Self control and credit cards

Don't avoid credit, but start small if temptation is great

By Sally Herigstad

To Her Credit

Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). Ask a question.

Dear To Her Credit,
Are there some people who shouldn't have credit cards? I think I might be one of them. When I'm stressed, I spend every dime I have, and I don't even know where the money goes. A few months ago, I was stressed out at work and before I knew it, I had spent the rent money. I don't have any savings or retirement funds, but at least I don't have any credit card debt. I'm so scared I'll get in trouble with credit cards that I've never had one. Should I stick to paying for everything with cash?
-- Michelle

Dear Michelle,
The fact that you look far enough ahead to want to avoid racking up credit card debt demonstrates that you are already far more financially savvy than many people. Now if we can just bring the rest of your financial life into consistency with that wisdom, you can make real progress on your money situation. You can start to give yourself some credit -- even trust yourself -- and feel more secure about your future.

It is important nowadays to have some form of credit. Why?

•  You need to build a credit record. You never know when you might need credit, and by then it's too late to build a good credit history.
•  Credit offers consumer protection that cash does not. When you buy something with cash and it breaks or doesn't work out, your only recourse is to find the seller and convince him to refund your money. If you bought it online, or if the seller is uncooperative, you're stuck. If you buy the same item using a credit card, the credit card company offers you some security. They will withhold payment to the company until the dispute is cleared up. In my experience, sellers are more cooperative when a credit card is involved.
•  A credit card is also safer to carry around than cash. When I was 23, I cashed my two-week paycheck and put the money in my brand-new purse. My purse was stolen at the movie theater that night. Goodbye new purse and paycheck! If I had had a credit card in my purse instead of cash, I could have called the bank and had it canceled. I'd have only been out the cute purse.
•  Side benefits: Purchasing things on credit helps with record keeping. You can look on your statement and see where your money is going. And don't forget the perks! You're buying things anyway. Why not take advantage of cards that return a percentage of your purchases to you in the form of store certificates or airline miles? I have one card that gives me free plane tickets and another that sends me $25 department store certificates.

You can build a credit history without allowing yourself to slide into debt. Consider getting a secured credit card. That's a card that requires you to have as much money on deposit at the bank as you are allowed to spend on the card. This is an easy type of card to get, because the bank isn't at risk. You're not allowed to spend more than you have, so you can't go crazy. Or, apply for a credit card or department store card with a very low limit. If your limit is no more than you can pay off every month, you can learn to use credit safely.

You've demonstrated enough willpower to stay out of debt. Now start trusting yourself a little more. Practice controlling your spending with the convenience and safety of a limited amount of credit. You can do it!

To Her Credit answers a question about a debt or credit issue from a CreditCards.com reader each week.
Send your question to Sally.

Published: April 24, 2008