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Is it possible to ditch the credit card?
Posted by crazyTsu • 10/10/09 • Subscribe to this Discussion [RSS] • Report This Topic
Topics: bank ethics, credit system socks, reward for no debt
My bank charged me sneaky fees for using my card, and wouldn't refund me, so I closed down the account.
I am thinking, do I really need another card? What are the pros and cons?
User Comments
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Aside from having credit to fall back on in an emergency, establishing credit history is important for large ticket purchases like cars and homes. If you already have other active credit accounts, you don't necessarily need a credit card, but without a current credit history you will pay higher interest rates for vehicle loans, mortgages, etc. It's also generally a good idea to keep your oldest account open, as that's one factor in determining your credit score. You may have difficulty obtaining another card right now, though, even if your credit is good, because credit issuers are in the process of eliminating billions of dollars in consumer credit.-
It is goofy the way it works. The more you take credit, the less your interest rates.
Not, the more you are debt free the better your risk profile. I will never understand why
And I am not going to purchase a home anytime soon, though I may purchase an old car (cash) -
Well, actually middle ground is the best. The reason you're considered a higher risk if you don't have recent credit is that you have no track record to demonstrate that you'll make payments on time.
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How is my recent credit activity related in ANY way to my intention or ability to pay back any credit?
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It's just a predictor--if you have a habit of making payments on time, it's one bit of evidence that you're likely to continue to do so. If you've never had credit or haven't had credit recently, there's just nothing to go on. Whether it makes sense or not, that's the system...someone who has lived his whole life paying cash and never incurred a bit of debt will pay higher mortgage interest rates than someone who has used credit responsibly during that time (if he can even get a mortgage)
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I hate being told "Whether it makes sense or not, that's the system"
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I know. I noticed that with your comment about the law the other day. But it doesn't matter whether you hate it or not, any more than it matters whether it makes sense or not. The credit industry has the power, and that's the way they've decided to do it, and you have a choice between playing by their rules and paying higher interest rates and/or being unable to get credit later.
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Ya I am a bit crazy being angry with senseless rules. It's not much different from scolding a piece of rock, or crap
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Can you get a debit card instead? I cannot justify paying 18%+ in interest when it is pretty difficult to get that sort of return on the money you have.-
Yes, I have a debit card. I guess it's useful for the online payment stuff
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well, it seems to me that having some kind of card that has a visa or mastercard logo on it is just plain necessary in this day and age. OTOH, though I do have cards with those logos on them, I don't have any actual credit cards so I am not saying that credit, as opposed to transactional compatibility is a must have -
The hubby and I have been off credit cards since the first of the year. It's liberating! Instead, we just have the debit card which is also a "visa" for those purchases (i.e. online, airplane tickets) which require some form of plastic. But basically it's cash.-
And how do you keep your credit history from lowering?
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In our case, we weren't doing a good job keeping up with the cards. So not using them at all is actually helping us. We do have a mortgage, a home equity and two car loans which we are extremely diligent about paying on time.
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I suppose you can ditch them. Think of those days when people don't have so many cards.-
The financial world operated differently then. For instance, mortgage loans and vehicle loans and such typically came from your own bank or from a local dealer, and credit decisions were made based on income and assets and even reputation more than on payment history and credit score.
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That made good sense, didnt it? Why did they change it?
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Because everything has gotten so big. We no longer have bankers who know our families and our employers and such. We're no longer tied to a geographic area, so it's easy for someone to take out a loan in one place and move across the country. Virtually all credit applications are stranger-stranger transactions these days, which necessitates a standardized means of making determinations.
The one we have isn't very good, especially since about 25% of credit reports contain serious errors, but it's what we've got at the moment (and for the foreseeable future) -
But the whole thing is on the wrong track!
I am a person who believes in managing my finances, so to me I am being very very financially responsible paying my bills with my own money. Why do they want to say I am not responsible than a guy who uses others' money to pay his petty bills?
They are pushing me, bullying me to take their credit card. Or else, they will slap me with high interest -
Well, they're not saying that you're not responsible, just that they don't know whether you will be or not and so it's a higher risk for them to loan you money. While I agree that there is a lot of coercion and corruption in the credit industry, it isn't exactly as if they're forcing you to take their credit cards in order to get lower rates--you can create a credit history with a variety of different types of credit/loans, and they certainly needn't be with the same creditor you plan to use for your big-ticket items.
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Two points
- if I guy pays off his petty bills every month do they REALLY know he won't default on the big loans?
- and if a guy does not pay all his bills at one go, like in the case of credit, then he is less trustworthy? They dont know about him, or are they just playing dumb
This is kindergarten stuff - they should know, not pretend not to know -
@ MadamX
I guess the smart thing would be to find the alternative methods of building the silly "credit history".. What are the ways to do so? -
One good way, assuming that you don't have any major purchases that you want to finance, is to take out a small loan from your bank and pay it off over time--make larger payments than the mininum, but don't pay it off too quickly. You want to establish a record of regular payments over time. It's sometimes harder to get that kind of credit than a credit card, so if you can't get the loan straight out, buy a CD with your bank and borrow against it.
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I've never had a credit card in my life. I decided a long time ago I would never get one. So far it's turned out ok.-
You are a smart guy in my books.. but what do you intend to do about the big-ticket purchases?
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Have you purchased a home?
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Well I have, but in my own country. It took no credit history etc. Although it is 3x populated than here and stranger to stranger
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Sorry, Tsu--that was meant for Trailofpen
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Nope, still with roommates. I don't know when I'll buy a home. It's not really on my agenda for now. I'm using my money towards other ventures.
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for me, the important thing is do not treat the CC as an extra income!! It's just alternative way of paying, no else! so whatever card you have, make sure you are able to pay the bill.
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That's a really good point. There's a lot of talk about it being more responsible not to use credit cards, but the real issue is HOW you use them, not whether you use them.
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I intend on ditching my second credit card. It was one of the cards I got out of excitement knowing I can get one. Unfortunately, I also used it too liberally and am currently paying the price but it'll be out of my hair soon enough.
I'll be keeping my American Express for subscriptions, like my web-hosting and monthly gaming subscriptions. For everything else, I use my Visa debit.-
Another reason closing credit accounts can hurt your credit score: a huge factor in determining your credit score is what percentage of available credit you're using, and those with the highest credit scores are typically using less than 25%. If you have two credit cards each with a $3000 limit and you owe $1000, the "use of available credit" piece of your score is strong. If you close one of those accounts, your rating on that piece plummets because you've just jumped from using 16.7% of your available credit to using 33%.
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I ditched credit cards six years ago when I was $20k in debt and getting divorced. I have a Debit/Credit card through my credit union - it's tied right into my checking account. I can charge up to $2,000 on one transaction but if I am charging something bigger, like when I had to put $5,000 on my surgery in March, i call them, let them know, and they will up the approval limit for that day - but only if I have the money in the account.
I absolutely love being debt free (just paid off the divorce debt a year ago) and find it really hard to want to get a new credit card. I probably will some day but for now, it's nice to control my spending to only what I can truly afford. -
This month my wife and I will pay off our credit cards and use them only for securing a hotel room. If we don't have the cash we don't really need what we want.
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