9 Reasons to Say No to Credit

How to talk yourself out of using credit when you can’t afford to pay cash

With credit cards and lines of credit (LOCs) abundantly available, getting what you want right away has become common practice regardless of whether you have the cash to pay for it. There are many popular excuses for convincing yourself that this immediate gratification is acceptable. It isn’t hard to understand why we’ve become a nation of debtors.

Whether you need a gentle nudge to get back on track or basic knowledge to keep yourself out of trouble, here are nine ways to talk yourself out of drawing on credit when you can’t afford to pay cash. 

Key Takeaways

  • Using credit cards and not paying them off monthly can be detrimental to your credit. 
  • The major downsides of using credit when you don’t have the cash to pay it off later—besides the high-cost interest—includes hurting your credit, straining relationships with family and friends, and ultimately bankruptcy. 
  • The best practice for avoiding credit card fees and interest is to not spend money until you save enough to cover the purchase. 

1. Credit Discourages Self-Control

At best, an unwillingness to exercise self-control when it comes to money can rob you of financial security. At worst, an impulsive attitude toward buying can have a negative impact on other areas of your life, including self-esteem, substance abuse, and interpersonal relationships. Yes, exercising restraint may be difficult and boring, but it also offers many rewards and advantages, such as the ability to achieve financial goals, like buying a house.

2. It Likely Means You Don’t Have a Budget

Without a budget, it’s easy to forget how charging a cup of coffee here and a new book there can add up during the month and get you in trouble. For many people, a budget is a great tool for keeping spending under control.

If you don’t have one, it’s easier to make a budget than you think. Budgeting can be as simple as making a list that shows how much money you earn in a month, followed by a running total of expenses. The remaining balance will tell you how much you can spend. 

3. Interest Is Expensive

The reason that self-control is so important when it comes to finances isn’t moral or spiritual; it’s practical. Credit card interest rates are high, making your purchases more expensive.

For example, if you buy something for $1,000 by using a credit card with an 18% interest rate, and you make the minimum payment each month, then you will end up paying $175 in interest after one year and still owe $946 on your purchase.

If you don’t have the money to pay cash for something in the first place, then you probably don’t want to make it more expensive by adding interest to the price.

4. Rates Can Rise with Unpaid Balances

To add insult to injury, the great annual percentage rate (APR) that you thought you had on your credit card may have been an introductory rate, subject to increase if the balance is not paid off in full. That’s why an 8% APR can easily skyrocket to 29% in the blink of an eye.

“But that will never happen to me,” you might say. “I’ll pay my balance in full as soon as it’s payday.” You may have the best of intentions but can get easily derailed by unanticipated expenses, such as car repairs.

5. A Poor Credit Score Affects a Lot

If credit card balances go unpaid, then your credit score will start to diminish and you may get an unexpected rate increase on your insurance bill. Insurance companies that check credit scores when calculating premiums may assume that if you can’t pay your bills, then you might let your car or home maintenance slide, or you might be an irresponsible person, making you a higher risk.

Poor credit scores can generate other problems as well. Some employers run credit checks on job applicants and may not hire you if your score is too low. And your credit score is particularly important when purchasing or refinancing a home because it will determine the interest rate on your mortgage—and even whether you’re eligible for a mortgage in the first place.

6. Bad Habits Risk Your Relationships

Studies indicate that couples and families fight about money more than any other subject, and it can be an especially sensitive topic when there’s not enough of it. As a result, couples and families should work on budgets and financial self-discipline together, whenever possible.

7. Financing Leads to More Spending

Many folks spend more money by purchasing unneeded or overly expensive items when they pay with credit instead of cash. This is psychological, because buying a $1,000 laptop or smartphone won’t seem like a life change if you just sign a receipt and don’t even have to think about paying for a month.

On the other hand, you can physically feel the $100 bills leaving your hand if you pay with cash, giving you a better sense of how much those items cost and how much money you have left in your now-lighter wallet. To a lesser extent, this also can apply if you pay by check and immediately record the purchase in a checkbook that shows the impact on your account balance.

8. It Can Lead to Bankruptcy

If you go on several spending sprees without a plan to pay them off, or if your plan goes awry because you lose your job or get hit with medical bills, then you may find yourself hopelessly in debt. Declaring bankruptcy will scar your credit history for up to 10 years, and when the report finally goes away, you have to build good credit all over again.

9. It Can Erode Your Peace of Mind

If you don’t owe money, then you won’t have to worry about late fees, interest, annual fees, or over-limit fees. The best way to treat yourself to something nice is to save and buy it when you can truly afford it. The peace of mind that comes with not financing that purchase will be like treating yourself twice.

The Bottom Line

Credit works well when balances are paid off each month, but it can be disastrous when poorly managed. The convenience, protection, and rewards offered by credit cards make them handy financial tools, but consider the risks before getting in over your head.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. MyCreditUnion.gov. “Understand Your Credit Card Statement.”

  2. Experian. “Understanding Credit Scores.”

  3. American Psychological Association. “Stress in America: Paying with Our Health.”

  4. Experian. “How to Remove Bankruptcy from Credit Report.”