Myth: You NEED a Credit Card

70% of working American families live pay-check to pay-check, with large amounts of debt, a credit card won’t improve this environment. Myth: You need a credit card. Two common misconceptions are that you need a credit card to rent a car or make a purchase online, and to build up your credit score. To thrive within this world, unknown by the common ear, you don’t need a credit card. 

 A credit card is,“is a thin rectangular piece of plastic or metal issued by a bank or financial services company, that allows cardholders to borrow funds with which to pay for goods and services with merchants that accept cards for payment”(Bloomenthal, 2020). According to Carnegie Mellon Magazine, researchers are studying the neurological impact of big purchases, with MRI screening to watch brain activity. They discovered that when people spend cash, it neurologically registers as pain, although this does not apply to credit cards. (Ramsey, Ch. 4) Credit cards are seeming easier to use, because our mindset is stuck on the factor, “it’s not our money” and “we can totally pay it back.” According to Experian’s annual Consumer Credit Review, the average credit card balance per person in the United States was $6,194 in 2019, an increase of 3% compared to 2018. Additionally, American consumers ended 2019 with a total of $4.2 trillion in debt not related to housing, much of which can be attributed to credit cards (Amadeo, 2020).

Credit cards are considered a very bad debt. Credit cards are the most expensive debt you can take on, since it comes with double-digit interest rates. If you have a credit card, and assume you can pay off your debt with minimum payments, think again. You may end up paying that debt for years! An example from NerdWallet expresses this best, “Let’s say you have a balance of $8,000 on a credit card with 18% interest and a minimum payment of $160. If you only make the minimum monthly payment, you won’t pay off the credit card for seven years and seven months and you’ll pay $6,432 in interest¨ (Issa, 2014) Clearly the influence of credit cards is very unacceptable. 

Commonly when shopping online, individuals assume that you need a credit card, this is a myth. They’re are multiple ways to shop online without a credit card, such as debit cards, prepaid cards, gift cards, PayPal, and Amazon Cash. To shop online using your debit card, you’ll need to input the 16-digit card number along with the expiration date, security code, and billing address. The funds for the transaction will be deducted from the checking account linked to the debit card. Prepaid cards are similar to debit cards, except funds are loaded onto an account associated with the card, not a checking account. Gift cards, such as Visa or MasterCard, can be used at any online store that accepts payment from that network. You can also use a retail-specific gift card to shop online, for instance a Macy’s gift card. You can also link a PayPal account to your checking account, and any purchases you make through PayPal will be deducted from that checking account. Lastly, Amazon Cash allows you to shop on Amazon.com without a credit or debit card. You just add cash to your Amazon Balance whenever needed. (Irby, 2020)

Another misconception is that you need a credit card to build up your credit score, you actually don’t even need a credit score to begin with. The credit score is an “I love debt score.” It measures how one deals with debt, not how much money someone makes, or however much you own, just debt. The five components of someone’s credit score consists of debt history, debt levels, new debt, duration of the debt, and lastly type of debt. Many argue that you need a credit score to rent an apartment or possibly take a mortgage. Although those arguments fall short, because they’re ways around such concepts. Many apartments will work with you if you can provide first and last month’s rent as well as a security deposit. Also, if you don’t have a credit score to take out a mortgage, you should focus on having a large down payment. You’ll have to have an outstanding history of rental and utility payments (Ramsey, Ch.4). Although it seems impossible and extraneous, these out of the box concepts can keep you from debt. 

Therefore one can conclude that the use of credit cards is pointless. The only thing to evolve from credit usage is large amounts of debt. You clearly do not need credit cards to buy merchandise online, nor do you need it to produce a credit score. Thus, in conclusion, it is a myth that someone needs a credit card to survive.

Works Cited:

Amadeo, Kimberly. “Is Your Credit Card Debt Higher Than Average?” The Balance, 30 Nov. 2020, www.thebalance.com/average-credit-card-debt-u-s-statistics-3305919.

Bloomenthal, Andrew. “How Credit Cards Work.” Investopedia, Investopedia, 14 Dec. 2020, www.investopedia.com/terms/c/creditcard.asp.

Irby, LaToya. “Make Purchases Online Without a Credit Card Paypal Prepaid Gift Cards.” The Balance, www.thebalance.com/how-to-shop-online-without-a-credit-card-960981.

Issa, Erin El. “Why Is Credit Card Debt ‘Bad’ Debt?” NerdWallet, 23 Sept. 2020, www.nerdwallet.com/article/credit-cards/credit-card-debt-bad-debt#:~:text=The bottom line: Credit card,balance in full each month.

Ramsey, Dave. Dave Ramsey’s Financial Peace University Workbook. Lampo Group, 2010.