Can you get by without credit? Can you get by without a credit card? Can you get by without a car loan? Can you get by without a mortgage? The answer is yes.
However, it won’t be easy to get by without credit, and you’ll make your life more difficult than you need to.
Life with Jane getting by without credit
Let’s examine the daily life of a person who has chosen to get by without credit. We’ll call this person Jane.
Jane has probably chosen this course for one of three reasons.
- She worries she won’t be responsible with credit.
- She doesn’t manage money very well.
- She’s afraid of credit.
Jane can only get past these blocks if she educates herself. Nothing else is likely to change her behavior.
How Jane gets by
Jane works a job. She cashes her paycheck. Some of it stays in the bank, accessible by ATM. She pockets the rest.
She pays cash for everything. Whether she’s going to the gas station, to the grocery store, to the movies or to a sporting event, she uses greenbacks.
For other things, like utilities or her cable TV bill, she’ll whip out the checkbook.
Jane is so intent on getting by without credit that she uses prepaid debit cards to shop online.
Downsides for Jane
Jane is managing to get by without credit. Life isn’t as convenient as it may be for some, but she’s doing just fine.
However, Jane is going to run into trouble if she wants to own a home. She may not ever want to own a house, but she should leave her options open. If she is getting by without credit, that means she’ll have a next-to-nonexistent credit score.
It will be very difficult to obtain a mortgage at all without a credit history, and even if she can get a mortgage, it is likely to be more expensive than it otherwise would be – as in, tens of thousands of dollars over 30 years of interest payments.
Does Jane want to buy a car? She doesn’t have to. Millions of people lease cars or buy used cars with cash. A few pay in full with cash.
But cars cost a lot of money, and she will have a hard time buying a new car unless she’s got more than ten grand saved up. She’ll need a car loan and, well, she’s back to the mortgage problem.
Big downsides for Jane
Will Jane ever get robbed? If she does, the credit cards will not stick her with any liability. If the robber gets her cash or her checkbook, there’s not much she’ll be able to do.
Will Jane ever have an emergency? Probably at some point. If she goes to the doctor, and needs serious medical care, she better have health insurance.
If she doesn’t, the doctor’s office will want payment then and there or refuse treatment (not at an emergency room, however).
Does Jane want rebates? Sometimes she can get a cash discount when she buys stuff with cash, although that doesn’t happen often. With a credit card, she can take advantage of credit card cash-back and rewards plans, which have value, as well.
Look, Jane, look …
My advice to Jane: Live life with at least some access to and responsible usage of credit.
Cash image via Shutterstock
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