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  • Writer's pictureWarrick

Please remind me of the purpose of credit cards...

Can we live comfortably without having a credit card?

Hello fellow Protagonists,

When I was a smaller adventurer I can think of a few financial lessons that were passed around amongst family, friends and places like school. I remember once being told that a Student Loan will be the cheapest debt I ever have. This was before ever being taught about debt in the first place, so yeah, sounded good. Nothing mentioned that over time I would be potentially paying as much over its 25 year life as my share of our first house deposit, share of our wedding and total price of my current car... Combined!

For anyone out there who thinks student debt isn't a problem for younger people, please be advised that they're potentially a house deposit, wedding and car down before they even start working.

Anyway enough of that, today I am focusing on another piece of advice/common knowledge that went around through my early adulthood:

"Everybody has a credit card, you should have one too" - Most people between my birth and early adulthood

Fortunately I never ended up taking this second piece of advice like I did the first. For some reason in my 30 years of breathing on this planet, I have never had a credit card and neither has my wife.

I was told on multiple occasions that I needed a credit card to be approved for a mortgage so they can trust me to pay it back. I have some liberating news for you Buff people... I am currently living in my second house and the final extent of credit card conversations with the mortgage brokers went as follows:

The mortgage man that comes from far away - "Any credit cards?"

Me - "No"

The mortgage man that comes from far away - "OK"

Could it be possible that the more we have to prove we can afford to pay something back that it may not be an easy thing for us to do?

I love a good Dave Ramsey rant and have seen a few classic ones on credit cards and credit scores , which he calls your "I love debt score." The better we become at going into debt and paying it off the more debt they are willing for us to go into. To me this feels like a level-up and then trying something even harder until we can't win.

The first practical part of Ramit Sethi's book I can teach you to be rich, is also focused on getting a credit card. I love the book overall but this is just something I could not get my head around.

When we are taking out any debt we are paying for our present with our future, with money we have not earned yet. As discussed in a previous post, we also become a new slave to a new master until the debt is settled. If we go through a process of going into this debt and paying it off at the end of the month, our master returns each month as well, just to make sure we are being a good worker for them.

In a recent poll of 2018 people by they found that 63% of those carried personal debt (not including mortgages) into 2020, 38% said this was due to a credit card; they found that 33% had between £2,000 and £10,000 of debt and 74% of those with credit cards are not able to pay it off in full at the end of the month.

Let's take a second to appreciate the last part of that summary... About 3/4 of all people questioned do not pay off their credit cards monthly. The master hangs around! I bet most of them opened the credit card with the intention of paying it off every month.

Why else would credit companies be happy to throw in air miles and other bonuses.

Also, why does it seem to be credit companies (and insurance companies) that can pay to sponsor some of the best sports teams and stadiums.

For a test of true colours I would like you to try the following like I once did. Walk into a car showroom and let them know that you intend on paying for the car in full with no loan required. Watch and see how quickly they try and get you sorted so they can move on to the more "profitable" person. I was even offered a lower price if I was willing to take a percentage on a loan with them that would cost more in the long run. You should have seen his face when I asked to borrow his calculator!

Debt is where the real money is made (and lost for us).

Instead of relying on credit to make larger costs and purchases, lets use an emergency or sink fund instead.

I am not saying never to the idea of a credit card. I appreciate that the legal cover of a credit card is far better than a debit card. Current legal protection can cover up to £30,000. I think if serious amounts of money were on the line I would potentially take a credit card out to pay but I would certainly have the money ready in my account to pay it off the day after I was satisfied with the outcome of the purchase, then cut up the card.

I still get a letter once a month or two with a credit card application inside. They really really want me on board and you never know, one day I briefly might, but I haven't yet and I would certainly not be making them any profit out of me.

Calling all Millennials! You do not need a credit card to get a mortgage!

How long have you lasted without the need of a credit card? Who finds them greatly useful?



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