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Isentropic32
Posts: 1
Registered: ‎12-11-2012

Do you really need a credit card for backup?

I filed for bankruptcy and that was cleared a few years ago but I am very hesitant on getting a credit card.   What I did and has worked well for me is that I have my main Visa Debit card which is what I use for everything, and then I have a 500 dollar Visa gift card that I have in my wallet "just in case" something would happen, like my main visa is declined for some reason and I am not sitting there in a panic. Does anyone else do this too?  I think its great cause you dont need a credit card for emergencies then...

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llecs
Posts: 32,880
Registered: ‎08-04-2007

Re: Do you really need a credit card for backup?

Welcome!

 

What is your goal? Higher score? Clean credit? Debt-free? Major purchases down the road, like a home?

 

IMO, you should never use a CC for emergencies; that can lead to a financial disaster over time. But I also feel it's OK to use a CC for whatever provided you have the cash on hand to back it up and to pay in full after each use. I went off the credit grid for 6 years and what worked best for me was my debit and cash on hand. I could do the same thing everyone else can do with a CC, and had no issues using it at car rental places, hotels, at the gas pump, etc. Over time though I began to realize that creditors like to see credit activity, since cash-based activity isn't reported (like your debit card or gift card). My goal was to get a home and had to change my lifestyle to incorporate CCs when needed. I had to do that because there were minimum credit scoring requirements for a new home and I didn't have the cash to pay for it in full. So, I got some CCs and let them report. Some have a misnotion that credit = debt. You can have a CC, use it to buy a pack of gum once every 3-4 months, pay it in full, and enjoy the benefits of a high FICO without being in debt.

 

Revolving credit is a very significant part of FICO scoring, but you can be a part of that without being in debt. Again, I don't know your goals. If you have everything you need credit-wise, then CCs are very unimportant, IMO.

Frequent Contributor
brother7
Posts: 376
Registered: ‎02-06-2009

Re: Do you really need a credit card for backup?

Do you ever plan to rent an apartment, finance a car, get a student loan or apply for a mortgage for a house? If so, you'll need a good credit score. Using credit wisely is a means to that end.

 

If I were a lender looking at your credit report, I would see that no one has extended you credit and would be hesitant to be the first to take a chance on you. Or if I did extend you credit, I'm gonna charge a high interest rate because the risk is greater. You have no proven history of good credit.

 

Do you need a credit card for backup? No. But it's always nice to have a backup plan, just like it's nice to have health insurance, car insurance and life insurance. Just in case.


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HiLine
Posts: 2,831
Registered: ‎10-19-2012

Re: Do you really need a credit card for backup?

[ Edited ]

Isentropic32 wrote:

I filed for bankruptcy and that was cleared a few years ago but I am very hesitant on getting a credit card.   What I did and has worked well for me is that I have my main Visa Debit card which is what I use for everything, and then I have a 500 dollar Visa gift card that I have in my wallet "just in case" something would happen, like my main visa is declined for some reason and I am not sitting there in a panic. Does anyone else do this too?  I think its great cause you dont need a credit card for emergencies then...


If you plan to take any kind of loan for your house, your car, your kids’ education, etc., you'll need to re-establish your credit history. Having a credit card is a great start.

 

Also (quoted from my personal finance blog):

 

 

Credit cards have perks that unfortunately too few people are aware of. If your card is a decent one, it should offer you at least 1% cash back on every purchase. That means if you charge $10,000 on your card in one year, the card would give you $100 back. Then you can reward yourself with a nice Christmas gift. But what I personally consider the greatest benefits of credit cards are extended warranty and purchase replacement. Let me quote the summary of these benefits that my BofA secured card provides:

” Purchase Guard will double the manufacturer’s original United States (U.S.) warranty period on personal items purchased in full with your eligible card that carry a warranty duration of less than 1 year and extend the manufacturer’s original U.S. warranty period for 1 additional year for Covered Purchases with a warranty duration of 1 to 3 years. “

” Purchase Replacement – Within the first ninety days of the date of purchase, Purchase Replacement will replace or repair eligible items of personal property purchased entirely with your eligible card up to a maximum of $500 per claim and $50,000 per year, in the event the item is lost, stolen, or damaged. “

This means that if I used my card to buy a laptop from Lenovo with the regular 1-year warranty, I would have another 1-year warranty from the card, and if I damaged my laptop within the first 90 days and Lenovo doesn’t cover it, my card will pay me $500. How many times have you damaged your laptop without coverage from the manufacturer, and how many times have you had a laptop stop functioning right after the 1-year warranty? If the answer to either of these questions is more than 0, having a credit card would’ve saved you a lot of money.

My credit card offers other perks such as emergency travel assistance and auto rental collision damage waiver, which I have yet to utilize but are definitely nice to have. If you already have a credit card and wonder about its benefits, you can find out through this website:www.benefitinformationcenter.com 

Established Contributor
ccnewcc
Posts: 560
Registered: ‎09-29-2012

Re: Do you really need a credit card for backup?


Isentropic32 wrote:

I filed for bankruptcy and that was cleared a few years ago but I am very hesitant on getting a credit card.   What I did and has worked well for me is that I have my main Visa Debit card which is what I use for everything, and then I have a 500 dollar Visa gift card that I have in my wallet "just in case" something would happen, like my main visa is declined for some reason and I am not sitting there in a panic. Does anyone else do this too?  I think its great cause you dont need a credit card for emergencies then...


I think the best source of emergency cash is what is appropriately called an "emergency fund."  An Emergency Fund is normally at least 6 months of cash in your checking/savings to fully sustain your expenses and lifestyle for at least 6 months.  So that "in case of emergency, break glass" you use your cash.

Regular Contributor
nois
Posts: 120
Registered: ‎07-14-2009

Re: Do you really need a credit card for backup?


Isentropic32 wrote:

I filed for bankruptcy and that was cleared a few years ago but I am very hesitant on getting a credit card.   What I did and has worked well for me is that I have my main Visa Debit card which is what I use for everything, and then I have a 500 dollar Visa gift card that I have in my wallet "just in case" something would happen, like my main visa is declined for some reason and I am not sitting there in a panic. Does anyone else do this too?  I think its great cause you dont need a credit card for emergencies then...


I understand why you are hesitant to get a credit card. Debit cards do offer a debt-free, convenient way to pay.

 

However, consider that by consistently using your main debit card for everything, you are making your checking account significantly more vulnerable to fraudulent charges. While it is true that most banks guarantee that you won't be held liable for fraudulent charges to your debit account, they may not release the disputed funds in a timely manner pending a sometimes lengthy investigation. This could put you in a bad situation. Of course, fraudlent charges can occur with credit cards, but the inconvenience is generally much less and it doesn't tie up your checking account.

 

Take a look at these articles from bankrate.com here and here.


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AndySoCal
Posts: 1,893
Registered: ‎04-07-2009

Re: Do you really need a credit card for backup?

Keep in mind there is a differences between a credit card adn debit card if and when a fraudulent charge is made.  A credit card you have with most companies a zero fraud liability not so with a debit card.  My friend had their debit card number used fraudulently. From the date it was reported till the money was replaced back in the account took several weeks if not a month or two. This just one example ot differences.  Something to think about 

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BikerMama
Posts: 20
Registered: ‎12-28-2012

Re: Do you really need a credit card for backup?

I like the idea of having a backup gift card. It seems like every time I use my credit card for "emergencies" (gas, diapers), I get used to using it and before I know it I have built up a balance I can't pay right off. I have been workIng to pay off my debt and I have some setbacks but I hope that once it is completely paid off I can use your gift card idea. I know using a credit card for everyday purchases and paying the balance off each month would have great rewards/security, but I don't have self control. :/




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