The secret lives of America’s debtors
Americans are loaded up with credit card debt. What’s worse is that some husbands, wives and even children hide those money woes from their families. The results are often devastating.
Just Saying “No” to Credit Cards
For nearly a decade, I lived without a personal credit card. In 1998, I destroyed all my cards and canceled my accounts in a last-ditch effort to curb my compulsive spending. It worked (sort of), and it wasn’t until 2007 that I finally felt like I was responsible enough to use credit wisely without going into debt. (And so far, it’s been smooth sailing.)
What was it like without credit? Surprisingly easy, actually. Though a lot of folks will tell you that it’s impossible to rent cars or get a hotel room without a credit card, that’s just not so. A debit card lets you do all of these things, too. (Though, to be fair, companies will often put “holds” of several hundred dollars on a debit card when you rent cars or stay in hotels.)
To be honest, I didn’t miss having a credit card when I was living without one. I never encountered a situation where a credit card was required. Not once.
Writing in this morning’s USA Today, Sandra Block says that more and more consumers are saying “no” to credit cards:
In a country where the average consumer owns five credit cards, [folks without credit cards] may seem somewhat quaint, like an Amish farmer who drives a horse-drawn buggy. But proponents of a no-credit-card lifestyle say there’s nothing old-fashioned about their choices. And they’re convinced that their numbers will grow as consumers become increasingly disenchanted with credit card industry practices.
The author points out that credit card usage is slowing rapidly. National credit card debt fell by nearly 20% in November; new credit card accounts are down almost 50% from a year ago; and even folks who do use credit (73% of Americans, according to the Federal Reserve) are using credit less often. (IndexCreditCards.com, a credit card comparison website, also released a report on how average credit card debt has dropped to $3,752 from $4,013 in their last report from July 2009.)
Block’s article profiles several Americans who have decided to declare: “No credit needed!” Among them:
- Emily Maddox (24 years old), who has never had a credit card and has no plans to get one. They make her nervous.
- Dann Zinke (22), who is saving for college. He thinks credit cards are a hassle.
- Our very own GRS staff writer, Adam Baker (25), who opts to live without credit cards because it’s easier to track spending and helps him live a simpler lifestyle.
- Luis Rosas-Guyon (37), who finds that since he gave up credit cards ten yeas ago, his life is less stressful.
- Tim McFarlin (34), who ditched credit cards because he thinks the industry’s practices are unfair to consumers.
There are tons of different reasons to live without credit cards. (For my book, I interviewed three different folks who live by the “no credit needed” motto, and each had a different motivation.) The policy has some drawbacks — credit cards do offer consumer protection and other benefits, and they help you build your credit score — but I know from first-hand experience that living without them is a perfectly valid choice. It’s not only possible, but can be profitable as well.
How many of you live without credit or have done so in the past? I know from past conversations that there are some die-hard credit-card users around here (and these are folks who use them wisely, not irresponsibly), and there are also some die-hard “no credit needed” folks. I think both camps have merit, and the important thing, as always, is to do what works for you.
[USA Today: More consumers just say no to credit cards]
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Related Articles at Get Rich Slowly:
- Credit Card Index
- I Do Not Use Credit Cards
- Discussion Forum Highlights
- Video: Credit Cards in the Blender
- A Quick Trick for Tracking Credit Card Expenses in Quicken
Credit card hikes raise Congress’ blood pressure
As credit card companies continue raising rates and fees, lawmakers are considering bills to stop such hikes until new credit card laws take effect.
5 evil things credit card firms can (still) do
The credit card reform bill tries to help cash-strapped customers, but companies are just coming up with new ways to boost profits.
Secret cash advances worry wife
If spouses have separate credit card accounts, should they be accountable to each other? Also: How card issuers view cash advances.
Credit Card Offers 79.9% Rate!!
Yes, it’s true. It’s not a joke or a misprint. First Premier Bank is offering a “Premier Card” credit card with a 79.9% APR. That’s right, 79.9. And it’s not just the interest rate that’s outrageous. The fees are pretty hideous, too.
Your Brain Wants to Waste That Gift Card
A new law will extend gift card expiration dates. But psychology says this will only harm consumers more.
The Credit Crunch, Vol. 1: Five Useful Links
• “Prepaid, but Not Prepared for Debit Card Fees”: The New York Times
• “Credit Cardholder’s Bill Of Rights: Sooner Would Be Better”: The Wall Street Journal
• “Investigating Old or Inaccurate Addresses on Your Credit Report and Why You Should”: MasterYourCard.com
• “How to Improve Your Credit Score When Paying Down Debt”: NoDebtPlan.net
• “Gen Y Faces Credit Hurdles”: The Sydney Morning Herald
The Credit Crunch, Vol. 1: Five Useful Links
• “Prepaid, but Not Prepared for Debit Card Fees”: The New York Times
• “Credit Cardholder’s Bill Of Rights: Sooner Would Be Better”: The Wall Street Journal
• “Investigating Old or Inaccurate Addresses on Your Credit Report and Why You Should”: MasterYourCard.com
• “How to Improve Your Credit Score When Paying Down Debt”: NoDebtPlan.net
• “Gen Y Faces Credit Hurdles”: The Sydney Morning Herald
Help your child manage credit
In recent years college students could get credit cards almost as easily as they could score beer. Some 84% of undergrads have at least one card, a Sallie Mae study found, and half carry four or more.
Avoiding Holiday Debt Starts Now
While you’d be better off if you started saving in March, Spend On Life has pulled together 10 ways to avoid Christmas credit card debt, which it estimates will net you $750 toward Christmas gifts in the next two-and-months.
The Pitfalls of Prepaid Debit Cards
Prepaid debit cards have stepped into the market for consumers who can’t get a credit card, don’t have a bank account and want the convenience (or the status) of whipping out a card. But beware, the fees on these cards will gobble up your cash.
Congress is riled up – Overdraft fees
A new battle is brewing in Congress, riding the same populist wave that pitted banks against consumers on credit card fees earlier this year.
Your Credit Report Card
Mark Frauenfelder is the co-founder of my favorite sites, Boing Boing (which is a “directory of wonderful things”). Mark’s also a GRS reader. He dropped me a line the other day to tell me about a new project he’s been following.
Today, Credit.com is launching a free new online financial tool called Credit Report Card. This tool is designed to provide users with a quick snapshot of their credit reports. According to the site’s FAQ, “it breaks down your credit report into five simple-to-understand categories and gives you a letter grade for each one.”
In his e-mail, Mark offered a personal example of how the service works:
Here’s a screenshot of what a Credit Report Card looks like. It’s my own credit report card. (I’m only showing part of the report card, as I don’t want to share my personal data.) As you can see, I have excellent credit
, but I’ve made too many “Inquiries” in the past year, which has knocked my overall rating down a bit.
Interestingly, the day after I generated my Credit Report Card, I went to Macy’s to buy a gift for my wife. The sales clerk wanted me to apply for a Macy’s credit card, promising all sorts of discounts on this and future purchases. If I hadn’t used Credit Report Card, I might have taken her up on the offer, which might have damaged my credit rating. So this tool has come in handy already.
Here are some things to know about Credit Report Card:
- It’s absolutely free.
- You can request a new report card every thirty days.
- It draws its data from the TransUnion credit bureau.
- Its data comes via a “soft pull” of your credit, so using it will not affect your credit score.
Curious, I signed up for Credit Report Card myself. Some GRS readers will be wary because the sign-up process requires that you submit your Social Security Number (which is needed to pull your credit report) and asks a couple of broad but personal questions. I felt comfortable with this, though, and created an account.
My overall credit “grade” is an A. I scored high in the areas where I knew my report was strong, and I scored a little lower in the areas where I knew it was weaker. (Though I do have a personal credit card now, I try to avoid credit when possible, so I don’t have as broad an “account mix” as I could.)
The bottom of the report contained a summary of the statistics used to produce the Credit Report Card. You can see that I spend about $1000 a month on my credit card, which I diligently pay in full. (This earns me about $10 a month because it’s a 1% cash back card.)
Each section of the Credit Report Card also contains a detailed explanation of how your grade was derived. These sections contain a couple of paragraphs each explaining how credit scores work and recommending actions you can take to improve your credit.
The Credit Report Card isn’t earth-shattering. It’s not a tool that’s going to revolutionize the way you deal with money. It is, however, a useful way to monitor your progress. I’ve added the site to my bookmarks, and I plan to check in every month or two when I’m doing my personal finances.
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Related Articles at Get Rich Slowly:
- How to Obtain Your Free Credit Report
- How to Dispute Credit Report Errors
- Credit Card Index
- How One College Student Handles Credit Cards
- Ask the Readers: What If Somebody You Know Steals Your Identity?
