What Happens if I Don’t use my Credit Card?

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With increased debt loads across the country, many Canadians, including millennials, have decided to start using cash and debit more. But that brings up an interesting question. What happens if I don’t use my credit card?

It really depends on our individual situation. In theory, we’ll spend less since research has found we spend less when we use cash but there are plenty of other benefits that come with credit cards that we’ll start missing out on. Using credit cards responsibly is never a bad thing but let’s take a look at what happens when you don’t use your credit card

What Happens if I Don’t use my Credit Card

It affects your credit score

This really depends on our individual situation. Let’s say we’ve been using credibly responsibly for a long time. That means paying our bills on time and in full every month. But then we decide to stop using credit completely. In this case, our credit score probably won’t be affected too much since we’ve already built a solid credit history. That doesn’t mean we should start cancelling our cards, we want to keep them since our credit history is still active.

On the flip side of things, some millennials don’t even bother applying for credit cards at all. Between cash and mobile debit, they believe they don’t need to bother with credit. This may sound good in theory but it could affect us in the future. If we ever need to apply for a mortgage or car loan, the lenders are going to want to see a solid credit score/history. This is a lot harder to do if we’ve never used credit cards.

We miss out on major benefits

If I were to ask myself, what happens if I don’t use my credit card? I would immediately think of the major benefits that I would lose. My credit card earns me travel rewards points which I’ve been able to claim free flights and hotels with. My credit card also gives me comprehensive travel insurance which saves me a few hundred dollars a year.

For those who don’t like to travel, there’s always cash-back cards. A no-fee card will earn us 1-2% cash-back on our purchases but a premium card could give us up to 4%. That’s a pretty big incentive to use credit over cash.

Don’t forget about the additional benefits

Travel credits, cash-back, and travel insurance aren’t the only benefits we may get by charging our purchases. Premium credit cards usually offer auto insurance which covers car rentals too.

Even if you have a no-fee card, there are many standard benefits. Purchase protection will cover purchases from loss, damage, and theft for 90 days from the date of your purchase. There’s also a good chance that you’ll get an extended warranty. Finally, every credit card has a zero liability policy so in case you’re a victim of fraud, you won’t be responsible for the charges.

Final thoughts

Assuming we’ve already built up a solid credit history, there’s nothing technically wrong with not using credit cards. We would miss out on certain benefits (which are incentives to use credit) but it’s really a personal preference when it comes to our preferred method of payment.

About Barry Choi

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. You can find him on Twitter:@barrychoi

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