Tony and I have been credit card debt free since January of this year. But for the past couple of months, we’ve started using our cards again every month.
Don’t worry, it’s not what you think. We still don’t carry a balance, and we probably never will again. But we also don’t want to leave our credit cards with a zero balance for longer than a month or so right now.
I’m sure you’ve heard about credit card companies reducing credit lines or even closing unused accounts. By not using your zero-balance credit cards, you may be targeting yourself for account closure.
As much as I hate that it works this way, your credit history is tied pretty strongly to your credit card history — especially if you’re like me and you’ve never had a car loan or a mortgage.
I opened my first credit card at 18 years old. I didn’t open another one until I was 23 years old. If my first credit card account was closed, it would shave 5 years off my credit history. Since length of history is a factor in determining your credit history and score, it’s likely mine would take a big hit.
Even though we plan to live as debt free as possible, I’m not against the idea of holding a mortgage or another car loan someday. If I want to get a low interest rate, though, keeping my credit history healthy is crucial.
To ensure that my accounts stay open, I’m using them a little bit here and there. Using credit cards at all can be a little dangerous, so I’m very careful to set boundaries.
- I never use them to purchase things that I want, only regular needs that I would be spending money on regardless (gas, groceries, and other necessary purchases).
- I pay the balance as soon as I receive the statement.
- I budget for these purchases just like any other purchase. This is crucial. I’m not using my credit cards to sidestep my budget. They’re just another way to pay for regular purchases.
It’s definitely a hassle, and I wish we could get away with not using them at all. But unfortunately this is a reality of our current economy. I want to protect my credit history and credit score so that when we’re ready, we can qualify for a low interest rate on our mortgage or (maybe) car loan.
Karen –
You’re so smart to do this! Most people don’t realize that your credit history is tied to your credit card history payments. When my husband and I started dating, he was surprised I had no credit cards, which I thought was great. “Oooh, look at me, I’m debt free.” Of course I had a car payment at the time, but when we started looking into buying a house years later, I was shocked to discover his credit history was actually better than mine, mainly due to him having a credit card and paying it on time, even when he had paid only the minimum, which most people don’t realize is better than paying nothing.
Keep rockin’ on girl!
That’s a very wise decision. I do the same thing because I’ve had no loans or mortgage or any kind of debt and therefore ironically no credit history. So now I have one card which I use to pay some regular bills. It’s worked quite well and I hope that my regular use of the card will mean it doesn’t get closed.
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It can be a slippery slope. We did this after having the cards paid off for almost 10 years. Suddenly we had a medical emergency with a preemie baby and not only did we have huge expenses, we weren’t able to care all that much about our finances through this difficult time. Result? About 2500 in card balances that we will struggle to pay off. Just be careful.
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I am in a similar situation. I finally paid off the last of my credit card debt last year. I am so thrilled! But I have recently applied for, gotten, and started using a new card. I will definitely be paying it off each month, but I look forward to getting the rewards that are offered by my card (Amazon Chase). I also think your point about credit history is spot on. I want to make sure to keep up a good record of on-time payments.
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My husband and I are middle aged. He’s had one and only one credit card for the past 35 years. I’ve never had a credit card, auto loan or mortgage (I inherrited my home). Recently, we were looking to move to another state, thus causing us to house hunt. When we applied for a pre-approved mortgage the lending institution said our interest rate would be 2.5% higher if I was on the mortgage. Why? Even though I outright owned a vehicle and a home (both fully in my name), and all utilities were in my name and I’d never had a late payment on them – The mortgage agent told me for all purposes intended I did not was a “non-existant” person. Subsequently, we applied for the pre-approval in only my husband’s name, because of the credit card and other paid off loans, he has an excellent credit history. Upon returning home, much to my unwillingness my husband insisted I acquire a credit card. He worries that if he were to pass away, I’d have a hard time getting credit if I needed it, because of my age and no history. Although I am anti- credit card, I have had to change my stance to anti-credit card balances. I’ve been purchasing one tank of gas per month and paying it off as soon as the invoice arrives. Hopefully, in a couple years, the credit world will recognize me as an “existing” person.
Mrs.B
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