Why I Finally Got a Credit Card After 20 Years Without One

When Kate and I were newly married 20 years ago, we had a goal to pay off our debt, made up of tens of thousands of dollars in student and car loans. So we did what plenty of folks did at the time: we picked up a copy of Dave Ramsey’s The Total Money Makeover and followed his plan for getting ourselves financially square.

Our combined income was paltry, but we pinched a lot of pennies and budgeted by putting cash in envelopes allocated to different expenses; once the cash was gone, we couldn’t spend any more. And we did the debt snowball, where you pay off your smallest debt first, then roll that payment into the next smallest one. The snowball worked for us. It gave us a lot of psychological momentum and helped us pay off all of our debt in a few years.

Another step in Ramsey’s plan is to get rid of your credit cards. The idea is that if you have problems with spending, you don’t want easy access to buy things on credit. Kate and I are both frugal by nature, so buying stuff we wanted with credit cards wasn’t a problem for us, but we got rid of ours anyway. We were both pretty philosophically anti-consumerist, and ditching our credit cards felt countercultural and contrarian. And it feels cool to be countercultural and contrarian. Our perspective was: we’re committed to never buying stuff we don’t have money for, so why would we need a credit card?

So we started relying exclusively on cash and debit cards for buying stuff. And by and large, it worked fine; you can get through most of life using just a debit card.

But in recent years, we’ve started traveling more as a family, and I noticed that not having a credit card was making things a hassle. For one, plenty of car rental companies won’t let you rent with a debit card, and the ones that do often make you jump through extra hoops. On one trip, I thought I had reserved a car with a company that took debit cards, but when we got to the counter, I discovered they had stopped taking them a few months earlier. So we were scrambling to find a car we could rent for the week. That was stressful.

Buying plane tickets became a hassle too. With how dang expensive tickets are, every time we bought them, I had to call the bank and ask them to raise our debit limit. Sometimes I’d be on hold for 20 minutes to talk to a banker, then on hold for another 10 while they got the increase approved by their manager.

At the same time, after years of hearing about the benefits of using a credit card that earns you rewards, like airline miles, I started wondering: am I missing out by not having one?

So last year, after two decades without one, I finally got a credit card again. And I got to tell you, I’m very glad I did. It’s reduced a lot of dumb friction in our lives. Traveling is so much easier now. I can buy plane tickets without having to call the bank first. Renting a car is a breeze. Also, we’re racking up airline miles for free flights. And I’ve done it without paying any interest.

With all due respect to Ramsey, I’ve come around to seeing a credit card as a great tool. Here’s why.

The Benefits of Having a Credit Card

1. It Builds Your Credit Score

You can be financially responsible, have plenty of money in the bank, and have no debt, but still have a poor or nonexistent credit score. That makes it hard to get a car loan or mortgage at a good rate. In many states, information from your credit history can also affect your auto and homeowners insurance premiums.

Using a credit card responsibly is one of the easiest ways to build good credit, which can help you qualify for loans at better rates.

2. It Protects Your Checking Account From Fraud

Both credit and debit cards have legal protections against unauthorized transactions, but there’s a big difference between the two: when someone fraudulently uses your debit card, your money leaves your checking account immediately. If fraudulent transactions on your debit card go through, federal law provides protections to help you recover your money, but you may have to wait while the bank investigates.

With a credit card, fraudulent charges eat into your available credit and not your checking account. Federal law caps your liability for unauthorized credit card charges at $50, and lots of card issuers have zero-liability policies, so you probably won’t even pay that.

3. It Makes Travel Easier

For me, this has been the biggest benefit of getting a credit card again. Rental car companies and hotels would much rather you use a credit card for reservations and security deposits. The places that do take debit cards might put a $500 hold on your checking account that ties up your money until you return the car or check out of the hotel. And it can take several more days for the hold to disappear.

Some airline credit cards come with perks like airport lounge access, free checked bags, trip cancellation coverage, and priority boarding. The free checked bags one has been a nice perk for us. Checking a bag isn’t cheap these days, and when the whole family is flying, those fees add up. If you travel a lot, those benefits — even before the airline miles — can make a card with an annual fee worth it.

4. You Earn Rewards on Stuff You’re Already Buying

Lots of credit cards give you cash back or travel rewards for everyday purchases like groceries and gas. If you have a card that offers 2% cash back, you’d earn $600 on $30,000 of spending. When you pay your credit card statement balance in full each month and never incur any interest, that’s basically free money. Nice! Most debit cards don’t offer anything like that.

5. You Get Extra Protection on Purchases

Many credit cards offer protections beyond what a retailer gives you. Some cards extend the manufacturer’s warranty on eligible purchases. Others cover stuff that gets stolen or damaged. So if you buy something and some jagweed porch pirate swipes it off your front step, your credit card might cover the loss. And if you order something online that never shows up, or you pay a guy to fix your fence and he skips town with your deposit, you can dispute the charge with your card issuer, and they may be able to reverse it for you.

6. It Gives You More Financial Flexibility

Even when you have an emergency fund to cover big, unexpected expenses, getting to that money when you need it can be a hassle. A credit card makes covering those emergency costs easier.

For example, let’s say your furnace goes out when it’s below freezing outside. Without a credit card, you might have to transfer money from your high-yield savings account to your checking account and wait a few days for it to show up before you could pay. With a credit card, you just pay for the furnace, then move the money over from your emergency fund to cover the credit card bill at the end of the month.

Think of a credit card as a supplement to a properly funded emergency fund, not a replacement for one.

How to Use a Credit Card Responsibly

I’m only a fan of credit cards when they’re used responsibly.

Treat your credit card like a debit card and only spend money you already have. Pay your statement balance in full every month and use autopay so you never miss a payment.

Keep your credit utilization low. Using a small percentage of your available credit helps your credit score. If you’re using a lot of your available credit each month, making a payment before your statement closes can help keep your reported utilization low.

Don’t chase rewards. Spending money just to get an extra $2 back is a losing proposition.

Watch out for annual fees. Cards with premium perks can charge hundreds of dollars a year. If you don’t use those perks enough, you won’t get your money’s worth. So before you sign up for a card with a $200 annual fee, ask yourself, “Will I really use these benefits?”

Keep it simple. You don’t need five cards and some convoluted points-maximizing system (I’ve seen lots of them out there). Get one or two cards with the benefits you want and enjoy them.

Who Shouldn’t Get a Credit Card

I think Dave Ramsey’s advice to ditch your credit cards is still useful if you struggle to control your spending. People tend to spend more when they pay with a credit card, and the little dopamine hit from earning rewards only makes the temptation worse. If you consistently carry a balance or have a hard time staying within a budget, having a credit card is probably not a good idea. You’ll just be incurring interest. There’s nothing wrong with skipping credit cards if that keeps you disciplined.

Credit cards are neither good nor bad. It just depends on how you use them. The ideal is to enjoy the benefits without ever borrowing a dime at interest. That’s what we’ve done for the past year, and it’s made my life easier. I haven’t spent 30 minutes on hold with my bank just to buy plane tickets since.

Also, this whole experience was a reminder to be mindful about the advice you take from people (even AoM!). Use what works for you and ignore the rest. Ramsey’s debt snowball strategy was useful for Kate and me, but I don’t think we needed to get rid of our credit cards since using them really wasn’t a problem. Don’t follow stuff blindly. Use your practical wisdom.