Could We Exist in a World Without Credit Cards?

Posted on 24. Sep, 2007 by in Credit & Debt, Saving & Investing

studentcreditcard.jpgI’m a big fan of Kevin Rosen, columnist for the Kansas City Star. He writes high quality columns about kids and money on a regular basis. However, one of his recent articles has drawn a lot of heat. In the article, Kevin made the following statement:

Wouldn’t it be nice if our children grew into adulthood in a world without credit cards? Look at all the problems that would be solved in a cash-and-carry society — no gut-wrenching debt overloads, no junk mail from credit card issuers, and perhaps most important, fewer opportunities for cyber thieves to steal our identities.

It’s an interesting idea – could you live without credit cards? Do you wish society didn’t have credit cards?

He received a ton of responses to the piece from people criticizing his head-in-the-sand approach to credit. But some of the responses, listed below, provide some valuable insight into the way people think about credit. In fact, the following statements prove to me that most people believe credit cards are a good thing, when used wisely.

“Easy credit is ubiquitous in our society. If it isn’t bank plastic, there are pay-day loans, no-interest mortgages and floods of home-equity loans. ”

On credit cards and children:

“I gave them credit cards about the same time they got driver’s licenses. Of course, these were cards on my accounts with their names on them. And when the bill arrived every month, I knew exactly what they had spent and on what.

By laying down the rules this way, I required they pay off their balance every month. If they didn’t have the money, I took the cards back and deducted it from their allowance until the debt was paid. Being denied allowance was a shock, and they quickly learned the basic lesson — credit cards are not free money; it has to be paid back.

My kids — one recently graduated from college, and the other a senior — have their own credit cards today but use them strictly as convenience cards. There is no huge debt being amassed. They already learned the lesson firsthand but under conditions where things would not get out of control.”

“I am a Depression child. I was taught to only buy what I could pay for. You certainly won’t get in financial trouble. I have tried to live up to this, but I have had cash refused. I have never thought I would experience this. This is scary.”

Earlier this month, student loan provider Nellie Mae surveyed graduate-school students about credit-card usage. Among other things, the report found that 93 percent of these highly educated students try to pay at least the minimum monthly requirement, but only 20 percent acknowledged paying off their credit card bills in full each month. That’s maddening, and signals an ongoing need for credit education in classrooms and on the home front.

But I whole-heartedly agree with Kevin’s basic thoughts on putting credit cards into the hands of college students: Don’t even think about it until your child can handle cash responsibly and has a firm understanding of the benefits and dangers of using credit cards. It also doesn’t hurt to help them set up something like an automatic withdrawal from their checking account to pay off the balance each month.

I love the convenience and purchasing power that credit cards offer people. But without the proper education, credit cards can turn into your worst nightmare.


One Response to “Could We Exist in a World Without Credit Cards?”

  1. Truthseeker

    07. Jan, 2008

    Ideally the world would be without credit since credit leads to things such as inaccurate judgement of funds and a need for a future that is stable and consistent. Life is unpredictable and full of change and credit’s monthly approach does not take that into account.

    I see no reason for credit to even exist except for the case of investment. Ideas need material currency to get off the ground because people demand compensation for their work. It is more efficient to have work start, incur a debt, then make up with productivity later than to wait for enough capital before being productive. Science would be slow without credit since everyone would want payment in full before research started. Our world would be slow evolving if capital for every piece of equipment had to come in before work started.

    Credit has it’s place in the world but the problem I see with credit is that it is in too many places where it should not be. You are not going to die if you don’t have your 90 inch TV now. Using credit for cars and houses is stupid unless the car and house are going to make money for you, make that money fast (none of these I’ll break even in 40 years by which time inflation eats my funds or old age eats me), and is a low risk loan. Credit is a very volatile tool which should be treated like a firearm. Educate yourself about credit. Use only when the situation absolutely DEMANDS it.

    My biggest pet peeve with credit are the credit card companies paradigms. These companies are in it to make money. Many things in life should not be “for the money.” Healthcare, insurance, and credit are some of them off the top of my head. Highly conscious folk need to run these organizations after we tear out the mess these organizations have put forth in our world. Credit companies ENCOURAGE people to go bankrupt by offering heavy credit users bigger loans!!! The more you use your card, the more debt you incur, the more credit you can have!

    I pay off my credit bill in FULL every month and this was my mistake. The credit card companies NEVER raised my limit. The companies claim they only give loans to “good credit people” but me with a perfect record of ALWAYS paying on time and IN FULL never got a limit raise. I only got a credit raise AFTER I started PAYING MINIMUM + 5$ on every balance. Thus, by “incurring debt” to the credit card companies barely 2 months later they raised my limit 3,000$!!!

    Credit in today’s form is all a scam. If you want to beat the card companies use your credit to raise a debt you KNOW you can EASILY pay off. Then just chip away at this debt with minimum payment + 5$ a month. Beat them at their own game. They will think you’re in debt and TRUST you with MORE MONEY (of course in hopes you go bankrupt and they can reposess all of you).

    Let’s abolish credit and demand credit only be used in investment where it belongs.

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