I’m serious. I understand the many varied reasons why people WANT a credit card. What I’m more curious about is why people feel they NEED a credit card. Are they just confusing wants and needs? Or are there times when you really do need a credit card.

Like Guns, in the Hands of the Untrained and Impulsive, Credit Cards are Dangerous

Some friends of ours are poster children for how to use a credit card properly. They only buy things if they already have the money in the bank waiting to pay for them. They read their statement carefully looking for fraud and errors. They pay off their balance in full each month. They even take advantage of a few discounts by using a card (gasoline) and get a few points once in a while (Air Miles.) I’m quite sure VISA hates them.

But credit cards can be very dangerous in the wrong hands. If a person lacks self control, even once, they can end up buying something they can’t pay for when the statement arrives. Then the evil interest starts accumulating. The interest rates on credit cards are outrageous. At a time when you are lucky to get 1.5% on your cash investments, credit cards are charging 5-20% interest! It’s easy for a purchase to end up costing twice what it cost when it was rung up at the till.

Credit cards are also dangerous in a more subtle way. Apparently people are more likely to buy more items and spend more per item if they shop with a credit card than if they shop with cash.  There’s no physical, tangible pang of loss when handing over a credit card like there is when handing over a crisp new $20. In fact when using a credit card you often don’t hand over anything: the card never leaves your hand.

Why Do People Want Credit Cards?

There’s quite a variety of reasons people want credit cards:

• They want to be like their friends.
• They don’t like to carry cash
  • …because of germs
  • …because they can’t get to the bank easily
  • …because it’s bulky
  • …because it can get lost easily
  • …because it can get stolen
• They need to buy items online and the vendor asks for a credit card.
• They want to rent a car and the auto company doesn’t want to rent if they don’t have a credit card.
• They want to buy something that requires on-going payments and the service provider wants to bill it to a credit card.
• They want to collect reward points or miles.
• They want to earn “cash back.”

When Do You Actually NEED a Credit Card?

Of all these wants, there are only a few situations when you actually need a credit card.

• buying airline tickets
• renting a car
• booking a hotel room
• paying for work-related expenses where you have to wait to be reimbursed and yet you don’t have the cash to cover the costs until then

I’d argue that in most of those cases you could still work around it through a combination of debit or cash deposits. People who cannot get a credit card manage, although it is probably difficult, embarrassing and time-consuming.

But Do You Need a CREDIT Card or Just a Delayed-Payment Card?

When you mention cards and plastic, you usually think of a credit card like VISA or MasterCard. There is a second type of card, though. The most common brand-name is AMEX, American Express. These cards allow you to delay paying your bill until the end of the billing month. You can’t carry a balance past that same month, however. Payment in full is due when the bill arrives.

These delayed-payment cards, or charge cards, may be the answer for some people who need the convenience of a credit card but who don’t want to risk over-spending.

Pre-Paid Credit Cards

Another option that might work for some people are cards where you load money on the card and you can use it to spend until the money is gone. Personally, I don’t see many advantages for these cards over debit cards. You’d have to check for fees and transaction fees before getting one. If they are like the VISA and MasterCard “gift” cards of a few years ago the fees might be a problem.

So Do You Need a Credit Card?

Do you really NEED a credit card or just want one? Or are these cards just so common now that you figure you should have one like everyone else does? What do you think? Please share your views with a comment.

Related Reading

• Yes, Credit Cards are Making You a Bad Person
• Always Leave Home Without It
• Charge Cards vs. Credit Cards: What’s the Difference
• Why Does Everyone Offer Me a New Credit Card and 10% Off my Purchase?
• Reduce Your Risk Online Shopping with a Low Limit Credit Card

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Please share your opinions on the ever-controversial topic of credit cards with a comment.

For some reason, I had thought that our credit card worries were over once we signed a letter disputing the fraudulent charges to our account and replaced the card with a new one. So it was with shock I opened two large envelopes from our bank to discover still more paperwork. Were we going to be on the hook for thousands of dollars we didn’t spend?

Reviewing the Vendor Authorizations and Bills for the Fraudulent Purchases

What was in each bulky envelope was individual packets for each transaction made illegally against our card. Apparently when we refused to pay,  the credit card company asked each company involved to provide proof that we had made a purchase.

Not Every Disputed Charge Turns Out to Be Fraud

I realized as I looked through the billing reports that this is actually a necessary step. It reminded me of a billing mystery we’d faced a few months before. On that bill, there was a charge for about $1.57 payable to an online book seller. It seemed a very unlikely amount. We almost always order enough for “free shipping” so the bill should have been over $25. The listing on our monthly statement just listed the name of the vendor and a toll free number. It didn’t state what item or items had been purchased.

Luckily, saving probable embarrassment, before I took it any further the light bulb went off in my head. We had placed an order for one of our children. Most of the order had been paid for with a gift card they received from a birthday. The balance, $1.57, had to be paid for directly by credit card.

That’s an example of why the credit card company wants us to review the transaction details. What if we denied a charge by accident due to faulty memories or some mix-up about the name of a company? By reading the detailed transaction history we would have known what books were ordered for “$1.57.” Similarly, we might look through these bills and realize the name a company bills under differs from the name of the company’s website.

Causes Minor Panic

The forms requested us to review the transaction details and if we still denied making the purchases we needed to sign them and send them back. If we didn’t return the signed forms by a deadline, we were deemed to have accepted the charges as valid and they would appear on our next bill.

The panic came from the deadline. The forms were printed by the bank on June 19 but we didn’t receive them until Thursday June 27. And we had to return them by July 3. Yes, that’s right, Canada Day weekend stood between the day we got them and when they had to be back.

A phone call to the bank was somewhat calming. They said they could be faxed back from any bank branch. They also said that they usually give a bit of grace period despite what the letter said. In fact, judging by the tone of the person I spoke with, I think these types of disputes must be very common and these types of mail delays must not be unusual.

Faxed Back and Now We Wait Again

So we have faxed back our forms. Now we wait again. We’re waiting for the vendor forms for the other 1/3 of our disputed charges. They are likely still in the mail.

Will it all end well? I certainly hope so. It’s almost enough to make me stop using a credit card entirely.

Who Really Pays for Credit Card Fraud

I felt rather sick realizing how many small businesses were going to lose because of this fraud. They mailed their merchandise off to the customer in good faith. Now they have no way to get back those Apple TVs and iPod kits. Yet they have no way to get paid for them either. That’s got to hurt.

And, of course, eventually it is all of us who will be paying for this fraud. Those businesses will have to raise their prices to real customers to cover their losses. Or they will go bankrupt which will reduce price competition and again lead to higher prices.

I hope they catch the perpetrators of this crime and jail them. They have robbed from all of us and they should be the ones who have to pay for it.

Related Reading

• What Happens When Your Credit Card is Used Illegally and Fraudulently? Part Two
• Limit Your Risk Online Shopping with a Low Limit Credit Card

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Has your card ever been scammed? Did it work out ok? Please share your experiences with a comment.