Five Signs You Shouldn’t Use a Credit Card

Despite the bad rap they’ve gotten over the years, credit cards really do offer benefits you can’t get with other forms of payment. While most come with zero fraud liability, others come with guaranteed returns, rental car insurance, trip cancellation/interruption insurance, and extended warranties. The best rewards credit cards on the market also dole out airline miles, hotel loyalty points, fixed travel credit, or cash back for each dollar you spend. And yes, these perks can all be “free” — with the important caveat that you avoid credit card interest like the plague.

When you pay with cash or debit card, on the other hand, you’ll get none of those perks. Nada. Zilch. With that in mind, it’s no wonder people flock to credit cards in droves.

Unfortunately, this is where the love story ends. Yes, Americans do use credit cards in large numbers. And yeah, we’ve got the debt to show for it. Americans owed a collective $981 billion in credit card debt as of October 2016, according to the Federal Reserve. Among American households with credit card debt, the average unpaid balance was $9,600 as of May 2016, according to

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Five Signs You Shouldn’t Use a Credit Card

While any number of circumstances can lead to debt in a heartbeat, it’s safe to say that some indebted families didn’t plan to end up that way. Perhaps they tried credit for convenience or wanted to earn some rewards. Along the way, they realized they struggled to manage their credit the way they hoped – but by then, it was far too late.

Let’s face it: Not everyone should use credit cards on a regular basis, and some people shouldn’t even own them. If you fall into one of these categories, you should seriously consider steering clear of credit cards altogether.

#1: You don’t use a budget.

Going sans budget? You might want to avoid signing up for credit cards. Without an idea of how much you’re spending in certain categories or any inclination to keep your spending in line with your income and your priorities, a credit card could land you in a heap of trouble. Without a budget, you’re free-flying without any sort of plan for your spending. Don’t compound that problem by using credit without a plan, too.

Without a budget, you’ll be a lot better off sticking to cash – so you can only spend what you have. While you won’t score credit-related consumer protections or rewards, you’ll at least know when you’re running short. The biggest benefit of using cash is that it behaves like a very simple budget — because when it’s gone, it’s gone.

#2: You’re a compulsive shopper.

Do you love a good sale? Do you shop first and ask questions later? If you shop without thinking, a credit card is probably the last thing you need.

Cash might be your best bet if you’re someone who shops compulsively and has trouble keeping track. Where credit cards let you buy now and worry about payment later, using cash helps you realize the financial impact of your purchase right away.

#3: You’re living paycheck-to-paycheck.

A Federal Reserve study from earlier this year showed that almost half of American families couldn’t come up with $400 to cover an emergency. Any family in this situation is teetering on the edge of financial disaster, since one job loss, one health crisis, or one slow month at work might be all it takes to knock their finances seriously off track.

If you’re living paycheck-to-paycheck, signing up for a credit card is flirting with disaster. With a line of credit at your disposal, it’s far too easy to lean on credit when times get tough. And if you’re living paycheck-to-paycheck, keeping up with a new credit card bill might push you over the edge.

#4: You have trouble paying bills on time.

If you have trouble staying on top of your bills already, a new credit card might just make things worse. Imagine being able to charge whatever you want and worry about payment when the bill arrives in the mail. For some people, the lapse in time between a purchase and actually receiving a bill is enough to make them forget how much they spent altogether.

Since a late payment can trigger late fees and penalty APRs, paying late can also have a domino effect on your finances. The more you’re late, the more money you’ll pay in interest and fees. Over time, the added expense that comes with paying late can leave you even worse off.

#5: You’re already in debt.

If you’re already in debt, your best course of action is to pay off the debt you have, not accumulate more of it. With another credit card, you’re bound to end up worse off than you already are.

If you’re using credit cards now, you should stash them away in a drawer for safe-keeping. And yes, you should avoid signing up for new credit cards altogether — unless you’re serious about using a balance transfer credit card to get out of debt.

If you’re already in debt, it’s time to stop digging. By steering clear of credit cards, you can focus on paying off the debts you have — without adding to the pile.

Final Thoughts

Credit cards offer a ton of lucrative benefits, but their perks are far from free. If you spend more than you planned, lean on credit during lean times, or use your credit card haphazardly, you could wind up with credit card debt that lasts for years.

Before you sign up for a credit card, ask yourself whether your finances are truly ready. If you’re debt-free, paying all of your bills on time, and sticking to a regular monthly budget, a credit card might be a net positive for your finances. On the other hand, if you’re already struggling financially, not great with budgeting, and living paycheck-to-paycheck, a credit card could be your worst enemy.

The benefits that credit cards offer might intrigue you, but you should know that someone is paying for them. And if you’re one of the millions of consumers who carry a credit card balance and pay credit card interest, you can rest assured it’s you.

Holly Johnson is an award-winning personal finance writer and the author of Zero Down Your Debt. Johnson shares her obsession with frugality, budgeting, and travel at


Do you use credit cards? Why or why not?

Holly Johnson
Contributing Writer

Holly Johnson is a frugality expert and award-winning writer who is obsessed with personal finance and getting the most out of life. A lifelong resident of Indiana, she enjoys gardening, reading, and traveling the world with her husband and two children. In addition to The Simple Dollar, Holly writes for well-known publications such as U.S. News & World Report Travel, PolicyGenius, Travel Pulse, and Frugal Travel Guy. Holly also owns Club Thrifty.

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