Why Cutting Up Credit Cards is a Dumb Idea

Don't Cut Up Your Credit CardsWe’ve all heard the idea that credit cards are evil and that you shouldn’t have one. We also know about the obvious negatives of getting a credit card too early in life. I’m sure we’ve had someone suggest to us before that we should cut up our credit cards. I personally think that it’s irresponsible advice to blame credit card companies for your financial situation.

I remember addressing a reader question about canceling a credit card. Today I wanted to talk about the idea of actually cutting up your credit card when you get fed up with it.

Why is it a dumb idea to cut up your credit cards?

It doesn’t address the problem.

What do you accomplish by cutting up a credit card? You haven’t done anything about your lack of control and inability to delay gratification. I don’t want to come off like a jerk, but the reality is that cutting up your credit card won’t solve the real problem here. I would compare this to when someone throws away cigarettes in hopes that a friend will quit smoking. The problem is still there. You’re just trying to hide it or find a quick fix. If you don’t try to learn how to use credit cards properly at an early age, you might find yourself in trouble in the future.

You must learn how to manage debt.

Credit card debt is one of the most common forms of debt for 20-somethings next to student loans. Instead of blaming the world for your problems, it’s recommended that you learn how to deal with this debt. Cutting up your credit cards and complaining about credit card companies will not help you learn how to deal with credit and debt.

Credit cards can help you build your credit score.

A while back I wrote a piece on how you can build amazing credit. A major part of building your credit score involves using a credit card wisely.

Allow me to re-post my original breakdown of your credit score:

  • 35% Payment history. Your ability to make credit payments when you’re expected to.
  • 30% Amounts owed. How much credit you owe compared to how much money is available on all of your accounts.
  • 15% Duration of credit history. How long have you had credit available to you? How long have you been paying your credit card balance off on time?
  • 10% Recent credit. The amount of new credit available to you compared to credit that you’ve had in the past. Closing down a credit card can affect your credit score in the short term at this level.
  • 10% Sources of credit. This is based on the different types of credit that you have used over the years.

As you can tell from reading the breakdown of a credit score, your credit card can be a great financial tool when used properly. Now I realize that it’s easy to mess up when you have a credit card in your wallet that you can use on anything you want. The thing is that you need to learn how to use a credit card now, or else you’re going to struggle with credit for a long time to come.

That’s my stance on why you shouldn’t cut up your credit cards.

Where do you stand on the whole credit card issue? Do you believe in using a credit card or no?

7 thoughts on “Why Cutting Up Credit Cards is a Dumb Idea”

  1. I do not think credit cards are evil, but I do find them unnecessary. I have not used a credit card in three years and have no intention of using them again.

    I agree that cutting up the cards does not solve the underlying problem, but when you become in love with plastic, cutting them up is a nice way to make a statement that enough is enough.

    I understand the credit score argument, but I am not concerned about my credit score. I am concerned about building wealth. The only thing I plan on financing again would be a home. A good mortgage lender with a brain can look at your history and current financial status without a credit score. Unfortunately, many lenders don’t think past a credit score.

    I am not mad a credit cards or people that use them, but I think we have been so well marketed to by the banks and live and die by a credit score number.

    You have some very good information on this site, but I am not in 100% agreement on this one.

    1. Thanks for stopping by Brent. I appreciate your insights. The only reason I stress the importance of a credit score is that sadly mortgage lenders take it very seriously. This is just the reality. It’s a tangible figure that they can look at to obtain a snapshot of your situation.

  2. Brent raises some good points. Some people are able to save and forgo instant gratification for many years in order to pay for big ticket items they want outright. If one is able to pay for things with their own money, then credit and a credit score would be irrelevant to them. My parents are such people. However, (and unfortunately) that does not represent the majority of Americans.

    In my opinion, if one has to rely on borrowing, then it is wise to borrow at the lowest interest rate possible and in an amount that they can pay back stress-free. It would be difficult for someone in their 20s to walk into a car dealership with absolutely no credit history and finance a car at a very low interest rate. Outside of a student loan, there aren’t many options at such an age that one can take to start building their credit history. A credit card (used responsibly) allows a person to choose the amount they want to borrow (i.e. if you just used it for groceries) while also allowing them to build a positive credit history. The amount of your student loan is dictated by the cost of your tuition, and many can agree that it’s never a small amount. So had this hypothetical individual in their 20s opened up a credit card during college and used it for groceries (or any other expense that they were able to pay back), then when it comes time to walk to apply for that auto loan they won’t need a cosigner and may get a better rate than the person with zero credit history.

    I agree with the author of the post that what needs to be addressed is what’s causing a person to misuse a credit card. I don’t think that the credit card by itself is the culprit of money mismanagement and a lack of financial discipline. How then would one explain people that don’t own a credit card but are still letting utilities bills pile up, partying and not paying rent, or have no money saved? One can have no debt and also no savings.

    This is only my opinion based on my personal experiences. I opened up a credit card when I was 18 and used it responsibly. When I needed a loan for my master’s degree, I didn’t need a cosigner and got a good rate. When I began my career and needed an auto loan, I was able to do the same thing. Both of my siblings didn’t open a credit card in their youth and needed cosigners for all of their loans coupled with high interest rates. They were still responsible and diligently overpaid their debts to counter the high interest rates. There is no right or wrong. If you don’t need credit, then don’t get it. If you need it, learn to use it responsibly.

    1. Thanks for the comment Jasmine. I’m pleased to see the insightful discussion that this post has sparked.

      It’s great to hear that you responsibly managed your credit card. Very few people can make this claim upon receiving credit at age 18.

      Your statement at the end is a great summary of credit card use:

      “If you don’t need credit, then don’t get it. If you need it, learn to use it responsibly.”

  3. Having a credit card for a rainy day is why I think many people keep a credit card. It acts as a safety net for emergencies. While I do understand this thought and did it myself in the past, I feel it is a bad decision.

    If you are broke and have an emergency, using a credit card at that time is when many people get in to trouble. You lose a job or the car breaks down. Now not only do you not have any money, but you owe money with interest thay you probably can’t pay back.

    What ever happenned to having an emergency fund put away for a rainy day. I. Know emergencies happen to everyone so why not prepare yourself. Its a tough concept because it takes discipline and sacrifice, but it’s vital if you want tprotect yourself.

    I can say this because I used a credit card as a crutch many times in my life and what I thought I would pay back in month or two took much longer in many cases. I know everyone is in different situations and you have to make your own decision, but that’s my two cents.

  4. I agree, Brent. Everybody should do their best to accumulate 3 months-6 months living expenses as an emergency fund. The last thing somebody needs after recovering from a family disaster, a health problem, or an accident resulting in property damage is a pile of debt.

    I’ve personally never opened a credit card account and wonder how this might affect my credit score. I doubt a few hundred dollars worth of purchases per month can have as large of an effect as consistent, steady payments toward my student loans.

    1. The emergency fund is one of the most emphasized concepts on personal finance blogs. I personally funded an emergency account blindly until reality hit a few times and I needed this account to bail me out.

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