10 Reasons Not to Have a Credit Card - ToughNickel - Money
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10 Reasons Not to Have a Credit Card

Having worked for many years as a debt counselor, Paul is passionate about consumer rights when it comes to persaonal finances.

If you want to know why credit cards are bad for you, read on...

If you want to know why credit cards are bad for you, read on...

With credit so readily available nowadays, and credit cards being advertised and promoted as a convenient way to shop and spend, getting one or more cards is a temptation that most find hard to resist.

There are many downsides to credit cards, however. The main basis of them is that the credit companies make their money from users making financial mistakes. Many people struggle to avoid spending beyond their budget, and with the discipline involved with monitoring and paying off their debts.

I list the main reasons below why you should think twice before getting one.

10 Reasons Why Credit Cards are Bad

  1. High Costs
  2. Fraud
  3. Credit Ratings
  4. Discipline and Debt
  5. False Promises
  6. Card Management is Difficult
  7. Too Easy to Use
  8. Stress
  9. Minimum Payments can be Deceptive
  10. Foreign Transaction Fees

I will explain each reason in more detail below.

1. High Costs

They are an expensive way of borrowing money. Interest rates on credit cards are usually very high compared with other methods of borrowing, such as taking out a personal loan. Added to that are all sorts of other costs and fees that the credit card company adds on.

Why don't we call on the credit card companies to be accountable? They need to be held accountable for their predatory lending practices.

— Paul Wellstone

2. Fraud

As with all electronic methods of payment, you can can be defrauded by unscrupulous people out for financial or material gain, or your card can be employed as a tool for identity theft.

3. Credit Ratings

Many people get credit cards with the aim of building their credit rating. Ratings only improve if all the payments made are big enough and paid on time. If your earnings fall for some reason and the payments aren't kept up, a user's credit rating goes downhill rapidly causing all sorts of problems.

Not everyone has a personality compatible with the financial discipline needed to use a credit card.  Spending beyond your budget is extremely tempting.  Monitoring your spending is time-consuming.  Keeping up with statements and dates is no fun.

Not everyone has a personality compatible with the financial discipline needed to use a credit card. Spending beyond your budget is extremely tempting. Monitoring your spending is time-consuming. Keeping up with statements and dates is no fun.

4. Discipline and Debt

It takes a lot of financial discipline to use credit cards. Care must be taken not to overspend, even when there are temptations to do so. Spending needs to be monitored, statements read, balances paid off. Failure to do these things can lead to serious debt problems.

5. False Promises

Price deals, points, and cashback deals obtained by using them often aren’t so great when charges and interest payments are added into the equation.

Managing a credit card is not easy.  There is a temptation to spend beyond your budget.  Monitoring your statements and payments regularly also takes a lot of effort and discipline, especially if you have multiple credit cards.

Managing a credit card is not easy. There is a temptation to spend beyond your budget. Monitoring your statements and payments regularly also takes a lot of effort and discipline, especially if you have multiple credit cards.

6. Card Management is Difficult

Keeping track of all your debts and payments can become a major issue, especially if users have multiple cards, and other debts or loans. Three cards means three lots of statements and payment deadlines to deal with each month. With money coming in and out all the time, it can easily become confusing.

7. Too Easy to Use

Credit cards are are just too easy to use in some circumstances. Their convenience often means that users often don’t explore all their options - taking out a loan might be cheaper and more appropriate, for instance. The ease of use can also have negative financial consequences for people who have issues with impulsive behavior.

8. Stress

Owing money is in itself stressful for many people. It can cause anxiety, anger, and even mental illnesses such as depression in extreme cases. There is peace of mind in not having to worry about all your debts and how you are going to pay them off each month.

9. Minimum Payments can be Deceptive

Credit companies make their money mainly from users making financial mistakes. Sure, they want you to pay off your debt, but they also want you to hold on to your debt for as long as possible. Minimum payments are set very low, often only 2% to 4% of what you actually owe, so that you pay more interest over time.

10. Foreign Transaction Fees

International travelers often don't discover until too late that many credit cards charge significant foreign transaction fees for the use of credit cards outside of the U.S. The fees can be as high as 3%, making it a costly way to spend in other countries.

Credit cards are often promoted for their convenience, especially for travel purposes.  Many companies charge the user large fees, however, making them an expensive way to spend money abroad and a less desirable method for making purchases.

Credit cards are often promoted for their convenience, especially for travel purposes. Many companies charge the user large fees, however, making them an expensive way to spend money abroad and a less desirable method for making purchases.

5 Alternatives to Using a Credit Card

If you can't get a credit card, or don't want to use one, below are some other options.

  1. Use a debit card. This option gives you most of the convenience of a credit card without the worry about falling into debt, as the card payments connect with your bank and won't let you spend money that you don't have.
  2. Save up a fund of money to be used for emergencies. This requires a degree of self-discipline, but as well as helping to you avoid debt issues, it also means that you always have a pool of money, some of which can be diverted for other purposes if no emergencies occur.
  3. Get a secured credit card. These cards have a credit limit that corresponds with the amount that you have chosen to deposit. As well as imposing financial discipline and providing peace of mind when it comes to debt, they can also help you to build up a good credit score.
  4. Take out an installment loan from a bank or other financial service. The main advantage over credit is that interest rates for loans are generally significantly lower. Some people also appreciate the idea of just paying off a set amount each month until the loan is repaid, rather the constantly fluctuating debt of a credit card.
  5. Use an online payment platform. Examples of these include Paypal, Amazon Payments, Google Checkout, and Skrill. As well as enabling you to perform financial transactions, you can usually also use them to send or receive money from family and friends.

What Wall Street and credit card companies are doing is really not much different from what gangsters and loan sharks do who make predatory loans. While the bankers wear three-piece suits and don't break the knee caps of those who can't pay back, they still are destroying people's lives.

— Bernie Sanders

It is imperative that we make consumers more aware of the long-term effects of their financial decisions, particularly in managing their credit card debt, so that they can avoid financial pitfalls that may lead to bankruptcy.

— Daniel Akaka

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

Questions & Answers

Question: Will paying off half your credit card balance in one go boost your credit score?

Answer: It may boost your credit score slightly and will certainly reduce the amount of interest that you are paying, so it's certainly great in that respect. Generally speaking however, creditors are more interested in consistency over a long period, so making regular payments on time will increase your credit score more in the long run, albeit in a gradual way.