Wednesday, October 13, 2010

Can You Live Without Credit Cards?

Credit cards

The Malaysian government is about to limit two credit cards to each person to cut down the bankruptcy rate. The point is:” Can you manage your personal finance without credit cards?”

The disadvantages without credit cards are:

  1. More work: Instead of doing nothing by charging all your recurring expenses such as utility bills, telephone bills and insurance premiums to your credit card, you have to issue separate cheques and make payments at different places.
  2. No discount: You pay the usual price instead of getting a discount by charging to your credit cards for all your purchases including your grocery shopping and petrol.
  3. No reward points: When there are no credit cards there is no way to earn and accumulate points for your purchases to redeem for valuable items
  4. Cannot track spending: Instead of looking at your monthly statements to check your outflow, you have to do your own recording diligently to track where your money has gone.
  5. No online purchase: You can’t shop online at home without a credit card. 
  6. No zero interest installment purchases: You need to save enough for an item or else you have to get a loan and incur interest to buy a big-ticket item.
  7. No way to establish your creditworthiness:  The easiest way to establish creditworthiness is to get a credit card, use it and pay promptly. It demonstrates that credit can be granted to you and you have the ability to pay.
  8. Risk of carrying a lot of cash: Shopping with a lot of cash is a big problem. It is unsafe on the street.
  9. Inconvenient to go abroad: You can take along travelers cheques, but you have to cash them at a bank or in a hotel. It is so much easier and safer to use a credit card than carrying a lot of local currency

However, there are also advantages without credit cards

1.      No extra expenses:  No need to pay RM50/= every year and annual fees for each and every card.
2.      No debt: Without a credit card it is less likely for you to incur debt. and  interest, let alone unmanageable debt and bankruptcy
3.      No card related problems: No more misplaced cards, missing cards or fraudulent use of your cards and incurring unnecessary expenses.
4.      No impulsive spending: Without a credit card it is unlikely to buy what you want and incur debt.
5.      Peace of mind: Without a card, there is no temptation to overspend. Debt-free means peace of mind

So, can you survive without credit cards? I can’t.

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