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Young Americans Are Ditching Credit Cards

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#16 srbeen

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Posted 14 June 2013 - 23:38

building credit is different than having credit.

Borrowing and showing you can pay it back on time is great. Not having borrowed before and having a proven pattern is not wonderful.

Credit cards are great for keeping track of where you spend what, but with that comes the 21-days you have to shell out that cash again. If used correctly credit cards can be a great tool, organizing your life while building a credit rating with finance companies. Screw up ONCE and you will pay for it for 3 months. Literally.

If you get a credit card and put things on it, then pay them off within the same week, your rating score will fly through the roof. Do this rather than abusing it.


#17 +Majesticmerc

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Posted 15 June 2013 - 00:03

Erm say what why the hell would I need credit im not American but its a similar thing here in the UK older people all have credit us young people im 22 nearly (long an adult in this country) don't and won't ever have one. Why would I need a credit card or good credit ill just live with what I earn.... seriously enlighten me I don't expect to need a credit history to get a mortgage should I even want one.


You have a good attitude to money, but unfortunately we don't live in an ideal world.

Credit scores don't exist to measure how much debt you have, but are used to show how good you are at handling the debt you have. Institutions such as banks (and places such as letting agents, insurance brokers, etc) will all do credit checks to ensure that you are a worthwhile investment by checking to see if you'll actually pay them back. A bad credit score will set off alarm bells and make it hard for you to get loans, mortgages, insurance (and so on) because you are shown to be bad at handling your debts. If you've never had debt before (through a loan, a credit card, etc), you are a 'closed book'. Banks will often prefer a mortgage applicant with well-managed debt over someone with no debt because if you've never repaid a loan/mortgage, they don't know if you could handle the repayments.

The credit score will obviously be only part of your application checks, but it helps immensely if you have a good one. In my case, I was in a similar position to that which you describe at the start of this year (plenty of income, no credit cards or debts) and I wanted to get a loan to buy my new car. My girlfriend was also buying a car (we needed new ones to replace our bangers) and applied for her own loan as well. She currently has a well managed debt structure with a couple of paid off credit cards and mortgage on a house (not ours, which we rent). We applied for almost identical loans, and because of her high credit score, the bank gave her a 1.5% decreased interest rate on her loan. Hence I, with no debt, got 7.9%, and she got 6.4%, which works out around a few hundred £££ in savings over the course of the loan.

Two examples of why it may be desirable to have a good credit score:
  • Applications for Mortgages and Lettings BOTH require credit checks, better credit scores will allow you to secure a rental application or your mortgage. So if you need somewhere to live, its better to have a good credit score.
  • "Living on what you earn" is definitely a good attitude, but things can happen which will necessitate you needing to borrow money. In my case, it was to replace a car that was going to break down any day, and I didn't have the money to replace it. Without my car, my ability to earn money is hindered and I risk hurting my income by NOT taking out a loan for a new car. I can pay the loan back no problem, but I needed the bulk cash to get the car initially. That make sense?
Of course, living within your means is a given. No-one should ever, EVER, try to borrow more than they can repay. Before taking out my loan of several thousand pounds for my car, I created tons of spreadsheets, documents, receipts, accountancy documents that I used to determine the suitable amount of money I could borrow. I literally spent weeks preparing to even apply for a loan. Then the bank did the same by analysing my income and expenditure through my bank accounts to ensure that I was responsible with my money.

Don't get me wrong, the whole thing sucks arse, but money runs our lives much more than we'd like, and unfortunately if we want to borrow money (or find somewhere to live, or get insurance, etc, etc) we're going to have to play their silly little game. The key is to not let them win by getting into trouble.

#18 KingCracker

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Posted 15 June 2013 - 12:36

Erm say what why the hell would I need credit im not American but its a similar thing here in the UK older people all have credit us young people im 22 nearly (long an adult in this country) don't and won't ever have one. Why would I need a credit card or good credit ill just live with what I earn.... seriously enlighten me I don't expect to need a credit history to get a mortgage should I even want one.

To buy a car for one thing. Unless you buy a car outright you'll need good credit if not then you wont be able to buy one or you'll get a high interest rate.

#19 slapfacemcdougal

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Posted 15 June 2013 - 12:54

You don't need a credit card to establish a credit rating. You can do the same thing by taking out a small loan and paying it back in a timely fashion, and rinse and repeat.

Take out a $500 or $1000 dollar loan.. pay on it for a good long time and you'll get good credit in no time.

#20 +devHead

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Posted 15 June 2013 - 13:09

Same here but what would I borrow for? Seriously my parents have never borrowed anything in their lives.

That's great, but most people cannot pay outright for things like a house or a car. Having a credit card isn't what's bad or stupid, it's using it indiscriminately. My wife and I have extremely good credit, but we only use our credit cards when we already have the money to pay. This helped a lot since we just moved back to the states and had no problem getting a USDA (read: 3.375%) loan for a house. Aside from our bank credit cards, we have a Kohl's credit account, because you can save a lot when you use it instead of a debit card or cash. But again, we pay it off soon after we purchase something. I never pay any interest on my credit card, only the principal.

#21 Lewism

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Posted 15 June 2013 - 13:23

You don't need a credit card to establish a credit rating. You can do the same thing by taking out a small loan and paying it back in a timely fashion, and rinse and repeat.

Take out a $500 or $1000 dollar loan.. pay on it for a good long time and you'll get good credit in no time.

Except that you waste money on interest. With a credit card, if you pay the balance each month, you will have no interest to pay and you build your credit up.

#22 peter_uk

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Posted 15 June 2013 - 14:51

Make credit cards work for you. I use 2 for the benefits 1 of them earns me money every time I use it while the other allows me to use it abroad or online in a foreign currency, better conversion rates than Pay pal without any charges. Both are paid of in fully automatically each month. So there is no downside plus there are added benefits with all credit cards in the UK section 75 where if you pay for something between £100 - £30,000 and for example you buy a holiday and then the company goes bust, your credit card company with refund your money. This is not really the case with debit cards.

#23 slapfacemcdougal

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Posted 15 June 2013 - 15:22

Except that you waste money on interest. With a credit card, if you pay the balance each month, you will have no interest to pay and you build your credit up.


True but then it's too easy to make your available credit sky rocket if you do that.

#24 Sir Topham Hatt

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Posted 15 June 2013 - 15:35

I have a credit card for spending abroad.

In the UK, paying bills and having a mobile phone contract helps towards your credit rating.

Never really use the credit card in the UK as I use the debit card for everything. I also wait until I can afford it before I buy it. I don't really understand people who don't :/

#25 Growled

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Posted 16 June 2013 - 03:36

Just ask the millions of Americans way over their heads in debt if credit is a good thing.

#26 +Medfordite

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Posted 16 June 2013 - 03:42

I know that Credit Card companies target College students since they are often starting out with no credit so they entice them with special offers. However, on the same token, I would not be surprised if the number of College Students has decreased since we went into the Recession/Depression we are in now. Instead, I think there are a heck of a lot more older late 20-40 somethings going back to school after they lost their career in whatever field they were in.

#27 Arpit

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Posted 16 June 2013 - 03:42

Just ask the millions of Americans way over their heads in debt if credit is a good thing.


Well, no easy remedy for unfortunate circumstances, naivety or stupidity. They're good/useful if used responsibly, but if you can get without one, that's fine too.

#28 chrisj1968

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Posted 16 June 2013 - 03:47

Erm say what why the hell would I need credit im not American but its a similar thing here in the UK older people all have credit us young people im 22 nearly (long an adult in this country) don't and won't ever have one. Why would I need a credit card or good credit ill just live with what I earn.... seriously enlighten me I don't expect to need a credit history to get a mortgage should I even want one.


all part of the government snooping. before you dismiss my claim, the US government in this example collects all credit card data. what you buy, where, when and the why. you leave a trail of transactions as you go through life.

#29 KingCracker

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Posted 16 June 2013 - 04:02

Nothing wrong with having a credit card as long as you pay your payment on time. I never pay the minimum payment either. My card gives me 12 months interest free with purchases over 500 dollars so I always make sure I pay off the balance before the 12 months is up.

#30 tanybeen

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Posted 16 June 2013 - 04:15

My current credit card gives me back 6% cash back on groceries, 3% on gas, and 1% on everything else. I pay it in full at the end each month via an automatic payment (so there is no way to skip it). I haven't paid a cent on interest in 2 years, and received more than $1000 from it in rewards. Just don't spend more than you have people, and credit cards are a great thing if used right!