Here's What Happens When You Only Use Credit Cards

The best credit cards have a lot of perks -- cash back, travel rewards, purchase protection, and more. But what happens if you rely only on credit cards for every purchase? While swiping or tapping your way through life might sound convenient (and rewarding), there are some potential downsides to consider.

Let's break down the pros, cons, and what you should know if you're thinking about going all-in on plastic.

The upside of using only credit cards

If used responsibly, credit cards can be a powerful financial tool. Here are some of the benefits of going cashless.

1. You can earn rewards on everything

Most credit cards offer some type of rewards, whether it's cash back, points, or travel miles. If you're using a card for every purchase, those rewards can add up quickly. A great cash back card can effectively give you a discount on all or most of your spending.

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2. You'll have better fraud protection

Credit cards come with strong fraud protection that debit cards don't always match. If someone steals your debit card info, they can instantly start draining your bank account. But with a credit card, fraudulent transactions can usually be reversed, and you're not on the hook while the bank investigates.

3. You can build (and improve) your credit score

Credit card usage is a key factor in your credit score. If you're consistently making purchases and paying off your balance on time, you'll build a solid payment history, which can boost your credit score over time. A higher score can help you qualify for better interest rates on loans, mortgages, and even new credit cards.

The downsides of going credit-only

While the benefits are compelling, using only credit cards isn't perfect. Here's where things can get tricky.

1. It's easy to overspend

Studies show that people tend to spend more when using credit cards instead of cash. Swiping a card doesn't feel the same as handing over physical money, making it easier to justify impulse purchases or overspending beyond your budget.

2. You might rack up interest charges

If you don't pay your balance in full every month, interest can pile up fast. Credit card APRs (annual percentage rates) are often 15% to 25% or higher, meaning even a small balance can become costly if left unpaid. If you find yourself needing some help getting rid of an outstanding balance, consider one of the best balance transfer cards that our experts have identified. You can transfer your balance to a new card and get up to 21 months of interest-free payments on your transferred debt.

3. Not every place accepts credit cards

Some businesses -- especially small shops, local restaurants, and certain service providers -- don't accept credit cards or charge extra fees for using one. If you don't carry cash or a backup payment method, you could find yourself in a tight spot.

4. Credit card companies can lower your limit

If you rely entirely on credit and your card issuer lowers your limit (which they can do at any time), it could leave you scrambling. A lower limit also means a higher credit utilization ratio, which can hurt your credit score.

Should you use only credit cards?

It depends. If you're disciplined with spending, always pay your balance in full, and want to maximize rewards, using only credit cards can work in your favor. However, if you struggle with overspending, carry a balance, or want the flexibility of using cash when needed, it might be best to mix things up.

A balanced approach -- where you use credit cards for most purchases but keep a debit card or some cash on hand for certain situations -- might be the best of both worlds.