10 things that happen when you don’t use a credit card

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For decades, Americans have used credit cards to finance purchases today, while paying for them later. However, the millennials are changing those rules, often preferring to use cash, checks and debit cards over credit cards when spending. But according to a 2021 survey in The Ascent, “45% of consumers prefer to use credit cards to make purchases, making them the most common form of payment. This figure is up from 36% in 2019. “. [1]

Keeping plastic tidy in your wallet sounds like a great strategy for anyone trying to avoid debt. That being said, many credit cards offer great perks that you don’t want to miss.

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“The biggest misconception consumers have about credit and finance is that it leads to overspending and debt,” said Julie Pukas, head of U.S. bank cards and merchant solutions at the Bank. TD. “It’s true that the use of credit can lead to these things, but when used responsibly, credit cards are a financial tool that allows consumers to shop safely, while earning money or other rewards.”

Click to find out what can happen when you don’t use a credit card.

You are running out of free money

You are running out of free money

1. You are running out of free money

By paying cash, shoppers miss out on cash back and other lucrative rewards.

For example, depending on how much you spend, you could earn $150 in cash back during the year if you get a rewards card this gives you 2% cash back on dining and 1% cash back on all other purchases. Some cards even allow 3% to 5% cash back on other purchases and the percentage increases with partner merchants, depending on the credit cards you have.

For some consumers, that $150 can mean up to a month of free gas or several months of free coffee. Choosing cash over credit means “consumers are leaving that cash on the table,” Pukas said.

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You struggle to build credit

You struggle to build credit

2. You struggle to get credit

Without a credit card, you’ll have a harder time real estate loan. By opening a first credit card account, making payments on time and keeping balances low, young consumers are laying the foundation for a strong credit history.

“The strategic and wise use of credit allows consumers to build a strong credit score,” Pukas said. “This credit profile provides significant savings on interest by financing larger purchases, such as a house or a car.”

You struggle to get a mortgage

You struggle to get a mortgage

3. You’re struggling to get a mortgage

Mortgage lenders consider a variety of factors when making lending decisions, but they place great importance on credit history. According to the Consumer Financial Protection Bureau, consumers with good credit are eligible for much better loan terms.

MyFICO has a loan savings calculator this makes the benefit of a good credit score crystal clear. Enter changes to a hypothetical credit score into the calculator — while keeping all other variables the same — and you’ll see how a lower credit score can cost you tens of thousands of dollars over the life of the loan.

You get poor terms on a car loan

You get poor terms on a car loan

4. You get poor terms on a car loan

Like mortgage brokers, auto lenders consider credit when making auto loan decisions. Few Americans have enough money to buy cars with cash, so most end up financing their purchase.

Good credit — which can be built and maintained through responsible credit card use — can help you get much better car loan terms.

You don't have full fraud protection

You don’t have full fraud protection

5. You don’t get full fraud protection

In the age of identity theft, all consumers are at risk of being victimized by someone stealing their card or card number, hacking into their account, or spending their money fraudulently.

Reporting and reversing charges on your credit card is much easier than recovering money taken from a bank account through dishonest use of your debit card.

“If someone uses your debit card fraudulently, they’re spending your money that’s in your account,” said Matthew Coan, owner of the financial comparison site. Casavvy. “When someone uses your credit card for fraudulent expenses, they’re spending the credit card company’s money.”

you are short of money

you are short of money

6. You are short of money

If you use a debit card instead of a credit card, it may cause unexpected problems. For example, hotels and car rental companies often put a temporary monetary hold on debit cards if you use them to check in, reducing the amount of money you have in your bank account.

Once the companies are paid in full, they refund your money. However, repayment can take time, leaving you short of money or possibly facing overdrafts if the money was held on a debit card attached to your bank account.

No one supports you in disputes with traders

No one supports you in disputes with traders

7. No one supports you in disputes with merchants

Have you ever purchased an item, only to find that the quality was a little lower than advertised? If you pay cash, you may not have any luck getting a refund. At the very least, you may have to go through a lot of hassle to get your money back.

However, if you purchase the item with a credit card, the issuer will generally act on your behalf. “The added weight of the card issuer supporting the individual can push the merchant to fix the situation,” said Scott Vance, owner of Trisuli Financial Advice in Cary, North Carolina

You reduce emergency fund options

You reduce emergency fund options

8. You reduce emergency fund options

Poll after poll, most Americans have very little money saved for an emergency. This means they would struggle to cope with unexpected medical or dental issues, car repairs, or job loss. Most experts recommend saving and setting aside a minimum of at least three months of expenses.

Emergency funds don’t have to consist solely of credit cards. However, a credit card can supplement and support an insufficient fund for rainy days. The more responsibly you use a credit card, the more likely you will be approved for higher lines of credit, which can add an extra cushion to an emergency fund.

You are hurting job prospects

You are hurting job prospects

9. You’re hurting job prospects

Many companies pull applicants’ credit reports as part of employee background checks. Although the practice is controversial, a bad credit history — or a lack of credit history — can lower your chances of getting a job you’re otherwise qualified for.

“Credit reports indicate whether or not you are liable,” financial expert John Ulzheimer told CNBC. “And, they also indicate whether you are in financial difficulty. These are attributes that are important to employers.” [2]

You pay more to travel

You pay more to travel

10. You pay more to travel

Get a travel rewards credit card, and you can enjoy benefits that you wouldn’t get by paying cash. According to Forbes, there are two types of credit cards that can help travelers save real money:

  • Generic maps. These offer points or miles that can be used for any travel-related expense.

  • Brand specific cards. Airlines and hotels offer these cards to travelers who stick with a specific chain or airline.

Lucrative sign-up bonuses are another perk for travelers. These bonuses may include bonus miles, a free plane ticket, a free night in a hotel or cash back.

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Jake Arky contributed to this article.

This article originally appeared on GOBankingRates.com: 10 things that happen when you don’t use a credit card

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