When you’re best friends with someone for over a decade, you think you know everything about that person. But recently over a weekend breakfast at one of my favorite restaurants, I was surprised to learn an entirely new factoid about my best friend: he doesn’t have a credit card.
I was shocked. How could someone navigate the world without a credit card?
He admitted that he didn’t have a good credit score, due to his lack of credit history. This had caused him problems leasing an apartment. But other than that, he seemed to get by just fine. This made me wonder what kind of financial tools we could live without.
In this post, I’m going to explore what life might be like without a checking account.
What are the Advantages of a Checking Account?
As a young teenager, before I got too cool to be seen with my mom, I used to tag along on her day’s errands. That’s where I learned how daily purchases can be made using a debit card, which automatically withdraws cash from a checking account.
Charging a debit card to make small or regular daily purchases is the way many people use their checking accounts. In instances where they previously paid cash, they now just swipe a card and enter a PIN. In most cases, you can do this without paying a bank fee, at least for each individual transaction. This incredible convenience is one reason checking accounts and their corresponding debit cards are so popular.
Though our lives today are highly wired, there are some situations where you may need to write a paper check. Perhaps your landlord or a utility company only accepts monthly paper checks. Having a checking account allows you to easily accomplish this. Even if you can pay your rent or bills online, you can connect your checking account to the online payment system using your debit card.
Is a Checking Account Necessary?
Though I’ve tried to point out some strong reasons for using a checking account, I have to be honest about my own purchasing habits—I very rarely use my checking account.
Although many financial advisors warn against the dangers of charging a credit card to fund monthly budgetary costs, I use my credit card for almost every purchase. The reason I do this is because I have an airline rewards card that provides generous airline miles for purchases. This might seem irresponsible, but I’m careful to pay off my balance in full each month. I don’t recommend this practice unless you can do the same.
In addition, I rarely write paper checks. Almost all my financial transactions can be performed electronically.
I pay my rent online, buy gas with a swipe of my card, and charge my week’s groceries to my credit card. Even the DMV—which in California is the polar opposite of a modern, streamlined institution—accepts credit card payments.
My credit card is linked to my bank account, so I can easily transfer money to make my monthly payment. In the rare instances where I require a paper check, I could simply purchase a money order. Sure, it might come with a cost, but so do most checking accounts—particularly if you fail to maintain a specified minimum balance.
Banks are notorious for nickel-and-diming customers, and charging a debit card leaves you more vulnerable to those fees. Lastly, credit cards provide greater protection against fraudulent charges. Banks and credit card companies more readily credit you for claims of fraud on your credit card than on your debit card.
What’s the Difference?
Some readers might point out that charging a debit card and charging a credit card are exactly the same. I would argue that there is a difference in how you think about the purchase—and this distinction is important in deciding whether or not to ditch your debit card.
Since debit cards take money directly from your account, you must have the funds available before making the purchase. This can act as a mental control against excessive spending. For some people, charging a credit card—free money!—rather than a debit card might be an invitation for out-of-control spending.
Try to think about your spending tendencies in addition to the more tangible factors before you make a decision about whether or not you need a checking account. You might find that it’s an unnecessary expense after all.