You may have read a previous article about how I locked mine and my husbands credit cards in a safe. We were trying to break the habit of overspending. However we wanted to keep the credit cards for emergencies and to build our credit score. Ultimately our goal was to stop living paycheck to paycheck by paying off debt. My view has slightly shifted since that last article and I will explain why. We are often told that we need a credit card to keep up with our credit score. What if that isn’t true?
I was challenged on my view of credit cards from some YouTube videos, a close friend, and a conversation with God. Before the 1800’s credit cards were not a thing. Debt itself has been around for a while but the current credit card system was not in place. In fact the credit scoring system wasn’t even invented until the 1950’s. This begs the question of what did people do to afford emergencies, buy homes, buy groceries, etc. before the 1950’s. The answer may not surprise you but they paid cash for things.
Now it sounds silly to say we have to keep a credit card because we need to have a credit score. Sure our ancestors may not have needed a credit score but it was only because it didn’t exist, right? Wrong! Even if it had existed I don’t think they would have bought into it. There used to be more emphasis on only buying things you could afford. Credit card companies were actually the ones who changed societies view by making ads that everyone needs a credit score. If you take a step back and look at the bigger picture you can see that is a lie.
Today lenders like to pressure people telling them they can’t get an apartment, home, remodel, vehicle, etc. without a credit score. The reason they do this is because they make a larger profit when you take a loan. Not because it will be benefit you but because it will benefit them. If we zoom out there are ways to secure all of those things without going into debt.
Dave Ramsey, a well known financial coach and writer, would tell you that credit scores are not necessary. He actually calls them a “I love debt score”. A credit score is only based off your debt and is only used to go into more debt. I have heard plenty of arguments against Dave Ramsey’s view and I actually used to believe one of them in particular. The argument is that Dave Ramsey is a multimillionaire so of course he doesn’t need a credit score. However, everyday people who don’t make millions of dollars still need a credit score to get through life.
I believe the basis of this argument is coming from a story he told in his Financial Peace book about struggling to get an apartment without a credit score but how he was able to buy the entire building. The story is a little ridiculous. However, this story isn’t saying you either need a credit score or enough money to buy a whole apartment complex. It was meant to point out the ridiculousness that a credit score is a basis for renting or buying what you want. Cash is better and that was the point he was trying to make.
We have believed the lie that there is no other way to get what we want than to have a credit score. Thus the reason we keep credit cards even if they are hurting us financially. Let’s say you decide to buy a house without a credit score. You may think you need to buy it with cash because you won’t be approved for a mortgage. That is not true! There are still mortgage companies that do manual underwriting that bypass the need for a credit score. Thus keeping a credit card around to build your score to buy a home is unnecessary. Yes, you may need to go through some extra paperwork but you didn’t need to go into debt with credit cards to get more debt for a house.
If you want to move into an apartment or rental property instead, guess what? You don’t need a credit score for all apartment buildings and rental properties. Even if they normally ask for a credit score you may be able to get out it. If you have a conversation with the landlord, you show them proof of previous housing/utility payments, and bank statements they often will overlook your credit score. Is it more work on your part? Yes, but they make it this way on purpose because the system was built to try and keep us in debt long term.
I know a few people personally who do not have any credit cards. I met one person who has never had a credit card or a credit score. All of them are doing well for themselves and none of them are millionaires. Thus debunking this lie that credit cards are needed to build a credit score that you apparently need to get through life.
What about if you want to keep a credit card for emergencies? A credit card is debt and should not be used for emergencies. If you use debt to solve an emergency situation it really isn’t solved. You simply delay solving the problem because you will need to find a way to pay it back later. You really are just over complicating an already stressful situation. Not only are you now stressed over the emergency but you are stressed over the money. It isn’t a good cycle to get stuck in. A emergency fund saved in a bank account is a better route to take.
Not to mention when a credit card is your emergency plan suddenly everything seems to be an emergency. From running out of mascara to wanting to go out with a friend. Clearly defining a true emergency from a want can become fuzzy when you know you can always pay it back later. It is easier to determine if something is an actual emergency when you are debating about using cash in your bank account that took you time to build up.
What if you want to keep a credit card for the rewards it offers? There are benefits to having a credit card as most will provide reward points that can be spent on specific things. Have you ever wonder though why these kind of great benefits are offered? If everyone simply paid their cards off in time they would reap all the benefits but wouldn’t have to pay any interest. It feels like free money!
Credit card companies are not dumb. They know that if they offer benefits they will actually pull in more money than they will spend. 31% of credit card holders do not redeem their rewards in time. Meaning the credit card companies don’t even have to give out 31% of the benefits that they offer. On top of this only 45% of credit card holders actually pay off their balance on time. Meaning that 55% of credit card holders are paying interest back to the credit card companies. Maybe they will redeem their benefits but they most likely will also be paying interest back to the credit card company. Credit card companies come out ahead all the time because they understand how to get people to purchase more than they can actually afford.
My last deciding factor before I closed all of my credit card accounts was after reading Proverbs 22:7. God does not want us in slavery and borrowing is considered slavery. This was my main reason for wanting out of debt in the first place. I still kept the credit cards for a time because I was afraid that what society tells us about a credit score was true. Then one night I felt like God asked me “why do you not trust Me? I have told you debt is wrong and yet you keep a credit card in your back pocket?”. It really made me think about my credit card in a different light. I now see it as something that is unhealthy and it is not worth uprooting my relationship with God over some supposed credit card benefits.
You may still decide after hearing all these things that a credit card is still right for you. That really is your choice but for me and my house we will serve the Lord and never own a credit card again.
