Reader Mail: I Have Never Had a Credit Card

I am 27, and I’ve never had a credit card. My parents drilled the concept of “avoiding debt always period end of sentence” into me, and it’s basically how I’ve structured my entire financial life. I have a debit card, and that’s served me very well. I like knowing that every dollar I spend is a real dollar that’s directly connected to my bank account. It means that whenever I make a big purchase, it’s something that I have to save up for and really think about, and this has always kept me in check and helped me control my spending. 

I also work in TV, which means that, kind of like freelancing, the opportunities for work can come and go and turn very quickly. It’s an incredibly easy business to rack up a ton of debt in—I know a lot of people who live off their credit cards in the lean times, and I’ve seen a lot of lives made difficult because of it and hundreds of cautionary tales. Which is just more of an incentive to “avoid debt always period end of sentence.”

But my lack of a credit card is also something that generally makes my friends shriek “YOU HAVE TO GET A CREDIT CARD OR YOUR LIFE IS GOING TO BE RUINED DOWN THE ROAD!” whenever the subject comes up. I pay utilities, and in the last four years, I’ve rented two apartments in my own name and on my own credit, so maybe that’s why I’m not taking them very seriously? I suppose I’m just afraid that if I get a credit card, I’ll be too tempted to coast on it and look at the bills later. And I don’t know very much about how they work, which is embarrassing. Balances? Interest rates? This is all a foreign language to me! Help! — M.S.

Letter writer, you are one to be admired. And like Heidi Moore, who does not have a credit card, you will be okay if you decide not to get one.

When I was a recent college grad with no savings, and a future that felt uncertain, I opened my first credit card account with Discover because I wanted to have something to fall back on when times were tight. I did not have the luxury of parents who could welcome me home with any kind of monetary support, and student loan payments loomed over me, signaling to me that I had to get a job, and get one fast. I got a series of low-paying jobs, heard the lingering voice of my mother in my head say, “This is what you get for being an English major,” and charged money to my credit card to pay for groceries when I needed all the money in my checking account to go to my student loan payments. I would pay off the card, and then make more charges. Every dollar in interest that I paid hurt—I felt it in my gut. 

There’s a thing that Andrew Jackson once said that I think is relevant here: “When you get in debt, you become a slave. Therefore I say to you never involve yourself in debt, and become no man’s surety.” There was a time when I was a slave to my Discover card. Letter writer, be proud that you are not a slave.

If I had the option back then, I would have not gotten a credit card. I was already a slave to car payments (which I mostly paid off before graduating from college), and student loan payments (still fighting the good fight on this one), and I didn’t need to have a credit card for the age-old argument of building good credit to buy a house one day (my car and student loans were already on my credit report, and diligently making my payments each month would prove that I was a responsible borrower. Sure, a credit card would show I could handle multiple lines of credit, and would improve my score further, but it wasn’t absolutely necessary).

If the circumstances were different, and I had a job that paid me enough not to rely on a credit card for emergencies, I would be paying things the same way I pay now: with my debit card or with cash. I just paid for a flight to California with my debit card, and it felt good—I don’t have to think about paying that money back next month.

You need good credit to do things like convince a landlord to rent you an apartment. When I put in an application for my current apartment, I was told that I would be competing with six other people who were also interested in renting the studio. At the time, I had pulled my credit report and learned that my credit score was close to 800. I crossed my fingers and hoped that a good credit score and a solid letter of recommendation from my previous landlord would make me more desirable. I got a call a few days later saying that the rental company had chosen me. Letter writer, you have already rented two apartments, and there’s no reason that not having a credit card will prevent you from renting apartments in the future.

And there’s no reason that it will prevent you from buying a house one day either. You can get a 15-year, fixed-rate mortgage without a credit score through something called manual underwriting—you’ll need a 20 percent down payment, good income, and a history of paying all your bills on time (rent, electric, cell phone, etc.), but it’s an option to consider.

You don’t have to get a credit card if it’s something you don’t want. But you also don’t have to be afraid of them either. Although I say I wouldn’t have gotten a credit card in the first place, I’ve still held on to the ones I have. They are there in my wallet, but I am no longer a slave to them. If I put in the effort, I might be able to make myself become one of those people who can turn the slaveowners into slaves. I keep them because, yes, I have figured out way to be responsible with them, and being able to wave a good credit score around has been useful to me.

Letter writer, you seem like the responsible type—the sort of person who would not let yourself become a slave to a financial product. Here’s what you need to know: If you get a credit card, and decide to use it, pay off your bills in full every month. Don’t let the banks take any of your real dollars, connected to a real bank account, in the form of interest payments. I hope they never do.


[See previous advice columns]

Photo: Philip Taylor PT/Flickr


32 Comments / Post A Comment

Can we get some advise on choosing a credit card if we do want/need one? I switched from a Big Bank to a Local Credit Union recently but left my credit card (originally opened for overdraft protection) there because I don’t know how to choose a new one. It’s got a balance from some recent unemployment that I’m diligently paying down, so just closing it out (like I’d like) is not an option.

Mike Dang (#2)

@Saralyn@twitter I’ll dream something up for you.

@Mike Dang Yay! If my parents weren’t the kind of people who bounced around from card to card for the balance transfer deals, I would ask them. But, here we are.

ghechr (#596)

@Saralyn@twitter It depends on what you intend on using your credit card for. If you want to do a balance transfer, you will need to find one with the lost balance transfer fee and lowest interest rate. Often you can get a 0% introductory rate for several months. If you use your card like I do, I pay it off every month and collect the rewards points for stuff. To me, the monthly interest rate is not too important (because no interest ever accrues) but the card’s benefits are. It really depends. Personally, I use a Chase Sapphire card with Ultimate Rewards. I have also had a Southwest Airlines card.

@Saralyn@twitter I recently did the same thing! and transfered my CC balance (for shame, I know) to a Credit Card with the credit union. You should talk with your credit union, i bet they can offer you some options!

acid burn (#113)

One thing I have heard is that there are certain circumstances where it’s better to use a credit card than a debit card, like supposedly big-ticket items or online purchasing or when you’re traveling, because if something goes wrong you have more ability to contest the charges (if it’s debit, the money is just gone forever). Can anybody comment on this?

@acid burn good question! I just learned in the heidi moore post that you can make travel reservations on debit rather than credit and i’m still like “sayyyy whaaaaaaaaaaaat” so i’m clearly basically clueless and I want to know about this too.

chic noir (#713)

@acid burn -Yea, I’ve read that rental car companies make people paying with a debit pay a larger down payment. Oh, wait maybe that was people paying with cash.

acid burn (#113)

@chic noir Yeah, and also isn’t it the case that some places just won’t take a debit card at all? Like I want to say certain hotels. But maybe it is true that you just have to put down a bigger deposit.

Mike Dang (#2)

@acid burn Some car companies don’t accept debit cards, you’re right. And hotels can put a longer hold on your cash if you’re paying with a debit card, and not a credit card. But someone once made $1,000 worth of fraudulent charges on my debit card, and I was able to clear that up pretty quickly with my bank (which was Wamu at the time). But if there are fraudulent charges, yes, it’s nice that it’s affecting your credit, and not the actual cash in your account.

NoReally (#45)

@chic noir But student loan debt, like house debt, can be an investment, on which you can expect a return, with some risk. Houses can appreciate. Education can increase your income. The difference between interest you pay on crap you just want to have and can’t pay for, or even a car you can’t pay cash for, is that the interest serves just to let you pay even more for it, for the privilege of getting to buy it at all. There’s no return.

chic noir (#713)

Bravo on avoiding credit cards, your parents are very smart people.

< Avoid debt period!

I’m thinking this includes student loan debt. Susie Orman and the other “money gurus” are full of it. Student loan debt is not “good debt” it is the most dangerous type of debt.

@chic noir ideally student loan debt should be avoided. However, independent students <26yo must submit *parents* financial info to qualify for need-based grants (my parents refused to fill anything out…). So my personal stance is that if the student is reasonable about expectations (technical or state schools, pick majors that balance wage earning with “well-roundedness”, student loans may delay home ownership by decades) and do their best to minimize debt (take a full load each quarter/semester, apply for scholarships, live frugally, get a job, work full time in summers) the benefit of higher ed may outweigh a life with only HS education. A four-year ivy-league education isn’t for everyone, but a HS diploma doesn’t open many doors (unfortunately)

undinespragg (#867)

I have two credit cards: one I share with my partner and pay out of our joint checking account, and one is for my own expenses, paid out of my checking account. Both get paid in full every month (and I manage those payments, along with the rest of our finances–my (male) partner is much less knowledgeable about the details of our financial life–so take that, NYT trend piece). The act of scheduling that payment each month is a fairly useful reminder of how much we’ve spent. And there’s a certain sense of paying for everything twice, because at the time I buy something, I’m very much aware that anything I put on the credit card is something I’ll have to pay for, but then I have to actually pay for it all over at the end of the month. So I think that if you approach a credit card with the understanding (or, in my case, compulsion bordering on pathology) that you absolutely must pay the entire bill every month or some unspecified terrible thing will happen (like I said, it borders on pathology), it’s a lot harder to get sucked into seeing a line of credit as free money.

The upside of all that is that both our joint card and my own card have very good cash rewards program (because pathology about paying things off=good credit score). That means our joint card handed us back $300 last year, and mine gives me a couple hundred bucks a year. We’re not big spenders in general, otherwise the rewards would be even higher. As far as I’m concerned, dealing with the hassle of having a credit card is easily worth 500 bucks a year.

@undinespragg the feeling of paying for something twice is why i use my credit card as little as possible. yuckkkkk yuckie yuck <– mature

thewurst (#435)

Should I be bringing a letter of recommendation from my landlord with me when I move up to New York?

@thewurst You should bring a letter of recommendation from your landlord with you everywhere, always.

thewurst (#435)

@Logan Sachon I’ll keep it in my wallet.

But what if you lose your wallet? Better have it inscribed on your torso.

The notion that you “need” a credit card to have any credit at all is one of those things people say over and over on almost no evidence, because maybe like one out of 100 people have even the faintest idea how their credit score is calculated?

I rented numerous apartments and bought a house with my wife without ever having had a credit card and had zero problems (I gather if you’re doing it totally by yourself it might make buying a house hard, but if you’re buying a house completely on your lonesome I’m going to assume you probably make enough money to not look like a terrible financial risk to a lender). Live your financial life responsibly, pay your bills, and don’t live beyond your means and your credit score will be fine, with or without a credit card.

@Leon Tchotchke Oh partial retraction: checking into hotels and renting cars, that DOES cause some problems without a credit card.

@Leon Tchotchke Also I’m apparently late to the party in saying that. OH WELL.

frenz.lo (#455)

@Leon Tchotchke My experience is different from your own. My husband and I closed on our house last March, and though he has had bills in his name and paid on time for years, our broker told us that his credit score was too low due to lack of credit. (He had noa card.)Due We still got the house, using my credit score and information for the mortgage loan, and then titled him on the house itself. This could’ve been a problem, though, if our needs as far as space, amenities, and neighborhood were less modest, or if my income had showed as lower.
So, yes, you can get a house without a credit card in a variety of ways, but if a house is a goal, you are going to find it awfully convenient to lay in a card for that purpose.

steponitvelma (#914)

@Leon Tchotchke My experience is also different from yours. My BF has never had a credit card either and has led a very responsible financial life including having bills in his name. However because he is deemed to have no credit because he’s never had a credit card or a loan then he has been unable to rent a car (which I know you mentioned) which meant the extra costs of having to shell out for a hotel room for an extra night and taking a cramped bus for hours. He is also having trouble getting a cell phone from a new cell phone provider because they want a $500 deposit which is only refundable at the end of his contract in 2 years and he doesn’t have the income to do that. Not having any credit has definitely been a problem for him repeatedly and he has finally been able to secure a credit card through his bank so he can start building credit.
You mention that it is a myth that you need a credit card to build credit and most people don’t understand how their credit score is calculated. Can you point me to a link that explains it (or maybe you could just explain it)? Because I always assumed you build credit by having someone loan you money and then paying them back (i.e. having a credit card). From my understanding you don’t build credit by having bills in your name because no one is loaning you money they’re just extending you a service, you can only hurt your credit by not paying those bills and having them sent into collections. I’m sure it’s probably more complicated than that.

jjdavis (#871)

If used responsibly, credit cards can actually make you money.

I spend cash on almost nothing and very few bills are paid from my checking account — everything is put on credit. This has two benefits: 1) the money stays in my checking account for an extra month (until I pay my credit card bill) thereby earning interest (yes, I know interest rates are really low – but a couple of dollars a year is better than nothing), and 2) credit cards will give you cash back (1% on most purchases, and 2% or even 5% on other specific purchases). That cash back can add up very fast.

The alternative – paying in cash or directly from your checking account with a debit card – is that you get no cash back and you get no interest on the money in your bank accounts.

Of course, all of the above assumes that the credit card bill is paid in full each month. But if you have the discipline to not spend more than you can pay off, you are doing your self a disservice by paying with your own money.

@jjdavis And if you don’t have that discipline, there are also charge cards which give you the reward benefits of credit cards but require you to pay it off every month.

Also, paying it off every month is pretty much like a 30 day interest free loan.

Another benefit of some credit cards is purchase protection giving you extended warranties or guaranteed refunds.

I am also really debt-averse (I have an entirely manageable amount of student loan debt, and it still makes me so anxious, I want it all PAID FOR AND GONE) and was kind of nervous about getting a credit card, I got my first one last year at age 25, but now I really like it.

I’ve found it actually makes tracking my spending easier than my debit card, because I also use Mike’s “spend roughly the same amount each month but in different categories” budgeting strategy, and when I was adjusting my spending to having a new job, seeing the credit card balance made it super-obvious how much I’d spent so far, as opposed to doing math based on my checking account activity. Now that I have a good handle on monthly totals, It also helps me plan a bit farther ahead. I can always see how much I’ve spent so far this month but don’t pay for it until the next month, so if an unexpected expense comes up I can save on other things in anticipation of the next payment. Or if I had a month where I spent less for whatever reason, I can plan for the next month to put more money in my savings account or make an extra loan payment or buy myself something fancy, depending. I really like the advance notice.

I guess it makes a difference that my credit card is from the same credit union that my main checking and savings accounts are with, but I’ve never been tempted to charge something and feel like I’m not spending money, the credit card is a number I check along with my other balances, just one I subtract instead of add. I always pay off the full balance monthly, and it’s really easy and quick to do since, again, it’s all part of the same online banking system.

I also have hope that one day the interest rates on checking/savings accounts will go up and I’ll make some noticeable extra interest income from hanging onto money until the monthly bill is due.

Megano! (#124)

I just treat my credit card like cash? Like, it is part of my budget, and I just pay it off in full every month. And my limit is only $500, which is what I can afford. And if I need to put more money on the card (like to order furniture online because I do not have a car and hate going to Ikea), I just put extra on it and it is no big? Is this a weird thing?

kellyography (#250)

@Megano! I do this, too. Except I LOVE going to IKEA.

Megano! (#124)

@kellyography I HATE IT IT IS THE DEVIL. But a very good relationship test.

clairapluie (#805)

Can we do a whole article on balance transfers for a credit card? Because I did not even know that was a thing that existed and I have no clue how to complete one. How much money do you save on average? Is it worth transferring it to a card that’s not connected to my bank? Can I call my card company and just negotiate my interest down because I feel like it? I would really like to pay less interest per month on it. HALP.

I have nothing smart to contribute only that I’m also 27 and have never had a credit card. But then again, I’m a terribly cheap motherfucker.

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