay for medical bills, though I hope that if we reach that situation that we will be able to make other arrangements first.

    I sympathize with the desire to live without credit cards, and recognize that especially for people who have run into trouble in the past, this is a very wise choice. Its just like a diabetic swearing off dessert for the rest of his life, or like an alcoholic who doesn’t go to bars anymore. I do think, though, that credit cards can be used responsibly and that no one need feel as though they are an automatic evil.

  92. I’ve never had a credit ccard in my name and I never will. I know what I’m like – a compulsive shopper – and without my husband to keep me in check with online purchases I’d be a mess because I’d rationalize and ‘work it out’ in my head and then I’d be in debt up to my eyeballs. He is far more cautious and it is paid off monthly. We have never made an interest payment and rarely carry a balance beyond a week.

    My daughter, on the other hand, has just gotten her first and I’m just waiting for her to come to us with the reality of a heavy debt load. She was here at christmas with a $500 balance and she doesn’t make more than that a month in variable spending with her job. If she loses it or somthing goes wrong she is hooped. Sh won’t listen though. :(

  93. I like the insight of this post. We do use credit cards, for now, but are in the process of switching to a cash only system in order to pay off our debts. I use(d) them because we earn cash back. We had every intention of paying them off in full each month but getting behind a month really set us back. Now it’s just playing catch up and sacrificing. I don’t think credit cards are “bad” but it’s true, it’s a game.

    I will continue to leave them open and run my gas purchases through them in order to maintain a credit score. My new outlook is if we don’t have the cash, we don’t get it. If I don’t commit to this then I will be over run by credit card debt.

    I am however, fine with mortgages since I would never ever be able to save $150,000 in cash. You can always pay ahead to reduce the interest you pay but, it’s tax deductible most of the time and I’d rather keep that money in my savings for emergencies.

  94. Add me to the list of people who don’t play the game. I have better things to do than to spend my precious minutes making sure balances add up to earn $30 in rewards over the course of the year or airline miles we may or may not use.

  95. Love the conversation. I think that you can live with credit cards as long as you are extremely vigilant and I admire those who can pay it off every month. HOWEVER, we’ve discovered we just aren’t vigilant enough and we moving to cash/debit card only system. I think it’s too easy to purchase more with plastic. Budget lines start getting a little fuzzy and before you know it you’ve overspent. When I’ve got cash in hand at the grocery store, I’m much more careful about what I put in the cart. With a credit card, I just throw in whatever. But again, maybe it’s just a matter of your threshold of vigilance…

  96. I love the idea of not using credit cards at all. We’re an *almost* credit-free household (except mortgage) but we do occasionally use our credit cards, particularly for large purchases. Now that we’re not using our credit cards for everything we aren’t racking up enough airlines miles to justify paying the annual fee so will likely shut them down this year.

    I do not judge people who use credit cards. I can only say that for our family, our spending habits (and thereby, our finances) changed for the better when we went to cash.

  97. I’ve got one. One. With a low limit. I never accept limit rise offers. I don’t use it very often, mostly for bigger purchases. I try to live by the ‘if you don’t have the money for it, you can’t afford it rule’ but I do allow myself a few exceptions to this. I have been able to purchase some bigger items (fridge, oven, dental work) by using ‘interest free’ periods. Never more than one item at a time and I diligently pay it off each month so that when the interest free period is over, I’m done. I’ve never had a lot of money but I’m paying off my own house as quickly as possible and I’ve never had any real financial problems. When I don’t have cash my mantra is: my financial position does not determine my state of mind.

  98. I would love to live without a credit card. However, my husband is of the must have credit cards to get a “credit score” theory. Which has lead us to a compromise. We have 2 cards, with very small limits. We make one purchase per card per billing period. The purchase must be something we intended to buy with cash anyways, and we must have the cash set aside before the purchase is even put on the card. Its a compromise we both can live with.

  99. We have a credit card. We run absolutely everything through our budget (using YNAB–great software). Any charge that goes on the cc is money that was earned last month and budgeted this month. Any money we earn this month sits tight in the bank account until we budget it at the beginning of next month. What that means for us is that we could, at any moment, write a check to pay off the cc in full without affecting available cashflow for the month. It’s a more conservative approach than just paying in full, but it works for us.

  100. We use our credit cards for convenience, never for credit. We pay them off each month, have our 8-month emergency fund and other savings, and have never been in debt, and have the payments sent automatically. We are not enslaved to the cards and they work for us. Sometimes, when I think of the trouble that credit cards cause for so many people, I have thought about going completely without them. But the problem really isn’t in the cards, but in the human heart. Like any powerful tool, they can work well when used with care but are dangerous when used incorrectly.

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