It’s acceptable to stay clear of the use of credit cards. Customers can pay for their purchases entirely with cash, check, or a debit card and establish an excellent credit score by taking out other a trusted Apply Online suggests loans. According to a report released in May 2021 Federal Reserve report about the economic health of U.S. households, 83 percent of U.S. consumers had at minimum one credit card in 2020. This could mean that as high as 17 percent or more of U.S. consumers manage without having. Cash is a convenient way to purchase items or obtain credit cards from banks for additional convenience.
There are methods to avoid using a credit card in the U.S., and there are disadvantages. This is what you should be aware of if you choose to live your life without credit cards.
Cons to Not having a Credit Card
The absence of credit cards could hinder your ability to build a solid credit history with a decent credit score. In general, students in college (or even active teens in high schools, provided that their parents agree to cosign or add them in as authorized customers) get a first credit card during school, which gives them the early development of credit history. If they’re ready for automobiles with an auto loan or buy an apartment and get mortgages and credit history, it must be sufficiently extensive that they can be granted a loan. If they don’t have this type of credit history, it could be challenging to get approval for major financial purchases later on in life.
Utilizing only cash or debit cards can be a poor choice for rewards, in addition. One benefit of having certain kinds of credit cards is the possibility of earning cash rewards or cashback for your daily spending such as gas, groceries, or travel-related purchases. Certain U.S. banks offer small cashback on debit cards, but it’s not easy to locate a debit card that offers rewards.
Another disadvantage of paying using debit cards is that they do not provide the same fraud or purchase protection that you get with credit cards. In the event of a fraudulent purchase, being refunded to a checking or savings account could take longer or might not occur at all, dependent on the bank and circumstances.
In the end, certain activities like hiring cars and staying in a hotel could be more difficult if you are using a debit card. Certain businesses will request an enormous amount of money from your account with a checking account if you use a debit card. This could burden your account for a few days.
Alternatives to Not having A Credit Card
Even with some significant negatives, There exist ways to establish good credit and maintain a solid financial record without signing into a credit card:
- Make use of cash or debit cards to limit your spending. If only money or debit cards are available, you’re limited to spending only what’s available on your account or the bank account. It’s virtually impossible to invest more than the available amount. This can be a powerful method of ensuring that your budget is in order. Debit cards are much more efficient than cash, particularly when it comes to online shopping.
- Build credit by making sure you pay other debts or other charges promptly. Student loans and a car loan co-signed by parents are still part of the loan holder’s credit score. In time payments can boost the credit score, but it can take longer to establish an excellent credit score this way. Making other payments on time, such as utility bills, rent, or cable, could count towards credit history. While these types of payments aren’t usually disclosed to credit reporting agencies, some free applications permit this. For instance, Experian offers a free program known as Experian Boost, including the positive history of bill payments to the Experian credit report.
- Become an authorized user. The process of becoming an authorized user on a credit card does not need the user to open her own. This is an excellent solution for those with an accountable friend or family member who’s willing to assist in building credit. When an authorized user is a member, the person will enjoy all the advantages of having a good credit history and credit score so long as the account holder pays their bills on time and settles the balance each month. Before becoming the authorized person, be sure that the credit card company has reported authorized users’ activity to credit bureaus.
- Take out credit-builder loans. The credit builder’s loans assist people in building good credit scores provided they pay on time every month. If a credit builder loans the lender will have large or small money, which the borrower has to repay in installments. When they have paid the loan in total, the entire amount is released and deposited into a savings or checking account. It isn’t always the best method to earn credit since it comes with some costs involved; however, it’s an alternative.
You can avoid credit card debt; however, it might not be the most efficient financial decision based on your financial objectives. There are many ways to establish solid credit without one. Still, it is not as simple as applying for a credit-building loan, getting authorization for a user, and improving credit by punctually paying your other charges. However, using cash or debit cards to make payments can have disadvantages. They don’t provide the same level of protection against fraud or purchase and often don’t offer similar cashback rewards or sign-up bonuses. Before using them altogether, be sure to study the advantages and disadvantages of not having credit cards.