Here's What Happens When You Never Open a Credit Card Account

Credit card ownership is very common among Americans. Recent research from The Ascent found that 30% of those surveyed had one credit card, while 24% had two, and 26% reported having three or more. If you add up those numbers, you'll find that leaves 20% of survey respondents without any credit cards at all.

Around here, we recommend that most consumers have one or two credit cards. Credit cards offer a lot of benefits, and often for a pretty low price of entry (and in the case of no annual fee credit cards, that price is $0). Credit cards can help you build credit, protect your money, and earn rewards on your spending. But no one is required to have a credit card (or two, or three). Let's consider what fates might befall you if you skip opening a credit card account.

You might struggle to build credit

It is possible to build credit without a credit card of your own, but it involves more hoops to jump through than just, you know, getting and using a credit card. You could sign up for a service like Experian Boost, which lets the credit bureau Experian monitor bill payments like those for utility services and your cellphone.

You could take out a credit-builder loan through a bank or a credit union (which will charge you interest for the privilege). Or, you could ask someone you trust (and who trusts you) with strong credit to add you as an authorized user on their credit card. Applying for your own would be more straightforward than any of these options, however, and you'll build credit as you spend on your card and then pay your balance off.

You could be at greater risk of fraud

Just because you don't have a credit card, it doesn't mean you'll have to pay for everything in cash. You can certainly use payment methods like debit card, checks, and payment apps linked to your checking account. The problem is that none of these payment methods are as secure as credit cards. They're all linked directly to your bank account, and therefore, your money.

When you pay with a credit card, you're paying with the card issuer's money, and you'll later pay it back when you pay your bill. Debit cards have much more limited fraud protections, and you could leave yourself open to overdrafting your bank account if you're not careful. Check fraud has long been a problem, and check washing is an old form of fraud that's back in the news again. Payment apps are handy and useful, but if you're not careful, you could fall victim to scammers there too.

You may have to jump through more hoops for some payments

Let's say you're planning an epic road trip vacation, but you don't have a credit card. While you will be able to rent some wheels for the trip, you'll have to jump through more hoops. Some rental car companies will require a deposit to rent a car, or you might be limited in what models you can rent, or you might even need to undergo a credit check to pay with a debit card.

What about booking a hotel room? Again, you don't strictly have to use a credit card for a hotel room. But again, expect more of those hoops. You might need to cope with a large hold on your debit card (thus tying up that money) during your stay. Or you might need to find smaller independent hotels/motels for your trip, as they may be more likely to accept non-credit card payments.

Buying gas without a credit card is another headache. You might fall prey to "skimmers" who seek to steal your debit card information (and might therefore gain access to your bank account). You could also have a hold put on your account for far more than you spent on gas -- it's likely that you're not planning to spend $175 on one tank of gas, but that's what the hold could be on your Visa or Mastercard-linked debit card. And if you opt to pay in cash you'll need to make the trek into the station to pay at the counter. Not super convenient.

You won't earn rewards on your spending

One of the best things about credit cards is getting to earn cash back or points on your everyday spending. This can improve your life in many ways, especially if you seek out credit cards that work especially well for you. For example, one of my favorite cards pays me a high percentage of cash back on my spending at grocery stores, which is a sizable part of my budget. Rewards on debit cards are much harder to come by.

You never have to pay interest on a credit card balance

There has to be at least one perk of forgoing credit cards altogether. And since credit card interest rates average around 20%, you have the potential to save quite a bit of money if you never have to pay it. That said, you also don't have to pay interest on a credit card even if you have one (or two, or three). If you make it a point to never spend more than you can afford to pay back before the end of the billing cycle, you'll avoid interest charges completely.

Credit cards have some pretty sweet perks, and as you can see, some parts of modern life can be a lot more risky and much more of a hassle without one. While you don't have to get a credit card, it'll be a lot easier to build credit and avoid fraud if you do.