Do I Need to Use a Credit Card?

I got my first credit card while I was in college. I had just been promoted to associate manager at a clothing store, and I thought it was time to build my credit along with my career.

Oh, how I wish somebody had pulled me aside and told me I didn’t need to do that.

I didn’t know that back then. At first, I just used my credit card to buy a bacon, egg and cheese biscuit and a coffee every day before work—and I would pay it off every month. But then there was a pink peacoat in the mall that I just had to have. And my boyfriend needed a new suit for a job interview. Then my friends were taking a trip to a theme park, and I needed to go with them.

Suddenly, I had hit my credit limit! And the interest made the balance too high for me to pay it off every month. I didn’t have a credit card—the credit card had me!

Listen, you do not need a credit card to win with money. I want to walk through the most common arguments one by one, because once you understand what’s actually going on, you’ll see all the reasons why you can (and should) live without one.

Why Do People Think They Need a Credit Card?

People think they need a credit card because they’ve been told it’s the best way to protect themselves from fraud, handle emergencies, build credit and earn rewards.

And that message is everywhere. Eight in 10 adults (82%) have at least one credit card, and the average credit card balance is $7,279.¹ So clearly, a whole lot of people are buying into the idea that credit cards are a normal—and even necessary—part of managing money.

So let’s break down some of the reasons (ahem, excuses) people give for keeping a credit card around.

1. To Protect Against Fraud

You get the exact same fraud protection with a debit card as you do with a credit card, as long as it has a Visa or Mastercard logo.^2,3

And that’s huge, because nothing will ruin your day faster than a stranger buying a Nintendo Switch and a couple dozen Doritos Locos Tacos with your money. Dealing with fraud is never a fun situation, and credit card companies know that. That’s why they want you to believe the only way to protect yourself is by making most of your purchases with a credit card.

Now, most of the time, your bank will tell you if they see something fishy. But you should always keep a close eye on your bank account to catch any fraudulent charges—and make sure you get that money back.

2. In Case of Emergencies

A credit card can turn one emergency into a years-long debt disaster. Life happens. And when it does, it can be expensive (with a capital E). You know: The heater goes out—in the middle of a snowstorm. The AC fizzles out—on the hottest day of the year. The car won’t start—when you just loaded up the family for a summer road trip.

Folks swipe the credit card, thinking it’s the solution—only to realize they have just turned their emergency into a crisis. Now they have debt with interest! That’s not a solution. It’s a freaking sledgehammer that’ll wreck your finances even more.

I’ve got a better way: It’s called an emergency fund. So, instead of relying on the big credit card companies to “save the day,” you can be the hero of your own story. An emergency fund gives you the protection you need when life takes you for a ride. Plus, you won’t have to worry about the bill coming in the mail later.

3. To Build Credit

Managing the money you have matters more than building credit. The idea that you won’t be able to buy a house or a car without a good credit score is a straight-up myth. Creditors want you to believe you literally can’t survive without credit. But I’m here to let you know—it’s a lie!

Pop quiz. Can you name the five things your FICO score actually measures?

• Debt history
• Amount of debt
• Length of time in debt
• New debt
• Type of debt

This “I love debt” score only measures how you’ve managed debt over a period of time. It doesn’t measure things that actually matter—you know, like your salary or how much you have in savings. You could inherit a million bucks tomorrow, and it wouldn't change your credit score by one point. That’s messed up!

You know what actually shows you’re responsible with money? Money. Consistently paying your bills (rent, utilities, cell phone—stuff like that) on time. With your own money. The right creditor will take that into account (especially when you’re buying a house—but more on that later).

4. To Get Rewards and Cash Back

Credit card rewards are a rigged game designed to make you spend more money than you ever get back in “points.” Yeah, all those points, airline miles and cash-back offers seem like free money. But any perks you get are quickly canceled out by all the recurring fees and interest you end up paying throughout the year.

Most of the time, you have to spend $1,000 just to earn $30 in points. Oh, and a lot of those credit card points have an expiration date (yeah, they don't exactly advertise that part).

But if you’re using credit card freebies to justify having a credit card (and that includes store credit cards), you’re getting played. Credit card companies wouldn’t have rewards if they weren’t already making a ton of money off their customers. They’re cheating more than your uncle playing UNO—and you lose in the end.

Is It Okay to Have a Credit Card if You Pay It Off Every Month?

No. Even if you pay your balance every month, you’re still playing a dangerous game with a company that’s betting on you to fail.

Here’s what the numbers show:

• About half (45%) of those with a credit card have carried a statement balance at least once in the past year.⁴
• The average credit card interest rate has climbed to 22.15% for accounts carrying a balance.⁵
• Credit card interest alone cost consumers $160 billion in 2024, up from $105 billion just two years earlier.⁶

Listen, the odds aren’t in your favor. In fact, most people are only one emergency away from missing a payment. And that interest is no joke! Before you even realize what’s happening, you’re knee-deep in debt—which steals your joy, as well as your paycheck.

There’s no beating the system when it comes to credit cards. Even if you think you can make it work, it’s just not worth the risk. Period.

How Do I Rent a Car or Book a Hotel Without a Credit Card?

You can rent a car or book a hotel with a debit card—you just need to plan ahead for a temporary hold on your account. It used to be that rental car companies only accepted credit cards. But not anymore. Plenty of places now let you rent a car with a debit card, although they may have some extra requirements.

And yes, you can use a debit card at hotels too. Most major hotel chains will let you book with one, but they may put a temporary authorization hold on your account to cover any extra charges during your stay—things like room service, snacks from the minibar, or damage to the room. Basically, they’ll set aside some of your money until the hold is released. So give yourself some breathing room in your account before you travel.

I’ll be real with you: It’s not always super easy to travel without a credit card. But just because a credit card is more convenient in some places, it doesn’t mean you need one. You can absolutely travel with a debit card. Just know what to expect before you roll up to the rental counter or check into your hotel.

And since renting a car can be one of the trickiest parts of traveling without a credit card, here are a few tips to make it easier.

1. Find the right company.

When you’re planning your next trip, call ahead and ask car rental companies about their debit card policies. You want to find a company that will let you drive off the lot without flashing a credit card. And there are companies out there who will actually accept debit cards with a smile (instead of the industry standard’s usual eye roll).

2. Research your car options.

Sadly, some rental car companies may treat their debit card fans a little differently than credit card holders. Don’t worry—the worst that can happen is you might not be able to rent that exotic sports car you had your sights set on. But that’s okay! Who said traveling economy is bad? But if you really want to rent in style, call ahead to find out if the company you’re looking at will let you rent the car you want with a debit card.

3. Be prepared to jump through a few extra hoops.

Not all rental car companies think cash is king. So don’t be surprised if they want you to check a few more boxes than credit card holders before they hand you the keys. Some places might do a credit check, and others might ask for your return flight info if you’re renting from an airport location (they just really want to make sure you’re going to give the car back). But not having to mess with a credit card is always worth a couple extra steps.

4. Add a budget line item for holds or deposits.

When you rent a car, most companies will place a hold on your card (anywhere from $200–500). Now, don’t freak out when you see this pending charge. That amount is not coming out of your bank account. It’s just the rental company’s way of making sure they’re covered if anything happens.

This hold shouldn’t be a problem when you use a debit card—unless you don’t plan ahead and make sure you have enough of a buffer in your account. So just add a line in your budget for any card holds or deposits you’re expecting that month. Keeping a regular budget is key, especially when you’re traveling.

Can You Buy a House Without Credit?

Yes—you can buy a house without a credit score through an approval process called manual underwriting. So if you’ve heard that you have to build up a credit score before you can get a mortgage, that should be good news for you.

With manual underwriting, a real person looks at your overall financial picture instead of relying on a credit score to make the decision. They’ll look at non-debt aspects of your life, like your employment record, rent history, income and size of your down payment.

So, no, you don’t need to use a credit card if you want to eventually buy a house. As long as you pay your bills on time, have been in the same career field for two or more years, and don’t have a negative credit history (there’s a difference between no credit and bad credit!), you should have no trouble qualifying for a conventional 15-year fixed-rate loan.

How Do You Live Without a Credit Card?

It’s 100% possible to live without a credit card by saying no to borrowing, getting on a budget, spending only the money you have, and building an emergency fund for when life happens. And listen, I know it works because I live this way! I don't have any credit cards—and neither does my husband. And guess what? We’re doing just fine. In fact, we’re doing way better than fine!

Is it always easy to live credit-free in a culture that revolves around borrowing money? No. But it’s definitely worth it. Here are four tips to help you ditch credit for good.

1. Stop borrowing money.

Living a credit-free life is about more than just not using credit cards. It’s a whole new way of thinking—one that doesn’t involve borrowing money at all. Yeah, that’s actually possible and totally freeing!

It’s also way easier to quit using credit cards when you have zero payments stealing from your paycheck. So if you’ve already got credit card debt, car loans or even student loans (yes, that counts as debt), you need to get serious about paying it all off. The sooner you knock out your debt, the sooner you can actually make progress with your money!

2. Create a monthly budget.

I can’t stress just how important a budget is—especially if you’ve sworn off credit cards.

Now, maybe you see the word budget and you’re like, “Hold up, hold up. I don't want to be all confined like that.” Hear me out: A budget doesn’t confine your money. It defines your money.

Instead of worrying if your card will be declined or praying you have enough money for groceries or that Friday night movie ticket, you’ll know exactly what you can and cannot spend. Trust me, making a plan for your paycheck before the month begins gives you so much confidence!

My favorite way to budget is with a zero-based budget. That’s when your income minus your expenses equals zero. And no, this doesn’t mean you’ll have zero dollars left in your bank account. It just means you’ve given every single dollar a job to do. Go ahead and create your budget for free right now with the EveryDollar budgeting app.

3. Watch your spending.

It’s one thing to make a budget. The key is sticking to it.

Relying on credit cards means spending money now and worrying about how to pay for it later. But when you’re living without credit, you can’t just swipe your debit card and hope for the best. You need to make sure you actually have the money in your bank account. And that kind of self-control can be hard if you’re not used to it.

You’ll probably have to cut back on your spending, say no to things more often, or even find ways to increase your income to make sure you’re spending less than you make each month.

Yeah, in the beginning, it’s hard to say no to debt and stick to your boundaries. But you know what’s harder? Spending years fighting an unending cycle of debt that has no mercy. Um, I’ll take the debt-free life, please!

4. Save for emergencies.

It only takes one flat tire or a trip to the hospital to make you go back to your credit card—unless you’ve got a plan.

Remember that emergency fund I told you about earlier? It’s time to start saving your first $1,000 ASAP. Then once you’ve paid off your consumer debt, you should start building up that emergency fund to cover 3–6 months of expenses.

Trust me, the peace of mind that comes with having a big ole pile of cash tucked away just in case is a game changer. And instead of reaching for the credit card the next time emergency strikes, you can just dip into your emergency fund and take care of it right then and there.

Credit Card Myths vs. Reality

Okay, let’s recap. We’ve gone through fraud protection, emergencies, credit scores, rewards, rental cars and even buying a house—and every single “reason” you’ve ever heard for needing a credit card turned out to be a myth.

Hopefully I’ve caught you before you’ve signed on the dotted line and you can avoid the debt trap of credit cards altogether. But if you already have a credit card, I hope you see now just how dangerous they really are—and that you don’t need one. (And if that’s you, your next step is to cut up those jokers!)

A life without credit cards is a life of freedom. No more credit card bill after credit card bill. No more collection calls (if you know, you know). No more worrying if you’ve missed a payment. And no more having to use your paychecks to pay for the past.

Just ask Judy from THE Ramsey Baby Steps Community Facebook group. After closing her last credit card, she shared: “Finally paid off and closed my last credit card. On my way to having a zero credit score, one debt at a time. On to attacking student loans next, then mortgage! Life is so much better without debt!”

EveryDollar helps you find extra margin every month so you can start making real money progress, really fast. Just download the app, answer a few questions, and we’ll build you a personalized plan based on your situation to free up margin and make the most of every dollar. Every day. (See where we got the name?)