Should You Have a Credit Card?

Dave Ramsey is adamantly against having credit cards and with good reason--when you work with people who are continually digging themselves deeper in debt, you take away the shovel.  When we followed his plan to get out of debt, we cancelled all of our credit cards and paid off our debt and you know what, it worked!  When there is no means for adding more debt, it certainly makes it easier to get out of debt.

Four or five years after we got out of debt, however, we decided to apply for some credit cards, mostly because our credit scores were tanking because we weren't using credit and we planned to buy another house.  So we got credit cards, used credit cards, and generally paid them in full each month.  Until I didn't.  I made several large purchases and while I always paid my credit cards on time and paid much more than the minimum payment, I still ended up carrying debt (which I am making great strides to pay off currently).

So the question is, should people have credit cards?  Currently Americans are carrying $905 BILLION in credit card debt, a average of $15,654 per household with credit card debt.  YIKES!  Yes still many people feel like they can't live without at least a few credit cards.

I think credit cards can be a useful part of your financial plan but only if you pay off the balance in full each month.  People like credit cards that offer some sort of reward for using them but getting 2% cash back on all purchases yet carrying a credit card balance which you pay 18% interest on is dumb.  I have a friend who has a Delta American Express card and he only flies Delta so he can get rewards on his credit card however I can almost always find flights that are cheaper than Delta plus the credit card carries an annual fee of $95 so in my book, that doesn't make much financial sense.

Currently my plan is to keep my credit cards (they are all no fee, low interest cards from credit unions), pay off the one card I have a balance on, and use them sparingly (on large purchases which I have the money for so I can pay the card in full before the end of the billing cycle).  I am definitely NOT going to use them for lots of random purchases that I both don't need and can't afford.  I don't want to get rid of the cards and close the accounts because I do want to have a good credit score, and it is just psychologically more comfortable to know that I do have a lot of credit available if needed.