Here's What Happens When You Don't Have Any Credit Cards

Although many Americans use credit cards on a regular basis, it can be easy enough to land in debt when you have credit cards at your disposal. Case in point: During the first quarter of 2023, U.S. credit card balances rose to $917 billion, according to data from TransUnion. That's a 19.2% increase from just one year prior.

Because of the dangers of misusing credit cards, some financial experts will tell you that you're better off without them. In fact, financial guru Dave Ramsey is known for his anti-credit-card stance. And on his website, it even says, "A life without credit cards is a life of freedom."

The reality, however, is that when you don't have any credit cards, it can be more difficult to build credit, and also, to pay for certain things, like hotel rooms and rental car reservations. However, this doesn't mean that you can't function without a credit card, either.

Building credit without a credit card

Charging expenses on a credit card and paying your bills month after month can serve the very important purpose of helping you build credit. But that doesn't mean it's your only option.

Any time you make consistent payments on a loan, it can help you build credit. So if you borrow for college and make your payments on schedule, that can help your credit. So can taking out an auto loan and repaying it month after month in a timely manner.

Paying for things without a credit card

A growing number of businesses are going cashless these days, so you may have some challenges if you don't have a credit card in your name. However, in many cases, you can still use a debit card to make payments if a given establishment won't accept cash.

You should also know that some landlords will report timely rent payments to the credit bureaus if you ask them to. So if you're actively trying to build credit without a credit card, talk to your landlord about this option.

Now things can get a little trickier when it comes to booking a hotel room or reserving a rental car. But some hotels and rental car companies will accept a debit card instead of a credit card -- you may just need to call around and figure out which ones will allow this.

Should you go without credit cards?

Not only can credit cards help you build credit and make it easier to pay for certain expenses, but they can also reward you financially for the purchases you're making. Many credit cards offer cash back on everyday items like groceries and gas. So you might as well snag that cash on the things you need to buy anyway.

On the other hand, if you've run into issues with credit card debt before, then it's easy to see why you may prefer not to use credit cards at all. And similarly, if you don't trust yourself to not run up a large credit card tab, then you're better off sticking to debit and cash.

It's a good thing to be honest with yourself about whether you should have credit cards or not. And if you realize that your finances are better off without them, know that you can still build credit and find ways to pay for things like lodging that commonly require a credit card when you make your booking.