Make us your home page
Instagram

Breaking free of credit cards

Kira Limer opts for cash over plastic as she buys a book at Barnes & Noble. The idea of cutting out credit cards is gaining more exposure at a time when Americans hold more than $850-billion in credit card debt, four times as much as in 1990.

Associated Press

Kira Limer opts for cash over plastic as she buys a book at Barnes & Noble. The idea of cutting out credit cards is gaining more exposure at a time when Americans hold more than $850-billion in credit card debt, four times as much as in 1990.

NEW YORK — Here's one way to dodge credit card debt and late fees: Don't carry any plastic.

"People look at me like I'm an anomaly. But guess what? It's a whole lot easier when you're not juggling debt," said Paige LeFevre, a 41-year-old Atlanta resident.

The idea of living without credit cards is being given more consideration at a time when Americans hold more than $850-billion in credit card debt, four times as much as in 1990.

Of course, credit cards offer significant benefits — convenience being just one of many — so be sure to weigh them carefully before rushing to close your accounts.

A key concern is the role credit cards play in building your credit and maintaining a credit history. Remember that building good credit is important if you're in the market for a mortgage or other type of loan. Prospective landlords or employers often run credit checks, too. So holding on to your credit cards — even if you don't use them often — may be in your best interest.

Credit cards also offer certain consumer protections; for instance, issuers will often refund charges for faulty products. Cards are also necessary to rent a car and, if managed properly, can reap financial perks through rewards programs.

LeFevre says her vow of plastic abstinence came after she ran up $40,000 in debt while remodeling her home two years ago. But as a homeowner with a steady job for six years, LeFevre wasn't overly concerned about her credit score. She says she hasn't checked her credit score in recent years, but figures it's better when she's not buried in debt.

"It's just too easy to use," said LeFevre, who works for a retirement investment advising company. She has since paid off her debt with a number of drastic measures, including trading in her a car for a cheaper model, getting a roommate and selling many of her belongings (camping gear, jewelry, bicycle).

For LeFevre and others, keeping plastic around simply leaves the door open for temptation. The reasons for credit card debt no doubt vary, however, and in many cases is the result of financial hardship.

According to the Consumer Federation of America, a nonprofit advocacy group, 58 percent of people with credit cards don't pay their balance in full every month. Those who carry a debt have an average balance of $17,103, according to the group.

So how can you cut back? One option is to simply leave your plastic at home for a few months at a time. A credit card needs to be used about once every six months for the credit line on the account to count toward your FICO score, said Barry Paperno, a spokesman for Fair Isaac Corp., the company that created the FICO credit score.

For Kira Limer, not using credit cards makes it easier to stick to her guiding financial principle: Don't spend money you don't have. It also makes it easier to keep a running tally in her head of how much she's got in the bank.

"I just like to know for sure I'm not spending beyond my means," said Limer, 25, a resource librarian at a New York architecture firm.

Credit score factors

Your FICO credit score is made up of five factors of varying importance. Here's how your credit card use (or lack thereof) can affect each of the components.

Payment history. This accounts for 35 percent of your FICO score. If you have any late payments, the score will take into account how late you were, how much was owed and how many late payments there were. If your overall report is strong, a few late payments shouldn't be a score killer.

Credit use. Thirty percent of your score is determined by your credit utilization ratio, which measures your outstanding balance against your available credit. Experts say it's best to use less than 30 percent of your available credit.

Length of credit history. This determines 15 percent of your score. So if you're closing credit cards, keep the card you've had the longest.

New credit. This makes up 10 percent of your score. And signing up for new credit cards doesn't always boost your score because you're adding to your line of credit. Instead, it can lower your score because you may appear to be a bigger risk.

Types of credit in use. This makes 10 percent of your score, and looks at whether you have a mix of different types of credit, such as installment loans or mortgages.

Source: Fair Isaac Corp.

Breaking free of credit cards 09/22/08 [Last modified: Wednesday, November 3, 2010 1:04pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Associated Press.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. Trigaux: How Moffitt Cancer's M2Gen startup won $75 million from Hearst

    Business

    TAMPA — A Moffitt Cancer Center spin-off that's building a massive genetic data base of individual patient cancer information just caught the attention of a deep-pocketed health care investor.

    Richard P. Malloch is the president of Hearst Business Media, which is announcing a $75 million investment in M2Gen, the for-profit cancer informatics unit spun off by Tampa's Moffitt Cancer Center. Malloch's job is to find innovative investments for the Hearst family fortune. A substantial amount has been invested in health care, financial and the transportation and logistics industries.
  2. Three-hour police standoff ends, thanks to a cigarette

    News

    TAMPA — A man threatening to harm himself was arrested by Tampa police on Tuesday after a three-hour standoff.

  3. Another Hollywood nursing home resident dies. It's the 9th in post-Irma tragedy.

    State Roundup

    The Broward County Medical Examiner's office is investigating another death of a resident of the Rehabilitation Center at Hollywood Hills — the ninth blamed on the failure of a cooling system that became a stifling deathtrap three days after Irma hit.

    Carlos Canal, pictured at 47 years old, came to Miami from Cuba in 1960. Above is his citizenship photo. [Courtesy of Lily Schwartz]
  4. Despite Hurricane Irma, Hillsborough remains on pace to unlock hotel tax that could pay for Rays ballpark

    Tourism

    TAMPA — Despite the threat of a catastrophic storm, it was business as usual at many Hillsborough County hotels in the days before Hurricane Irma bore down on the Tampa Bay region.

    The Grand Hyatt near TIA closed during Hurricane Irma, but many other Hillsborough hotels were open and saw an influx.
  5. New Graham-Cassidy health care plan stumbles under opposition from governors

    Nation

    WASHINGTON — The suddenly resurgent Republican effort to undo the Affordable Care Act was dealt a blow on Tuesday when a bipartisan group of governors came out against a proposal gaining steam in the Senate.

    Sen. Lindsey Graham, R-S.C., joined by, from left, Sen. Roy Blunt, R-Mo., Majority Whip John Cornyn, R-Texas, Sen. John Barrasso, R-Wyo., Sen. Bill Cassidy, R-La., Senate Majority Leader Mitch McConnell, R-Ky., and Sen. John Thune, R-S.D., speaks to reporters as he pushes a last-ditch effort to uproot former President Barack Obama's health care law, at the Capitol in Washington, Tuesday, Sept. 19, 2017. To win, 50 of the 52 GOP senators must back it -- a margin they failed to reach when the chamber rejected the effort in July. [/J. Scott Applewhite | Associated Press]