Do You Really Need A Credit Card?

I got my first credit card when I started college, and man, was I proud. I had a $500 credit limit. But I must say that I never really "got" the concept of credit cards. In my naive world, I never would have dreamed of spending money I didn't have. So why would I use my credit card to buy stuff, only to turn around and pay off the credit card at the end of the month? That seems like an unnecessary step.

I was "building my credit," of course!

I remember one month my bill was due on a Sunday. I tried to pay my balance online, and it didn't look like it went through. I thought I messed up, so I tried again. The next day, I found out that in addition to taking both payments, I was charged a late fee because processing didn't take place on Sundays. I called the company and explained that I tried to pay my bill (twice) on time, so I shouldn't have to pay the late fee. Eventually, the representative conceded a "one-time" removal of the late fee. That was close!

A few years later, I got a card that had "Rewards." I never made the All-Star team in little league, but I was a winner now! Even better, I was taking advantage of the credit card companies big time!

Still Naive

The truth is that a credit card is not necessary to build credit. If you can show proof that you pay your bills and rent payments on time, you qualify for the best mortgage rates. The trick is to find a lender that does manual underwriting, instead of a lender that uses ">" and "<" as its main tools in determining whether or not you get a mortgage and what your rate is.

Since my small victory with getting my late fee removed, I have heard countless stories of credit card companies being extremely difficult to work with. They waited until after the due date to apply someone's payment (a check), thus producing a late fee. I have heard some cryptic rules, such as: if your online payment is made before 11:59AM of the due date, it is considered on time. Otherwise, it's late.

But I saw these companies at their worst when I tried to cancel my cards. I really couldn't believe that a business would spread so many outright lies in order to intimidate me into not canceling. They told me that I need a credit card to book a hotel room. Which was funny, because I had used my debit card numerous times. Well, you can't rent a car without a credit card. Wrong again. I had rented several cars with my debit card. And on, and on. I didn't think she ever cancel my card. After forty-five minutes, my account was finally canceled. And if there was some doubt in my mind before, it was gone: I was forever done with credit cards.

But wait! Wasn't I robbing the bank with all those reward points? Well, not really. I am not accusing anyone else of doing this, but from time to time, I found myself buying something that cost a little more because I was getting reward points. Or maybe I'd buy one or two more things to increase my points balance. Once I realized this, I felt sort of stupid. Mainly over the things I would do for some more points, to "win" more.

Then, I took a big step back, looked around, and thought about what was going on. Who was winning? The people that pour almost limitless money into focus groups and consumer research to figure out our every move, or the guy spending $100 on stuff he doesn't need so he can get $1 back?

They know what they are doing. As consumers, we often do not. But I knew exactly what I was doing when I emptied out my wallet, had several forty-five minute conversations with some nice ladies, and made some plastic confetti.

And now I get to keep $100 for every $100 I don't spend on junk, and that sounds like a real reward to me.