Here's What Happens When You Never Use Credit Cards

Many U.S. consumers use credit cards regularly. U.S. credit card debt just surpassed $1 trillion, which isn't a good thing per se but lends to the idea of credit cards being a popular tool.

But what if you're someone who's afraid of using credit cards? Maybe you're scared of landing in debt. Or maybe you've just been warned by too many people that credit cards are a source of evil.

The truth is that when managed appropriately, credit cards can be a helpful financial tool, not a harmful one. In fact, not using a credit card ever could actually end up making your life more difficult from a financial standpoint. 

When you don't have a credit history

It's common for lenders to look at your credit score to determine whether you're eligible for a loan, and at what rate. But if you never use credit cards, you might struggle to build a credit history. And if you don't have any sort of payment or credit history, the credit bureaus can't assign you a credit score. 

To be clear, making payments on a credit card isn't the only way to establish a credit history. You can also do so by paying a mortgage or another installment loan, like a car loan, off over time. 

But for many consumers, paying off a credit card every month is a good way to build up a payment and credit history. So if you never use a credit card, you might struggle to build that history.

You may be thinking, "What do I need a credit score for if I'm someone who doesn't believe in borrowing?" And that's fair enough.

But it's common for landlords to run a credit check before allowing people to rent a home. So if you need a rental, not having a credit score could be a detriment -- even if you're on solid ground financially. 

You could lose out on valuable rewards

Another problem with never using a credit card? You could end up missing out on lucrative rewards that put cash in your pocket for the things you're buying. 

Let's say you spend $6,000 a year on groceries and you have a credit card that gives you 3% cash back at the supermarket. By paying cash, you're forgoing $180 a year. That's about 1.5 weeks' worth of groceries.  

Consider both sides of the coin

Some financial experts will insist that you're better off not using credit cards. Dave Ramsey, for example, is known for his anti-credit card stance. But by not using a credit card ever, you could end up setting yourself up for some needless struggles while losing out on free money to cover essential bills. So before you write off the idea of credit cards, devise a strategy for managing yours well.

You may, for example, decide that you'll start off by limiting yourself to $500 a month in credit card charges, even if you're eligible for a much higher spending limit. Then, as you see that you're covering your charges in full with ease, you can allow yourself to spend more on a monthly basis. 

You may even decide that you'll only charge one recurring bill on a credit card to establish a payment history. But the key is to think about the upside of credit card usage and not just focus on the downside.