Partially unrelated, but I have a question. What good is there in having a credit card? I'm 23, have never had a credit card, and only use a check card. If I don't have the money in the bank to get something, I don't get it. I tend not to get things even if I do have the money, just because I need to have a good "buffer" incase anything happens.

My only debt right now is my home loan, which I recently refinanced to my local bank when rates dropped and Countrywide was becoming BoA (whom still mail me like crazy). My credit score is near-perfect (although I took a hit by refinancing), and I've never encountered a situation where I've thought "Man, if only I had a credit card".

So whats the point?

@Guard: they're good for emergencies...like when the funding you thought you had for the summer didn't come through and while your job pays your rent, you have other expenses. while I don't recommend living on credit at all...if it's short term, and you know it's going to be short term, and the alternative is starvation.
Also renting cars is a heck of a lot easier with a credit card, there are some places that WON'T let you rent with a debit card (or they place a huge hold on the card).
My limit is 3500, insanity. I don't need 3500 in a month, but when I had my funding problems, it was a nice fallback and I paid it off when I was overfunded.
And in theory, I could have put my second root canal on the card but I got a loan for that which was paid off before they started charging interest.

Rewards, emergencies, convenience, etc are the usual reasons. But something else to consider are the purchase protections offered by your check card. They are almost certainly not as good as the purchase protections offered by most "better" CCs. If anything ever goes sour with a purchase, you may have to fight a lot harder to get your own money back than you would to ask the CC Co. to take their money back. Same thing applies if your card is ever stolen. The thief isn't spending your money, draining your bank account.

@Guard: As far as I'm aware, having a credit card that you pay the balance off of completely each month is crucial to building and maintaining a good credit score, since a chunk of the score is based upon how much available credit you have and how much of that credit you are currently using.

I do find it funny that someone who can do financially fine without credit cards is considered more risky for loans and such than someone with credit card debt, but that's how the system is.

The big one is rewards. I get at least $500 a year back from my AmEx Blue.

Then there's the convenience of not having to worry if the money is in your checking account when you want to buy something. With credit you can buy it and then transfer money to checking to pay it off at the end of the month.

@Guard: I route all my bills and monthly expenses (groceries, gas, etc) though my AMEX card and pay it off every month. So at the end of the year get 5% cash back which adds up to quite a bit.

Granted if I ever miss a month payment the finance charge would kill the cash back but since I never miss a payment it's an easy way to get a chunk of change back at the end of the year. Been doing this a few years now.

It's also nice for paying for bigger ticket items like vacations (our recent cruise), both to not front that cash that second in case of emergency (which in that case I'll have time to get a bit out of my savings) and again to route those huge expenses though the cash back reward program.

You shouldn't NEED a credit card, but used properly can only help you. You just need to have self control.

@castlecraver: Yeah that's a good point, I forgot about card's purchase protection. I do think my check card has something similar but I agree its most likely not as good as a CC.

@Cletus: And depending on your account, the money you leave in there over the month can be earning interest.

@Guard: Lots of points.
When used wisely, Credit cards are infact a very awesome and powerful tool:

Purchase Protection, $0 Liability, Insurance, Extended warranty, Rewards Programs, Price protection.. and then some. The links below will give you an idea.

[www.iwillteachyoutoberich.com]

[www.iwillteachyoutoberich.com]

[www.iwillteachyoutoberich.com]

[lifehacker.com]

[www.iwillteachyoutoberich.com]

Credit union, credit union, credit union! I have a 7.49% rate on my credit union Mastercard (the rate is based on the t-bill auction rate so it does vary but it's still 1/2 to 1/3 of what the big banks charge), no annual fee, and I get rewards in the form of points for travel which can be redeemed on any flight on any airline.

@MostlyHarmless: And not to mention they build good credit. I use a CC for 90% of my stuff, but I only buy what i can pay off immediately. Its more of a self control thing. Just because you have a 10K credit limit does not mean you spend all 10 K

@Guard: Chargebacks. If you order anything on-line or over the phone, you may need to dispute the charges at some point in your life.

@Guard: They offer better protection than a bank card because it's a buffer between what you get charged and your real money. If your debit card is stolen and used, then you are actually out the money until the situation is resolved one way or another. With a credit card, you don't immediately take a financial hit. They also tend to have better rewards programs avail than rewards offered by bank debit cards (I'm not aware of any free rewards program offered by any local bank).

Credit cards are useful tools if you pay them off fully every month. I've only failed to pay it off entirely once and that was because I just finished school, went on an expensive trip, just spent a bunch of money on a new apartment (deposit, first & last month rent, plus furniture), and due to the delay between that and getting my first paycheck at my new job, it let me do all that stuff and it only cost me $20 in interest.

I just got a nice letter from Chase over the past weekend that my interest rate is doubling due to 'market conditions, federal regulations, and our increasing costs'.
I'm starting to enjoy writing all these rejection letters too. Screw you, Chase.

@Guard:

* Purchase Protection
* Rewards
* Extended Warranties
* Rental Car Insurance
* Flexibility

I've read over and over about people claiming to have great credit, stellar payment history, etc. and getting "screwed" by their credit card company. Nothing has happened to me yet. I have an American Express Blue Card with a (untouched) $30k line of credit and an APR below 10% (I don't know what it is, I rarely use the card, and never revolve my balance). I prefer to use my American Express Gold Card (not really a credit card per se) and pay that off, as required, every month.

Why on earth would I use debit? Thanks to my AMEX, I've received countless thousands of dollars in free merchandise and travel from the rewards, they credited me $200 when I got burned by Apple for being an iPhone early adopter, was able to have a camera replaced after it's manufacturer's warranty expired, etc.

The knee jerk reaction of people who hate credit card companies can't be coming from people with good credit and good payment history. "Good credit" is so subjective anyway.

Having a 720 FICO score isn't "good credit." That's like getting a B- average GPA and expecting a full ride scholarship. You say you're 23 and have a near perfect credit score. I'm not buying it. Unless you're above 800, you're not near perfect.

@Guard: If you already have a home loan, I think you're fine without it. I'm also generally opposed to cards (don't have one either), but I've built up my score with student loans and paying on time. Sure, I don't have the gold plated "I love debt" score, but it'll be good enough.

Awesome description! Sometimes good writing deserves its own props, and I'm glad the Consumerist is willing to give them, even though the story's only about three dollars. ;)

@Guard: Rewards and security.

My wife and I pipe all our expenses through a credit card that gives us 1% cash back and 3% on gas/groceries. We end up getting a cheque for $50 every couple months. It's not a huge amount but a free $600/year is nothing to sneeze at. Obviously the card has no annual fee and gets paid off on time in full every month so there's no interest charges.

Plus security. With a credit card you have a huge company on your side in any disputes. If you buy something (online, say) and don't get what you paid for, the credit card company will often give you your money back and go to bat for you.

Not to mention most cards (at least here in Candaa) give you free travel insurance and rental car insurance. And an easy way to view all your monthly purchases online.

It's not that you NEED a credit card, it's that you get so many benefits for zero cost. The only downside is your own temptation to spend money you don't have, but it sounds like that's not an issue for you.

According to Suze Orman, the last thing you want to do is kill off a credit card that's a few years old since it's an established line of credit that exists on your record. Killing this off will hit your overall score significantly.

Wouldn't it be best to just bury the card somewhere and forget about it, unless obviously it has monthly/yearly fees?

@Guard: It's really hard to book a flight or a hotel room without having one. Plus they're great for large purchases for protection (chargebacks, extended warranties).

I love how she wrote this.. and I especially love that she put the same spin on her email to the CEO.. Heheheh.

Go her! Maybe she can buy herself a really *fancy* toothbrush.

What about when I hate one of my card companies (Chase), but if I break up with them, my FICO score will go down, and then all my other card companies will raise my interest rates?

I guess the analogy only goes so far. Somehow I doubt that if I broke up a girlfriend, the others would expect me to pay for dinner more often.

Or, here's a thought. Don't have emotional relationships with multinational corporations.

Rewards and PIF every month go together very well.

I have a card that gives me 2% back on every purchase in stores and 4% for many online purchases. They give travel credits that can be used any day of the year booking through any site.

It's also got Primary car rental coverage, lost baggage and trip insurance. Not to mention the warranty extension and chargeback protection.

[www.discovercard.com]

@Guard:
Credit history
Money Buffer
Rewards

My brother is being screwed right now because he got frightened of credit cards - many of his friends got in trouble with them. So he never got one.

Now he's having trouble getting a home loan with the tightening of credit.

Lol that was a great story, I chuckled a few times at work.

@Guard: In addition to all of the reasons above, credit cards also help you when you travel. Aside from using it to rent a car or book a hotel, you really want to limit how far and wide your financial information goes. Credit cards offer a buffer between you and all of your money in the bank. If someone gets ahold of your credit card number, you can dispute the charges, you can get your money back. If someone gets your bank number or ATM number, the money is gone and you have to get it back after the fact.

When you're traveling, using a credit card also means you don't have to pay any ATM fees if you don't get your fees reimbursed by your bank, or if you are traveling in an area not serviced by your particular bank. For instance, if I had a Washington Mutual bank card but travel to the East Coast - no WaMu branches means no ATMs and I would have to pay a fee to extract money.

If you have the money in your account anyway, the credit card does nothing but help you make your purchases more efficient and safer. Just pay it off in full at the end of the month, and it's as if you used a bank card the entire time.

@Firethorn: I thought a 720 FICO was considered pretty good.

@B: Agreed, and don't write your letters to credit card companies so precociously.

That was a really great letter: short and to the point, but not without its own charm and humor.

Kudos.

@Guard: How could you possibly have a "near-perfect" credit score if you're only 23 and have never had a credit card? Did your parents add you to one of their credit card accounts when you were young to build up your score? A short/nonexistent credit history always counts against you. My credit history is 11 years, and it's still considered short.

Probably off-topic, but Jennifer Aniston is my future wife. I will see to that.

On topic: that is probably one of the best letters written to a CEO ever. It lays it down in a humorous, yet non-pretentious manner. Good work!

@locura79: Actually, yes, something like that. I know they added my SSN to one of their accounts (I'm not sure if its a credit card or other line of credit) but immediately my credit report showed a 20-year-old line of credit.

I'm not sure if a bank would mind that I opened a credit card at the age of 3.

@Guard: In addition to the excellent points everyone else has made, if your credit card gets lost or stolen, you're not liable for the charges. If your check card gets stolen and they clean out your account, you're fucked. I don't carry an ATM or check card -- I shred them when they come to my house -- for precisely this reason. I feel super-unsafe when I have them in my wallet.

And yes, I had my wallet stolen in October. And I was SO freaking glad it was all credit cards that were cancelled within the hour but even if the enterprising thief HAD managed to charge anything within that hour, it wouldn't have been my problem.

@Guard: While rewards programs are dwindling these days, I'll add that using my credit cards with them has regularly saved me probably over $1000 per year (no, no annual or other fees to deduct from that).

It sounds like you're pretty clear on the problems people run into with them and are a savvy and conservative user of your money, so I think you're likely to use them without incurring fees or other difficulties.

@Galactica: Why not? It got her what she was looking for, which is ultimately the measure of any consumer correspondence.

@Guard: First off, congratulations. You've somehow managed to navigate the rock-ridden shorelines of modern finance without falling for the hype, the propaganda, of the credit cards.

I shall continue my tyrade by rebutting any answers to the contrary.

@sponica:

Using a credit card for emergencies can only exacerbate the problem. Ask people who suffered medical problems, and turned to the plastic to pay for them.

The correct method of dealing with emergencies is to have an Emergency Fund.

@dragonfire81: ..And the system is broken.

What good is a credit score, but a gateway to more borrowing? If you're properly budgeting, spending less than your income, and investing the rest properly, you should never have to borrow money for anything except a house.

@MostlyHarmless: Some may consider the Purchase Protection to be a valued service of credit cards. I, on the other hand, consider proper due diligence before any large-ticket item to be a better method of protecting one's self.

Extended Warranties: Any savvy consumer knows that they are generally a waste of money. I'm sure that even this very blog has had articles to that point.

Rewards Programs: Studies show that using plastic actually increases your overall spending; the rewards points are just another carrot on the stick.

I am not familiar with Price Protection or $0 liability.

@MostlyHarmless: Again: What's the point of a credit score except to enable more borrowing?

@HiPwr: I suppose; but I'm 39 and to date have never had to do this.

Am I just lucky?

Granted I don't remember the last thing I ordered over the phone.

@bonzombiekitty: I spoke with my bank a few months ago, regarding the rumor of a CC's safety vs. a Debit Card's safety. I was assured that my debit card offered the same protection. This was Chase.

@Fist-oâ„¢: I'm older than you and have never done it either. I guess we are both lucky. I like having it in the tool box, though.

@SRSco: I will contend that "Flexibility" is a plus for credit cards *IN ONE CASE*: Renting cars. Otherwise, be prepared to have a large cash deposit. If you rent cars often then MAYBE its flexibility will be worth it.

@Fist-oâ„¢:

Extended Warranties: Any savvy consumer knows that they are generally a waste of money. I'm sure that even this very blog has had articles to that point.
Except that it comes for FREE automatically when you buy using the credit card.

Again: What's the point of a credit score except to enable more borrowing?
The point of it is that when you DO have to borrow (House, Car, Student Loan), you get it more easily, and at much lower rates.

Rewards Programs: Studies show that using plastic actually increases your overall spending; the rewards points are just another carrot on the stick.
Thats the whole point about people getting into debt, and hence the need to use it responsibly. If you are already responsible with money, that does not happen. I started using credit cards when I was 22. I was responsible with money before that, and years later, I am still responsible.

And other people have already explained in this thread about zero liability.

@Fist-oâ„¢: Try getting a good home loan without a credit history. You will be slaughtered by the interest rate itself.

Is that $600/year really free?

You do lay out a "No-Brainer" list of benefits. But what IS the cost? Somebody else has to pay for that $600. Where does it come from? What are the hidden risks?

When families fall under financial hardship and turn to CC's as their safety net, bankruptcy can result. Of course, I suppose they have no alternative or cannot see any alternative. That is a tough one. It gets the medical care authorized, anyway.

I don't know how common it is, but should you ever fall under a situation where the credit card company says you owe something that you dispute, you are bound to mandatory arbitration. Which means, you lose.

@squinko - doesn't need firefighters: See Above.

I've booked hotel rooms just fine with my Debit card? I see no problem there.

I don't know how many people have ever used the "Chargeback" thing. maybe a poll would be in order.

Again: Extended Warranties, rip-off.