Credit Myths: You Can Live Without A Credit Card

BOSTON (CBS) - Let's start with an issue many listeners have asked about; Getting rid of your credit cards. I read an article that a listener referred me to that advocated living on a cash basis.

It talked about cutting up your credit cards and cancelling them. They called it financial freedom.

It went on to say that you will never overspend or owe interest on anything you purchase.

That is indeed true. You will only spend what you have in your pocket or checking account and there is no temptation to overspend because you can't pull out a credit card to buy something you don't need.

But what the article didn't talk about was how are you going to rent a car, reserve a hotel room or buy an airline ticket?

Going commando does have its virtues but at some point in your life, most of us will need access to credit. You will need to create a positive credit history.  And to do so, it is necessary to have at least one or two active lines of credit.

Potential creditors want to see how you manage your money, use your available credit, and pay off the debt.

Without a credit history you will have trouble qualifying for a car loan, a mortgage, or renting an apartment. Most of us will need to borrow at some point in our lives for we cannot save enough money to buy a house, a car, or pay for college.

The article was right in many respects but the author did not explain the consequences as how the lack of credit usage may affect the consumer in the future.

We do hear lots about folks that get over their heads in debt, but what we don't hear about is the savvy consumer who uses credit cards as a money management tool. Building a positive credit history and score and getting points or cash back for the purchases they make.

....................

You can hear Dee Lee's expert financial advice on WBZ NewsRadio 1030 each weekday at 1:55 p.m., 3:55 p.m., and 7:55 p.m.

Subscribe to Dee's Money Matters newsletter here.