Is living without credit cards a dangerous idea?

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robotobor
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Is living without credit cards a dangerous idea?

Post by robotobor »

Hello. I am new here and would greatly appreciate your thoughts. :happy

I am thinking of closing all credit cards within this year to fully embrace the idea of living without debt. I will be credit card debt free in the next few months and would ultimately like to close all of them (I have 4 cards). None of the cards have fees and I am not paying any interest on the balance that I do owe. I am paying off a large vet bill all within the interest free time frame. Even if I do close all credit cards, I still have a student loan and a leased car loan in my name. The student loan is set to be paid off completely in the next 18 months and the car is a lease I took out on my mom's behalf because her credit score was too low. She is making her payments on time and only 2 more years left on the car. To ensure that payments are made on time, I make the monthly payments and she reimburses me every month. Considering that I have other loans in my name, would it be a dangerous idea to close all 4 cards? My credit score is excellent. It was 800 the last time I checked, but that was before the vet bill. The idea of living completely debt free is very appealing to me, but at the same time I would love to buy a house in the next 10 years (which means taking out a mortgage because homes in Los Angeles are ridiculously expensive) and understand the importance of an excellent credit score. Once the student loan and the car lease is over, I won't have any other loans under my name. Would it be better to keep at least one credit card around? Is it impossible to live without credit cards?

*On a side note, please consider getting your pet insurance. I can recommend a couple insurance companies if interested.

Thank you! :D
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kenyan
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Re: Is living without credit cards a dangerous idea?

Post by kenyan »

It's certainly possible to live without credit cards, and for those who have problems controlling their spending, it might even be a good idea. A debit card may be used in most (all?) cases where cash will not suffice, such as with car rentals and online shopping. It might be noted that there are some fees on debit card transactions that aren't charged on credit cards, but I believe the legal battle over those fees is still ongoing.

In my financial world, there is no such thing as credit card debt. It's not even an option, and my spending is well-controlled regardless of the presence of credit cards. Credit cards are just a tool for convenience, perks, and rewards. If this is not how you think of your credit cards, I can see the benefit to getting rid of them.

I can't comment with authority on how your credit score/ability to purchase a house in ten years will be impacted if you have no credit history over that time. I'm sure there are methods to making this happen without credit cards.
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ajcp
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Re: Is living without credit cards a dangerous idea?

Post by ajcp »

I'd probably keep them if you want to get a mortgage in 10 years. Closed credit cards fall off your credit report in 10 years, so as far as your lender will know, you never had them. I believe the same is true for the other loans. So if you wind up buying in 11 or 12 years, you'll have the same credit as an 18 year old just starting out, no negatives but no positives either.
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Re: Is living without credit cards a dangerous idea?

Post by Calm Man »

Keep 1 but don't use it. That's unless.... you ever want to book a hotel room or an airline ticket. And I HATE debit cards because once the money comes out for a debit it's your problem. On a credit card, it costs you nothing until a matter is resolved or you pay it. But don't go without one, you never know if an emergency will occur.
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frugaltype
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Re: Is living without credit cards a dangerous idea?

Post by frugaltype »

I would never be without two credit cards. There's always the possibility of some emergency where you don't have enough cash or enough in your checking account and the place requires being paid upfront. What about some vet emergency hospital, for example, or your car breaks down in the boonies.

Two cards because something can always happen to make one card useless - lost or some error that closes it.
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Re: Is living without credit cards a dangerous idea?

Post by YttriumNitrate »

robotobor wrote:The idea of living completely debt free is very appealing to me, but at the same time I would love to buy a house in the next 10 years (which means taking out a mortgage because homes in Los Angeles are ridiculously expensive) and understand the importance of an excellent credit score.
Well, if you think you are going to get a conforming mortgage loan (less than $417,000) then going by the FifthThird mortgage sheets any score credit score above 740 is treated the same and the slight credit improvement by having a credit card probably won't make too much difference.

To get the absolute best rates for a jumbo loan, a credit score of 800+ is needed, and in that case it would probably be best to keep the credit card around.
Random Poster
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Re: Is living without credit cards a dangerous idea?

Post by Random Poster »

Calm Man wrote:Keep 1 but don't use it. That's unless.... you ever want to book a hotel room or an airline ticket. And I HATE debit cards because once the money comes out for a debit it's your problem. On a credit card, it costs you nothing until a matter is resolved or you pay it. But don't go without one, you never know if an emergency will occur.
Exactly.

Booking an airline ticket or a hotel room (or renting a car) without a credit card is, in my view, simply asking for trouble.

And I'd use a credit card for big-ticket purchases, so long as you have the money in the bank, as well, since a credit card can give you extended warranty protection.

I also only use a credit card when buying stuff online, for the ability to do a charge-back if the product never arrives (or arrives not as shown on tv, so to speak). If you don't buy stuff online, though, then having a credit card for that purpose is of no use to you.
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retiredjg
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Re: Is living without credit cards a dangerous idea?

Post by retiredjg »

Getting out of debt does not require you to cut up your cards. You can have as many cards as you want and still be debt free. I'd keep them and use at least one of them (for gas maybe) and pay it off each month. After 6 months, use a different card. This helps you maintain your excellent credit rating and costs you nothing.

There are pitfalls for not having a credit card or two. There are things you cannot do without one. For example, you can't buy gas at the pump with cash - you have to go inside and wait in line. Online purchases and car rentals also come to mind - you pretty much have to have a card to do either of those.

Don't put yourself in a less flexible position just to say you don't have any cards. It's not worth it. Besides, if you close all your cards, your credit rating will likely go down.
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Re: Is living without credit cards a dangerous idea?

Post by ajcp »

YttriumNitrate wrote:Well, if you think you are going to get a conforming mortgage loan (less than $417,000) then going by the FifthThird mortgage sheets any score credit score above 740 is treated the same and the slight credit improvement by having a credit card probably won't make too much difference.
If all of op's account fall off, his score could easily fall below 740.
ddunca1944
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Re: Is living without credit cards a dangerous idea?

Post by ddunca1944 »

The idea of living completely debt free is very appealing to me,
Being debt free and having credit cards are not mutually exclusive.
but at the same time I would love to buy a house in the next 10 years (which means taking out a mortgage because homes in Los Angeles are ridiculously expensive) and understand the importance of an excellent credit score.
Would it be better to keep at least one credit card around?
Since you want to buy a house, you will need decent credit. Having at least one card and a history of regular payments will help.
Is it impossible to live without credit cards?
No, it's not impossible, but it would be inconvenient.

I'd keep one or two and pay them off in full each month.
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Re: Is living without credit cards a dangerous idea?

Post by ajcp »

You don't even have to use them every month if you don't want to. Even just a nominal charge every 6 months on a card or 2 could go a long way in 10 years.
denovo
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Re: Is living without credit cards a dangerous idea?

Post by denovo »

Some people think using credit cards trigger overspending.

If you think you fall into this category, only use your credit cards for monthly recurring expenses like the utilities and cable bill, spread that out on to the 4 cards and LEAVE THEM AT HOME.

I'd be careful carrying tons of cash around me . Keep the cards for your credit score purposes.
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galeno
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Re: Is living without credit cards a dangerous idea?

Post by galeno »

We live without credit cards and don't have a checking account. But we live in a country where cash is king. Local merchants will not accept personal checks. They pay 7.X% every time someone uses a credit card. It's a rip-off.

We have two credit cards but we only use them to reserve something like a hotel or car rental. Then we pay the bill in cash and ask for a receipt so we if we get double billed on the card we can dispute it.

We do this everywhere we can. Sometimes in the USA, we will get strange looks when we do this with large amounts of cash. I don't like "pay cards" of any type that gives a slice the bill to a bank or financial intuition.
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Re: Is living without credit cards a dangerous idea?

Post by nisiprius »

I don't think it's dangerous, but, unfortunately, it is so far out of the mainstream that you will constantly be experiencing small challenges. Very likely if you try to live without credit cards you'll find that the problems are surmountable, and that you will find solutions that I don't know about because I have a credit card. A lot of things in life are that way--you think you can't get along without some minor convenience, because you don't even try to figure out the alternative until you need to.

Someone had a fairly wise joke sign in their office that said "If there is anything at all you need, don't hesitate to ask me, and I will explain how you can manage without it."

It seems to me that the prepaid credit cards you buy e.g. at supermarkets at ripoff prices could be a partial solution--pay $3.95 for a prepaid Visa "gift card" with $100 on it, etc. could be a partial solution. It would at least give you a way to pay for small items in situations where only plastic can be used.

In the US people expect certain things from members of certain socioeconomic classes. Probably, these days, the list would include: a car; a cell phone--maybe a smartphone these days; Internet access; and a credit card. If you don't meet those expectations, there will be consequences. Just as there are consequences to breaching a written or unwritten dress code.

I think our supermarket will still take checks but it's so rare to see people paying with one that I'm not actually sure. Well, if you write a check at the supermarket you will probably see people behind you looking impatient. That sort of thing.

I shop for groceries on foot with one or two big shopping bags--sometimes one on wheels. Well, if when people see an old guy, out in daylight on a weekday, not in business dress, shopping without a car, they tend to assume that that person either can't afford a car--or had their license revoked.
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Re: Is living without credit cards a dangerous idea?

Post by Grt2bOutdoors »

Your credit score is based on how long you've held your credit accounts, your ability to repay as agreed upon - on time and the amount of credit you have utilized as a percentage of your overall credit limits. You should keep at least one credit card account open - a credit card account is known as revolving credit. Revolving credit are accounts that permit you to draw down the credit line when you charge something, as you pay it back, the amount of available credit you can access in the future goes back up. Typically, these accounts are unsecured. You can hold a credit card with zero activity and still be considered as "debt free". I wouldn't get too hung up on this "I must be debt free so I need to close all my credit accounts" - no you don't. The only thing you need to be debt-free is to have the ability to say "NO" when it comes to spending beyond your means.

Installment credit - are loans that you pay back a set amount over a period of time until it has been paid back in full, both principal and interest. The loans may be either secured or unsecured. A student loan is a form of installment credit.

A mortgage is a form of secured credit - you pledge your real estate asset to the lender, if you fail to pay as agreed, they foreclose and take back the real estate you pledged as collateral.

If you close all of your credit card accounts - your score will drop, based on the amount of your reduced credit availability, and by shortening the duration the average credit account has been opened and reduced payment history.
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Re: Is living without credit cards a dangerous idea?

Post by Grt2bOutdoors »

nisiprius wrote: I shop for groceries on foot with one or two big shopping bags--sometimes one on wheels. Well, if when people see an old guy, out in daylight on a weekday, not in business dress, shopping without a car, they tend to assume that that person either can't afford a car--or had their license revoked.
Was that you I saw on Friday? I noticed the police officer giving you the eye. :P
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Re: Is living without credit cards a dangerous idea?

Post by denovo »

nisiprius wrote: I think our supermarket will still take checks but it's so rare to see people paying with one that I'm not actually sure. Well, if you write a check at the supermarket you will probably see people behind you looking impatient. That sort of thing.
That's me! Not the person writing the check, but the person who is impatient. I think some supermarkets at least say no checks for the X items or less express line.
Last edited by denovo on Wed Jan 15, 2014 6:39 pm, edited 1 time in total.
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frugaltype
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Re: Is living without credit cards a dangerous idea?

Post by frugaltype »

nisiprius wrote: In the US people expect certain things from members of certain socioeconomic classes. Probably, these days, the list would include: a car; a cell phone--maybe a smartphone these days; Internet access; and a credit card. If you don't meet those expectations, there will be consequences. Just as there are consequences to breaching a written or unwritten dress code....

I shop for groceries on foot with one or two big shopping bags--sometimes one on wheels. Well, if when people see an old guy, out in daylight on a weekday, not in business dress, shopping without a car, they tend to assume that that person either can't afford a car--or had their license revoked.
I don't plan to get a smart phone, my decade+ cell phone is fine for me. I don't expect any unfortunate consequences from this.

I often see elderly people with those wheeled carts. I've always assumed, if I even thought about it, that they lived nearby and walked by choice. Not everyone drives everywhere, especially people who were brought up back in the days when people walked.
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Re: Is living without credit cards a dangerous idea?

Post by denovo »

frugaltype wrote:
nisiprius wrote: In the US people expect certain things from members of certain socioeconomic classes. Probably, these days, the list would include: a car; a cell phone--maybe a smartphone these days; Internet access; and a credit card. If you don't meet those expectations, there will be consequences. Just as there are consequences to breaching a written or unwritten dress code....

I shop for groceries on foot with one or two big shopping bags--sometimes one on wheels. Well, if when people see an old guy, out in daylight on a weekday, not in business dress, shopping without a car, they tend to assume that that person either can't afford a car--or had their license revoked.
I don't plan to get a smart phone, my decade+ cell phone is fine for me. I don't expect any unfortunate consequences from this.

I often see elderly people with those wheeled carts. I've always assumed, if I even thought about it, that they lived nearby and walked by choice. Not everyone drives everywhere, especially people who were brought up back in the days when people walked.
I think it can be regional. I never saw those in suburban Los Angeles, but see a lot in the dense DC metro area, even among members of the middle or well to do.
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Re: Is living without credit cards a dangerous idea?

Post by nisiprius »

robotobor, I'm not utterly fanatic about keeping out of debt, but I do enjoy "rolling out the boulder" from time to time, and since you are already inclined that way I will do so in your honor:

Image

This is one of a series of thirty or so boulders, whose inscriptions were commissioned by Roger Babson, in part I think as a charitable act to employ some people during the depression. They are near Gloucester, MA in the area known as "dogtown." There's a lot about the area in Dogtown: Death and Enchantment in a New England Ghost Town by Elyssa East. Babson was somewhat eccentric. He was a pioneer in financial statistics, and won fame for saying "Sooner or later a crash is coming and it may be terrific" at just the right time in 1929. He founded Babson College, a well-regarded small business school. He commissioned about fifteen "Gravity monuments" to be placed in various colleges, to inspire students with the idea of developing an antigravity shield.

Some of the other boulders have inscriptions on them like "Get a Job," "Help Mother," "If Work Stops, Values Decay," and, of course, "To Rockport."

I don't know of anyone who ever bothered to have a boulder carved saying "Stay In Hock."
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BL
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Re: Is living without credit cards a dangerous idea?

Post by BL »

I have one credit card with a credit union where I also have an account. I frequently, for no particular reason, go online and pay it off the same day I charged something on it. So that would be one way of having essentially no debt and still have a credit card. If you never travel by air, rent a car, order on-line, etc., you may do fine without a card. If they are a temptation, freeze them in a block of ice in your freezer so you would have to really make an effort to get at it.
playtothebeat
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Re: Is living without credit cards a dangerous idea?

Post by playtothebeat »

Frankly, i think it's very impractical in today's society to live without a credit card. For instance, you can't buy a meal or a drink on an airplane with cash anymore - has to be plastic (you can use debit, of course).

As someone pointed out, I'd use the CCs for large items (for rewards), and you also have to have one for things like booking a car. In some instances you can use debit as well, but I believe that places an additional hold on your account.

Plus, in case of emergencies, it's nice to have extra availability (and remember, this is unsecured debt; in an absolute worst case scenario, you can walk away - and ruin your credit, understandable, but if sht hits the fan, you wouldn't be the first person to do it).
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Re: Is living without credit cards a dangerous idea?

Post by hudson »

nisiprius wrote: This is one of a series of thirty or so boulders, whose inscriptions were commissioned by Roger Babson, in part I think as a charitable act to employ some people during the depression. They are near Gloucester, MA in the area known as "dogtown." "
I was interested in seeing the boulders without driving for 18 hours, so I found this. I hope to visit Dogtown in person....maybe they've got a good lobster shack nearby?

http://www.thedacrons.com/eric/dogtown/ ... cester.php
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Re: Is living without credit cards a dangerous idea?

Post by Caduceus »

You will still be able to get a home with manual underwriting (from what I've read). But if you are not the kind of person who is tempted by credit cards at all, why not slash the limits to something tiny (like $1000 or $2000) and then keep them in a drawer and not use them simply to lengthen the history?

On top of that, you could set up automatic email/text alerts if any transactions above a certain amount take place, to prevent fraud. But as your limits are so low to begin with, even the worst case scenario is not particularly problematic.

One thing to think about is that credit cards offer consumers better protection. You can easily dispute a transaction on a credit card; with debit cards there's going to be a lot more hassle.
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Re: Is living without credit cards a dangerous idea?

Post by tbradnc »

Get a prepaid Visa or MasterCard and try it for a year.

I don't think living without credit cards would be the dictionary definition of dangerous. I think you'd find it under "inconvenient" though.
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Re: Is living without credit cards a dangerous idea?

Post by VictoriaF »

Why do you think you should get rid of your credit cards? Is it your own idea, or are you influenced by a financial adviser you saw on TV? Much of the advice you get on TV is inaccurate, misleading, or downright wrong. If you have any doubt bring it to this Forum, as you did with the credit cards. Here are some general suggestions:

1. Credit cards are not evil, if you can control your impulses to buy.
2. For the same level of convenience, credit cards are preferable to debit cards.
3. If you are not sure in your willpower, train yourself to withstand the temptations of the credit. For example, you may decide not to carry credit cards with you and create some barriers for online purchases.

Someone I know uses the following trick. He puts credit cards in a sealed plastic bag and puts the bag into a dish with water. Then he puts the dish into the freezer. In order to use a credit card, he has to thaw the water, extract the card, and upon using it, put it back into the bag, seal the bag and put the dish back into the freezer. The cumbersome process significantly reduced his frivolous use of the cards.

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Re: Is living without credit cards a dangerous idea?

Post by sport »

If you travel, you never know what need for money might arise. Since travelers checks are a thing of the past, you should have a credit card, or two, with you "just in case". The other alternative would be a debit card and there have been earlier threads that explain why these are generally a bad idea.
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Re: Is living without credit cards a dangerous idea?

Post by LH »

keep a credit card.

1) use a cash back credit card, currenlty quicksilver 1.5 cash back is the best (unless you have a fidelity brokerage account). This gets you 1.5 percent off everything you use it for.

2) emergency use. A credit card is really handy.

3) booking things, a lot of places wont book unless you have a credit card

If you really have trouble paying off balances, then I guess just get a debit card, and use that. But realize, the opportunity cost of 1.5percent off expenses is a real one. That money adds up, and is significant.
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Re: Is living without credit cards a dangerous idea?

Post by mlipps »

My parents don't have and have never had a credit card. But they also don't do many of the things mentioned earlier in this thread that you might need to one for, like stay in hotels, rent cars, fly, or buy drinks when they fly.

Personally, the biggest reason I use a credit card is for fraud protection because I do most of my shopping online. It's not worth the risk of using my debit card.
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Re: Is living without credit cards a dangerous idea?

Post by NuB 2013 »

I think living without them would be really easy. Traveling without them would be a real pain. I had this happen recently when taking a road trip along the gulf coast. Credit card companies do not like the idea of charges that are not 'routine' showing up in their history and will send you a new one in the mail after shutting down your card.

In my experience it's been typical for them not to notify you in any way that they are doing so.

My suggestion would be to keep two credit cards at any given time for convenience.
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Re: Is living without credit cards a dangerous idea?

Post by denovo »

NuB 2013 wrote:I think living without them would be really easy. Traveling without them would be a real pain. I had this happen recently when taking a road trip along the gulf coast. Credit card companies do not like the idea of charges that are not 'routine' showing up in their history and will send you a new one in the mail after shutting down your card.
I take it you haven't heard of a travel notification form?
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Re: Is living without credit cards a dangerous idea?

Post by NuB 2013 »

[/quote]

I take it you haven't heard of a travel notification form?[/quote]

I have not heard of the travel notification form. I have called in advance for longer term travel, but must admit that for long weekends etc. I typically do not take these kinds of precautions.
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Re: Is living without credit cards a dangerous idea?

Post by amitb00 »

I always pay credit card in full, have paid no interest to them. Last year my rewards were >2600 USD. It is not the credit card but how you use it makes a difference. Even w/o CC, one can be reckless.
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Re: Is living without credit cards a dangerous idea?

Post by Watty »

Random Poster wrote:
Calm Man wrote:Keep 1 but don't use it. That's unless.... you ever want to book a hotel room or an airline ticket. And I HATE debit cards because once the money comes out for a debit it's your problem. On a credit card, it costs you nothing until a matter is resolved or you pay it. But don't go without one, you never know if an emergency will occur.
Exactly.

Booking an airline ticket or a hotel room (or renting a car) without a credit card is, in my view, simply asking for trouble.

And I'd use a credit card for big-ticket purchases, so long as you have the money in the bank, as well, since a credit card can give you extended warranty protection.

I also only use a credit card when buying stuff online, for the ability to do a charge-back if the product never arrives (or arrives not as shown on tv, so to speak). If you don't buy stuff online, though, then having a credit card for that purpose is of no use to you.

+1

For occasional large purchases carrying a thousand dollars or more in cash might not be the safest things.

I have heard of so many problems with them that I will not have a debit card either though several banks have tried to give them to me instead of an ATM card.
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Re: Is living without credit cards a dangerous idea?

Post by john94549 »

A credit card can be handy if booking an airline ticket. A credit card can be handy if buying "stuff" on-line. A credit card can be handy for all sorts of things. Life is dangerous.

One can "live off the grid" without credit cards, but it's a bit of a pain.

Up to you.
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retiredjg
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Re: Is living without credit cards a dangerous idea?

Post by retiredjg »

NuB 2013 wrote:In my experience it's been typical for them not to notify you in any way that they are doing so. My suggestion would be to keep two credit cards at any given time for convenience.
My experience is the opposite. One of my cards was compromised recently (odd charges). They froze the card and called me. I told them the charges were fraudulent and the card was cancelled. Another card saw what they though were odd charges, froze my credit and called me. I explained I'm on the road. The card was re-activated.

Perhaps your card people don't know how to get in touch with you?

I certainly agree it is good to have 2 cards.
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Re: Is living without credit cards a dangerous idea?

Post by Fallible »

robotobor wrote:Hello. I am new here and would greatly appreciate your thoughts. :happy

I am thinking of closing all credit cards within this year to fully embrace the idea of living without debt. ...
The best and most detailed advice I ever read on just about every aspect of credit cards is in Jane Bryant Quinn's (she's a Boglehead!) marvelous and mammoth book, Making the Most of Your Money Now. Chapter 10, "Kicking the Credit Card Habit" is a good place to start. But I hope you'll buy the book, as it can be a wonderful and thorough guide for just about everything financial. And if you keep one card, she will tell you what you need to know: "At the end of the month, you pay the bill. The whole bill."
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
Fallible
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Re: Is living without credit cards a dangerous idea?

Post by Fallible »

nisiprius wrote:I don't think it's dangerous, but, unfortunately, it is so far out of the mainstream that you will constantly be experiencing small challenges. Very likely if you try to live without credit cards you'll find that the problems are surmountable, and that you will find solutions that I don't know about because I have a credit card. A lot of things in life are that way--you think you can't get along without some minor convenience, because you don't even try to figure out the alternative until you need to.
...
I recently got a debit card, use it infrequently, and realize it lacks some advantages of a credit card. I've never had a major credit card and you have almost perfectly described what it's like: "small challenges" (but not at all "constantly,") and all "surmountable." :happy
Last edited by Fallible on Thu Mar 06, 2014 11:06 am, edited 1 time in total.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
sport
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Re: Is living without credit cards a dangerous idea?

Post by sport »

I bought a computer with a credit card. The hard drive died after one year, but before two years. Visa paid for a new hard drive. My son had an I-Pod die after the warranty was over. American Express paid for a new one. Some one used my Amex card fraudulently. Amex noticed it, contacted me, cancelled the card and sent a new one by overnight courier. My cost was zero. As long as you use credit cards responsibly, they are safe, convenient, and have some real economic advantages. The rebates are nice too.
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Re: Is living without credit cards a dangerous idea?

Post by denovo »

NuB 2013 wrote:
I take it you haven't heard of a travel notification form?[/quote]

I have not heard of the travel notification form. I have called in advance for longer term travel, but must admit that for long weekends etc. I typically do not take these kinds of precautions.[/quote]

Pretty much every credit card I use has a travel notification form on their site, but you can always call. If I am going to be more than 300 miles away from my home base, I send a notice. I have never had a problem and I do this quite often.
"Don't trust everything you read on the Internet"- Abraham Lincoln
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roymeo
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Re: Is living without credit cards a dangerous idea?

Post by roymeo »

I was recently at a bakery in Amsterdam that only accepted credit "for cleanliness reasons". (Does Japan still have machines to clean and wash bills?) I wasn't able to pay for anything there because I didn't have a Chip+PIN Credit card, though....do they make Chip+PIN Debit?

California Unemployment Insurance is now paid on a BofA Visa Debit card.

There's not an earthquake right now, but I have some survival supplies in the house. I think it would be wiser to be able to learn to use credit wisely (or rarely) rather that cut up the cards.

And what about online? Debit linked to your bank?

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stemikger
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Re: Is living without credit cards a dangerous idea?

Post by stemikger »

I would keep one to three. Use only one and use it as the old American Express Cards where you have to pay it off in full monthly. I got into trouble with credit cards in my early 20s and learned my lesson. I'm 49 now and have used credit cards responsibly. I look at them as a convenience and not a loan and since I have a very good credit score, I have benefited from 0% interest on some of my cards. In those cases, I have not paid them off in full but always paid them off before the 0% interest rate expired. It has worked for me all these years and in the credit card industry I'm known as a dead beat because they simply can't make money off me.

Unless you have no control over this issue, I think people can use credit cards responsibly. If not, then I guess your way and Dave Ramsey's way is the right thing to do. After all these years, I learned a way that works for me.

Good Luck.
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lrak
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Re: Is living without credit cards a dangerous idea?

Post by lrak »

robotobor wrote:I am thinking of closing all credit cards within this year to fully embrace the idea of living without debt.
What's your aversion to credit card debt that isn't costing you anything?

We find ourselves in somewhere between $1k and $5k of card debt every month. We also spend about $2k in cash and write 20 checks a year. The dollars vanish from the checking account no matter which way we chose to spend our money.
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robotobor
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Re: Is living without credit cards a dangerous idea?

Post by robotobor »

Thank you so much for your responses. I really appreciate your thoughts on this matter.

I would like to clarify a few things regarding my original post. I have a bank account and use a debit card for all of my purchases. I love taking on new challenges but living off the grid isn't one of them. I bank with Schwab and also have a savings account with First Entertainment Credit Union. I am not in the habit of using my credit card and use credit wisely when I do. I am not drowning in debt and living without credit cards is a challenge I'd like to take on at some point, but probably not before I buy a house. The only reason why I even charged my enormous vet bill on my AmEx is because the cash reserve I have now was set aside for emergencies, such as unemployment. I work freelance in the entertainment industry so cash is king when I truly need it. My preoccupation with becoming truly debt free was not influenced by Dave Ramsey (ugh) or Suze Orman (yikes). The decision came about a couple of years ago when I realized I'd still be in debt (school loans) well into my 30s and the thought did not bode will for me. I'm 28 now and would love to enter my 30s without debt. I fully understand that having credit cards does not mean I can't live without being in debt, but I think I can do without 4 cards. I just want to see if anybody out there lived only with a debit card and lived well without having to open a line of credit. People told me I couldn't live in Los Angeles without a car, but I am and loving it. Don't worry folks. I will keep my AmEx!

Again, thank you so much for answering my post! :D
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Re: Is living without credit cards a dangerous idea?

Post by bayview »

Good decision. Keeping that AmEx open will help you when the time comes to apply for a mortgage. Lenders get nervous when they don't see much (or any) credit history, because it means you have no track record from which they can predict your future risk of default. It will also hurt your scores, as mentioned above. It's all about demonstrating that you can handle credit responsibly; that it's a servant, not a master.

Personally, I'd keep 2 or 3 open for an optimal credit profile, but certainly at least one, as you wrote. Use it every now and then for a tank of gas or something, and obviously pay it off before the due date. When the time comes to apply for a mortgage, if that should happen, lenders will love you. :beer
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri
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Aptenodytes
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Re: Is living without credit cards a dangerous idea?

Post by Aptenodytes »

robotobor wrote: I fully understand that having credit cards does not mean I can't live without being in debt, but I think I can do without 4 cards.
{My boolean logic skills aren't quite up to the demands of that sentence, but I understand what you are saying}

I wouldn't worry about the number of cards, but rather the level of debt. I have more cards than I can count, because I like chasing different perks on airlines, amtrak, amazon, etc. etc. But I carry no credit card debt. On the other hand, you can get in big trouble with just one card if you aren't careful.

Your overall debt burden may be perfectly reasonable and nothing to be worried about -- it all depends on what you use the debt for and what your overall financial picture is. I'd say most people here stay in debt well into their 50s, and these days it isn't unreasonable to stay in debt throughout your entire life, if the overall picture is sound. My father, for example, was very successful financially, lived a comfortable, responsible life well within his means, and left a nice legacy to his heirs; but he chose to carry a mortgage into his 80s.

In addition to the ideas concerning pre-paid credit cards, you have the option of asking your credit card company to set a low credit limit, to create an upper bound on your worst case scenario.

Another thing to think about is that mastering the ability to manage credit responsibly is a very valuable life skill, and in the long run you may be better off learning how to live with credit now than going cold turkey and being unequipped down the line. You don't seem like a credit card basket case.
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Re: Is living without credit cards a dangerous idea?

Post by ajcp »

robotobor wrote:I fully understand that having credit cards does not mean I can't live without being in debt, but I think I can do without 4 cards. I just want to see if anybody out there lived only with a debit card and lived well without having to open a line of credit. People told me I couldn't live in Los Angeles without a car, but I am and loving it. Don't worry folks. I will keep my AmEx!
Nothing wrong with trimming down on the 4 cards. You don't need to, but if you find it easier to manage there's not much wrong with it either.

In a vacuum, you don't need a credit card, the debit would be fine. Since this isn't a vacuum and you want to get a mortgage, the cc will help. If you really want to close it after that, I'd say go for it.
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Raymond
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Re: Is living without credit cards a dangerous idea?

Post by Raymond »

In your situation, I would keep two cards.

Since you have indicated you wish to keep the AmEx, and many merchants do not accept it, I would also keep a MasterCard or VISA.

Use them every so often, pay them off, but otherwise keep them locked away or in the freezer :happy
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Re: Is living without credit cards a dangerous idea?

Post by scrabbler1 »

I would easily "+1" most of the replies here but as someone who generally avoids (until recently) using plastic for everyday purchases and has been debt-free since graduating from college 29 years ago (except for 18 months with student loan debt and 9 years of mortgage debt), I can relate to some degree the OP's concerns.

I carry one CC with me and use it mainly for purchases over $35 which are not often. It is a cashback card I have had since last summer. I don't use it for gasoline because my local station charges more for CC than the cashback discount gives me, which is fine. I have a backup CC I keep at home but I keep the annual revolving charge on it so the account will stay open. I use my debit card as an everyday backup to the CC although I have used the DC only about 5 times in 10 years and not since 2010.

The CC has been useful for the rare online purchase, rare airline ticket, and rare car rental. But in each case I was always glad to have the CC for these special purposes. Another reason I don't use DC for most everyday purchases is that my shopping patterns are often erratic such as around now. I do some extra personal shopping after Christmas when there are sales and no crowds at the stores. But I have three family birthdays coming up so that has me buying more things, too. I don't keep a lot of money in my bank account so all of these extra expenses would drain my bank account prematurely. Using my CC enables me to split up these purchases into two billing cycles.

I agree with the CC advantage of having added security compared to DC and not opening up a direct pipeline to your checking account. And pay the CC bill in full every month, of course.
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Re: Is living without credit cards a dangerous idea?

Post by goaties »

I thought the FICO algorithm included a calculation where your total available credit is compared with the amount of credit used. If the OP cancels cards that have a nice juicy credit limit, his total "credit utilization" percentage will suffer. Since he's aiming to totally get rid of debt, he will eventually be in the situation where his ONLY credit available is those cards. I wouldn't cancel anything.
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