Put Down the Plastic: Life Without Credit Cards

Just one word: Plastic.

Monday, October 26, 2009

Last week, we looked at how some banks were canceling consumer credit cards without warning and how consumers could avoid it by using their cards more. That discussion sparked a debate about whether people can get by without credit cards at all. We speak to two people who are doing just that: Joel Westendorf of Los Angeles; and Andrea Hermitt of Atlanta. Takeaway contributor Beth Kobliner lays out some of the logistical benefits and drawbacks of life without plastic.

"There's a myth that you have to have a credit card to have a credit history, and that's not the case. If you're paying off a car loan regularly, or a student loan regularly, or a mortgage loan regularly, that is also building your credit history."
—Beth Kobliner, on the myth that credit cards are required to establish a credit score

Guests:

Andrea Hermitt and Joel Westendorf

Produced by:

Kristen Meinzer

Contributors:

Beth Kobliner

Comments [9]

Katia

(cont. from above)
Personally I've always found it ridiculous that the credit card companies so rule the world. Credit score affects not just your ability to get loans but your employment, car insurance, and a multitude of other things, which has always angered me. Maybe more people need to not have credit cards and this society wouldn't be so based on whether, or how, someone uses a little piece of plastic to pretend they have money when they don't (or pretend they need to borrow money when they don't just to build up their credit score).

Oct. 27 2009 09:18 AM
Katia

(cont. from above)
Everyone always told me I should get a credit card to build credit history, and just buy something small on it every month and pay it off. I just haven't been able to reconcile myself to paying interest for credit I don't need. Besides, from the sounds of stories reported here, it seems like if what I buy isn't big enough--and face it, I'm not about to go into large-interest-rate-bearing debt to either buy large items I don't need or run up large balances on stuff I could already buy if I only relied on my bank account--my card would be canceled anyway and all would be in vain.

My credit score is good; I have very little credit but what I have (student loan and now car loan), I pay. However, I would be seen as a credit risk by a lot of people because my credit history is so short/small--my "responsible" move means people see me as IRresponsible.

Oct. 27 2009 09:18 AM
Katia

I don't know about other companies, but at Enterprise Rent-A-Car (and, I would imagine, the other car rental companies they own), you either have to have a credit card, or a pay stub and a utility bill showing that you've made your payments on time (which means those of us who don't have the utilities in our name are sort of stuck).

I've never had a credit card. Back in college when I first started avoiding them, I thought I was doing the smart and responsible thing--I'd heard all the horror stories of students getting in trouble with their cards. Since then I've never really needed one--I've always had the money to buy what I needed, or if I didn't, it was something like a car that I'd need to get an auto loan for anyway. I try to maintain my savings account for emergencies instead.

Oct. 27 2009 09:17 AM
ann r.

John commented he thought people who do not use credit may exude some sense of moral superiority. Celeste strongly disagreed. My experience is closer to John's as a teenager during the early 70s. My father in particular (a child of the depression from Brooklyn), bragged that he paid cash for our family cars and anything else. He would say that anyone with debts was not saving/planning properly. He looked down on others who did not have a saver "depression" mentality and took pride in saying how our family lived "below our means". In our case, he neglected to mention we had housing, utlilites, and health insurance provided for us since he was clergy. We lived in decent houses, had "nice stuff", he paid cash for my college education. Personally I limit use of credit to home mortgage, no more than 50% of a car loan, but recognize the challenges of saving due to individual circumstances. Limiting use of credit and saving is good life practice, but there is no place for "false" pride.

Oct. 26 2009 01:29 PM
Andrea Hermitt

Oh, well that's different. That used to be the case in the US as well, so maybe it will change there too? Here's to hoping!

Oct. 26 2009 11:09 AM
Richard Johnston

Perhaps I should clarify: I rent cars only in Europe and no rental company there will rent you a car without a credit card.

Oct. 26 2009 10:50 AM
Andrea Hermitt

I was one of the people on the show this morning, and I have to disagree with Richard Johnson who says you need a credit card to rent a car. You do not need to use a credit card to rent a car. I do it all the time. You need to have the money that it will take to rent the car plus another 20% or so in your checking account before you rent the car. They will use your debit card to put that money on hold, and off you go! You will also need to show that you have car insurance that will cover the rental car should you have an accident. If you don't return the car, they will have your drivers license information to track you down.

Oct. 26 2009 10:41 AM
John LaVallee

For the past year I have been living off my debit card alone and I feel GREAT! I had over $16,000 in credit card debt that I paid off last year. I realized I was spending over $400 in interest and fees alone. In the course of a year one company raised my interest rate from 11.9% to 24.99% despite the fact I had no late payments and a good credit score. In December 08 I paid everything off using my 401K and I don't regret a thing and even though I had to pay a penalty to withdraw but I think it was worth to clean my slate. I still have 3 cards but I carry NO balance. Now I can save for my future without feeling that I'm throwing away $400 a month in interest.

Oct. 26 2009 09:27 AM
Richard Johnston

To rent a car you have to have a credit (not debit) card. The rental company needs to be able to put a "hold" on some of your credit in case something goes wrong during the rental.

Oct. 26 2009 09:06 AM

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