There are many advantages to actually turning down all credit card offers. Roderick Arias, senior banker at Wells Fargo in Dallas says “many of my wealthiest clients have never owned a credit card.” While many people turn to credit cards as a great way to build credit, there is a growing contingency of consumers that are rejecting these plastic conveniences.
The Dangers of Credit Cards
Many people tout credit cards as a way to learn to manage money. Of course, owning a credit card and paying your bills on time will help you improve your credit rating. If you don’t pay bills on time and you incur finance charges, be prepared to see your credit rating sink.
There are many other ways to build credit besides using a credit card. One way of building credit is to take out a loan from the bank and pay it back on time. If you lease a car and make payments every month, it’s likely that you’ll be able to build credit this way, as well.
Credit cards can lure unsuspecting consumers into a dangerous trap. If you’re unable to pay off your credit bills, you could end up drowning in debt. Interest rates rise and you’ll end up paying a ridiculous amount of money to the credit card company. The longer you are delinquent on a payment, the further you fall into a pit of debt.
The Benefits of Debit Cards
For this reason, many people opt to use debit cards instead of credit cards. With debit cards, you are only spending money that you actually have, instead of spending money that really isn’t yours. It’s a good habit to get in to. One disadvantage of debit cards is that it might be a bit difficult to check into a hotel. Most hotels will put a hold on your card before you check in. Still, if you’ve got enough cash in your savings or checking account, then this isn’t a problem.
Remember also that credit cards often come with hidden fees. These fees can sneak up on you and really put a dent in your finances. If you are going to go for a credit card, it’s extremely important to read the fine print. Otherwise, you’ll end up signing a contract that you really never thought you were agreeing to.
Street Smarts and Finding That Balance
Also, beware of ‘free credit report’ sites that promise to give you your credit score for free. These sites are often scams that promise a free credit report but actually hide fees within the application process. Every American citizen is allowed to receive a free credit report from the three major reporting institutions in this country. So don’t pay for something that you don’t have to pay for.
Finally, if you choose to forgo credit cards, find an alternate way of building credit. Your choice might be very wise, but you need to have a backup plan in case you ever need credit for a house or a car. You will find that it is useful in certain situations. However, you don’t need a credit card to build credit! Go for it.