As an undergrad, I was an anomaly among college students: I did not own a credit card. I didn’t feel like I needed one. I was working full time and didn’t have a problem living within my means. I didn’t save much money, but I didn’t feel a need to spend more than I made. I wasn’t particularly concerned with not establishing a credit history, as I’ve never planned to buy a house or otherwise need significant credit in the foreseeable future.
I think I made a wise decision, because while I graduated from college with no credit history, I also graduated from college with no credit card debt. Of my friends who had credit cards in high school and college, I know of only a handful who have never carried debt. Many of my friends are currently looking at marriage and buying houses, and trying to pay off thousands in credit card debt before beginning their new, post-college lives. I think it is great that so many young people I know realize what a problem their credit card debt is and are making effort to pay it down now, before they take on mortgage payments or start families.
Currently, I use credit or debit for nearly every purchase I make. When I use credit or debit the card tracks my spending for me. This is the primary reason I use plastic to pay for things whenever possible. I upload my transaction history into Wesabe, tag my transactions, and easily have a record of my spending (without doing much of the “grunt work” myself).
When I use cash, I consider a $20 bill that I’ve broken to be pretty much gone. Once I have small bills, I’ll throw them everywhere – it’s very easy for me to spend $2 to $5 on small, random purchases. I’m more likely to grab a snack from a gas station or vending machine when I’m carrying small bills. I’m less likely to bother getting out a credit/debit card over something that’s only a few dollars, though – I take more time to think about whether I actually want to make a purchase. Nine times out of ten I decide I don’t really need it.
One good thing for me about using cash, though: The bigger the bill, the less likely I am to break it. When I used to work as a server and bartender, I would cash in all of my tips at the end of the night to get the biggest bills I could. I was pretty reluctant to break a $100 or $50 bill, unless absolutely necessary. Once I had $20 or smaller, though, it was gone.
I haven’t discussed the additional benefits of credit cards such as rewards, security, and extended warranties. This is because I don’t know a lot about these things. There are plenty of other places on the web where you can learn about these things, though. They’re all important to take into consideration.
Here are a few links to articles about credit cards written by other personal finance bloggers that you may find useful:
JD Roth at Get Rich Slowly has an article entitled Credit Card Basics: Five Essential Skills For Living With Plastic.
GE Miller at 20somethingfinance shares how he used credit cards to better his financial health.
Madame X at My Open Wallet explains her rules for credit card use.
Do you use cash or credit/debit cards? Why? What do you consider to be the biggest advantages/disadvantages to your choice?