Should You Cut Up Your Credit Cards?

Yesterday we took a look at the fact that there are two disturbing trends taking place today with Americans and their credit cards: higher-than-before credit card debt and failure to be able to make on-time credit card payments. These trends are causing some people to think twice about the benefits of using credit cards. And some people are seriously thinking about just cutting up their credit cards and relying on cash for everything that they need.

Although it is definitely a good idea to use your credit cards sensibly and in moderation, it probably isn’t a wise idea to just go ahead and cancel those cards or cut them up. Here is a look at some of the reasons that you don’t want to give up on credit cards just yet:

• You may need that money. Like it or not we are in a time of recession and that means that you simply might not have the money that is required to take care of your daily needs without some assistance from your credit cards. Yes, you should budget and cut back on things that aren’t necessary. But you shouldn’t suffer either. Those credit cards just might be something that you want to rely on in a pinch.

• You may need that credit card. Even if you aren’t actually going to use your credit card much, you may need it for certain types of purchases. Renting a car, for example, is something that is really difficult to do if you don’t have a credit card to secure the car rental.

• No credit is bad credit. You have established a credit history with your credit cards. That is what lenders are going to look at when you want to take out big loans like auto loans and home mortgages. More people are looking at getting new cars today because they want a car that’s more fuel efficient than the one they currently have. And getting a home mortgage is more and more difficult than in the past. If you cancel your credit cards, your credit score is going to take a hit and you could find it more difficult to qualify for these other types of loans that you spent time building up a credit history to obtain.

• There are benefits to making certain purchases on a credit card. You may not take advantage of all of the perks of your credit card but those perks are there for you to use. For example, most credit card companies offer certain terms that make it easier to return items bought on the card even if the return policies of the stores where they were purchased aren’t that great. You aren’t going to get that perk when you pay with cash.

• It’s easier to stay organized with money when using a credit card. You can always see where your money is going because your credit card statement will tell you and this means that you can make wise choices about budgeting that you might find more difficult to make if you are using cash for all of your purchases.

You certainly need to change some of your credit card habits if they are causing you to get into too much debt or to be incapable of making your basic payments. However, you don’t have to go so far as to give up on credit cards altogether. Make smart changes so that you can benefit from your credit card companies instead of having them benefit from you!