It's fine if you don't want a credit card. Consumers who pay in whole with cash, cheque, or debit card can still establish or improve their creditworthiness by utilizing alternative lending products. In 2020, 83% of U.S. customers had at least one credit card, which suggests that as many as 17% of U.S. consumers survive without one, according to a Federal Reserve study on the economic well-being of United States families published in May 2021. Any customer can pay for items using cash or a debit card issued by any financial institution.
Negative Aspects of Not Using Credit Cards
Having a low credit score when you start might be a result of not using credit cards. Getting a credit card in college (or even in high school if the student is proactive and their parents cosign or add them as an authorized user) is a common way for students to begin establishing credit. Their credit should be sufficiently established for them to be authorized for a loan when the time comes to make larger purchases like a vehicle or home purchase with a loan.
Making major purchases in later life might be challenging without such a record. Similarly, the incentives you may earn by paying with cash or a debit card may be severely limited. Having a credit card that offers rewards or cash back on commonplace expenses like food, petrol, and travel is a nice advantage. It might be challenging to discover debit cards that give incentives, but some U.S. banks do offer little bonuses for using their cards. Debit cards lack the same purchasing and fraud protection as credit cards, which is another drawback of using them.
Depending on the bank and the circumstances, processing a refund for a fraudulent transaction made using a checking account might take a long time or not happen at all. Finally, if you just have a debit card, it might be difficult to do things like hire a car or maybe book a hotel room. If you pay with a debit card at some establishments, they may withhold a sizable deposit from your bank account, which might keep your funds inaccessible for several days. It's true that you may use your credit card pretty much everywhere around the globe, but there may be some nuances on the basis of the specific country or region. Large purchases may be paid for with credit cards in some cultures, while others may prefer alternate ways of payment.
Is There a Reason Why Americans Rely So Heavily on Credit Cards?
Although cash is preferred, credit cards are used by 86 percent of Americans. In the United States, credit cards are often used for purchases both large and small. This is because of all the benefits that come with using credit cards, such as the ease of use, the possibility of earning rewards, and the possibility of deferring payment and establishing or enhancing credit. When used responsibly, credit cards may save you time and money by delaying the need to make a full payment for a purchase.
Most credit cards do not assess interest fees for new purchases if the monthly statement is paid in whole on the due date. This is easy if you need to make a buy right now but won't have the money to pay for it until next week. Rewards programs are a popular perk of using credit cards, and many companies offer them. Some credit cards come with perks like cash back or points that may be redeemed for travel. In fact, as per a recent survey, 39% of millennials would only use a credit card for benefits. If you have a credit card, you have access to a revolving line of credit that you may use as needed and repay over time.
In return for the flexibility of spreading your payments out over time, your credit card issuer will impose interest if you don't pay off your whole statement balance by the due date. It's true that using a credit card to pay for a big purchase is quick and easy, but it also comes with a hefty price tag. Credit card interest rates in the United States typically exceed 17%, with some cards charging 25% or more. Credit cards frequently have a promotional 0% APR term.
For the introductory period, you won't be charged any interest on your card purchases as long as you pay off your debt in full before the end of the promotional period and make your minimum payment on time each month. In the United States, your credit score is vital. It might be annoying if you can't acquire a credit card, a mobile phone plan, or an apartment because you don't have a credit score.
Know that your credit history in the United States will begin with a blank slate when you come here to study. If utilizing credit is essential to you or if you want to stay in the US for an extended period of time, it is in your best interest to establish solid credit habits before you arrive.