There was a man, we will call him Bob, who was earnestly against credit cards or any other credit for that matter. Bob's advice to other people was that if you could not afford to pay for it with cash, then you don't need it.
When listening to Bob, a person could easily understand his view on the subject. Why would a person want to pay interest on something that they buy? If a vehicle's price was $30,000 after taxes and other fees, why would they want to pay a finance company thousands and thousands of more dollars for nothing? Well, the thousands of dollars are for giving the loan, but Bob still seen it as them doing nothing for him.
Listening to Bob's opinions, at first it seems that he is correct. He makes it seem that life is so much more expensive when using credit in life. When you think about the finance fees paid to credit card companies and other loan companies, it seems like a person is throwing their money away for nothing.
In actuality, living without credit will be far more expensive for a person than living a life with established credit. Why? Because in modern day society, having a good established credit history is needed for many reasons.
We will start out talking about renting a home to live in. When a person applies to rent a house or apartment, landlords will run a credit check on the applicant. Most of the time, the applicant will have to pay for the credit check with no guarantee that they will get the place. If a person has bad credit, it will be difficult for them to find a home despite them earning a decent salary. You see, having good credit is not only needed to buy a home but to also rent one. Looking for a home can be very time consuming and expensive if a person does not have credit established.
When a person does get into a home, they will have to turn on the electricity, gas, phone, etc. If they do not have a good established credit history, they are going to have to pay some heavy deposits to get everything turned on. If they have established credit, they will not have to pay any deposits.
A person with good credit, when purchasing a vehicle, will pay about $1,500 in interest fees for a $10,000 car. Many people will pay even less than that. People with bad credit on the other hand, or those with no credit history will most likely pay about five times more than that. They will have to pay about $7,500 of interest or more on that same $10,000 car. It is not a good feeling when the interest cost is almost the same as the car price, but those with no credit will have to pay these hefty fees if they cannot afford to pay for the car with cash.
Even though Bob is wrong about life being cheaper by not having credit, Bob's point of view on credit may have been influenced by all of the people he has seen get in to credit card debt. These people usually do not manage their money wisely and soon have a debt that they cannot pay back.
Everybody should have at least one credit card for when an emergency occurs. An emergency that most people do not see coming is their car breaking down on them. Many times, the cost to make repairs will easily run in the hundreds and sometimes thousands of dollars. Fixing their car as soon as possible is usually a top priority for most people as they have to get to work, take the kids to school, etc. When a person has a credit card, they do not have to worry about having all of the cash on hand to repair their car. If they have no credit history, have no credit cards and do not have any money saved up, they will be in a dilemma that could possibly cost them their job.
There is always another place a person in this situation can turn to, and once again it is more expensive than having a credit card. Payday loans will always be there for any employed person, but the interest rates are staggering when compared to credit cards. This could easily be hundreds of dollars thrown away that a person could have saved if they had a credit card.
