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Frugal Friday: How to Live Without Credit Cards

Once upon a time I thought it was impossible to live without credit cards. Even if I had the funds “to pay it off every month,” it was the convenience I couldn’t live without.

Or so I thought.

Our month went like this: spend, spend, spend. Get the bill. Pay it with our monthly income, wiping out most of our cash on hand. Start all over again.

Sure, we “used credit cards responsibly.” We paid off our balance every month and tried to be frugal. But we were spending funds we didn’t yet have, counting on having enough at the end of the month. This worked fine for us until we hit a slick patch of unexpected unemployment and then it was a slippery slope into debt. Cutting out our credit cards was the first and major step to getting out of debt.

A friend called the other day with some burning questions about credit cards. They have a great income and plentiful savings, but she felt that she was paying three mortgages when it came time to pay the credit card bills. They “use credit cards responsibly,” but she realized that she was enslaved by them.

There must be a better way?

Photo Source: Dplanet

How to Live Without Credit Cards

1. We don’t carry any. There’s plenty of plastic in my wallet, but it’s my debit card and a store discount cards and gift cards that now weigh me down. You can’t spend what you don’t have. And if you don’t have a credit card in your wallet, you generally can’t use it.

2. We closed all our accounts. Yes, yes, we did. The accounts are paid in full and closed. If we were to go back to our old credit card ways, we would have to apply for a new account.

3. We use our Visa debit card or Paypal for online transactions. There’s no excuse that you have to use credit cards to shop online. It just isn’t so. I pay almost all our bills online without a standard credit card. Either I write an electronic check from our bank account or use our debit card. Visa debit cards have all the same securities and protections as a regular credit card, but the funds come directly from your bank account, bypassing a bill and a life of credit.

Photo Source: mangpages

4. If we are buying something big, we pay for it with cash. It is rare that we make large purchases on a whim. We tend to research and think about the purchase ahead of time. This helps us make sure we really want it as well as to secure the funds in cash or check to pay for the item.

5. We use cash, check, or debit card to pay for things. When money was super tight and we were aggressively fighting debt, we pulled cash from the bank and divvied it up into different envelopes. Since we paid off all our debts, we’ve gotten a little more relaxed about the envelopes, but are working our way back to a more dedicated use of envelopes to keep track of how we are allotting our funds.

6. We spend less by not using credit cards. Feel free to disagree, but the proof is in the pudding. Statistics show as does my experience that we are more likely to overspend when the money is not instantly removed from our possession. Using a credit card gives on the false sense of having more than we really do.

7. We are going to save for the Big Kahuna. College, retirement, and a house purchase are all big expenses, experiences that tempt people toward borrowing money and living on credit. We desire to avoid those temptations.

While we still own a rental property in Kansas City, we do not own the home we live in. Our philosophy? Until we get a big enough down payment and home costs are low enough, buying a home (and the ensuing mortgage) would be “renting money.” And renting is renting. In the meantime, we’re going to squirrel away extra money so that when the FishKids head to college or we really do find the right house, we’ll be in a good position to pay cash or a huge down payment for those things.

Are we worried about a good credit score? We have one. We’ve paid off our debts. And we plan to put huge down payments on anything that might involve a look at credit scores. Read this perspective on credit scores for more information.

Living without credit cards may seem radical. But, it is very doable. And it will save you money.

What do YOU do to save money?

Share your favorite money-saving ideas today. Leave a link to a post that shares some frugal wisdom. (Please no giveaways or deals posts. Teach us how to fish!)

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Comments

  1. Great post on living without credit cards. I like what’s in your wallet now!

  2. We don’t have credit cards either…and it’s a great thing.
    Thanks for hosting another great FF!
    ~Liz

  3. We have been using only our debit cards instead of credit cards for the last couple of months.

    When I use my debit card, I can actually imagine the money coming out of our checking account. That’s so much different than putting it on a credit card.

    It’s really made a difference in how much we spend a month.

  4. ” We spend less by not using credit cards”
    Why do so many people disagree with this statement? All the studies say that this is true, but everyone you talk to claims to not spend any more with credit…
    I think you spend less w/ cash… but I’m weird. :)

    Toni

  5. I almost always use cash for everything. I don’t even own a credit card, but I try not to use debit either because its harder to put a cap on your spending when your debit card doesn’t seem limitless. It would be nice to be able to have your current bank balance updated and written on your card (technology needs to advance to do that) so that you have a written reminder about how much money is actually available to spend.

  6. Hi! What a great article and attitude! Our friend is a wealth management expert and he told me lately that if a couple is subject to the alternate minimum tax that buying a house as a deduction is counter productive. Rent until you can purchase the house of your dreams! My article is actually a guest post by my dear friend Mary at The frugal buzz, so I thought it was perfect for your frugal fridays! Its all about eating healthy on a budget! Thanks for sharing your space wit us!

  7. This is very wise advice!

  8. I’m in the process of trying to rid myself of my credit cards….I’ve got 1 paid off but there are still 4 more. So thank you very much for posting this article!

  9. So true! We’ve been without credit cards for the last 4 years! Cash is King!

    Great point about when you use credit cards you are using next month’s money now! It can be hard for some people to switch to cash for this very reason!

    We still use the envelope system, it’s amazing how much easier it is to budget that way AND balance your checkbook! Without all the “little” charges to your debit card for something as simple as a bottle of pop or something along that line.

    Great Post!

  10. Wow! This is one I’m telling my husband about. Great article.

    Annie Kate

  11. Great article. I might even send it to my husband. We use cc “responsibly” by paying off at the end of the month, because we want the points, but I’m sure we would spend less if we gave them up. Something to think about.

  12. I pay cash for everything too. After paying off $20K in debt I won’t go back to it. It’s been almost 5 years now and feels great. My husband has the credit card (as he’s wayy more disciplined than me) and we use it for “the big stuff” but that’s it.

  13. We do these same things, too, FishMaMa… and I can testify that they do WORK! Being credit-card-free is great and doesn’t have to be an inconvenience.

    We are working toward being completely debt-free. With the Lord’s help, we have been able to be mortage-free (we paid cash for our house and 5 acres) for a year now. It’s down to a small loan on a property, then we’re free and clear.

    I really appreciate your emphasis on finances, frugality, and avoiding debt– it’s SO easy to get entrapped in the spending cycle in our culture!! Thanks for this post.

    Kristy @ Homemaker’s Cottage

  14. Happy Friday! Thanks for the linky. We cut up our credit cards. Awesome experience. I didn’t realize I had any “faith” in them until the feeling I got when we decided to snip them up. I’m excited to let GOD be my security blanket now! Not a piece of plastic that can only compound problems when you truly hit hard times!!!!
    Amy @ http://www.thecheapandchoosy.blogspot.com

  15. We have lived without credit cards for several years and it is one of the best financial decisions we have made for our family. Thanks for hosting the linky!

  16. Great post, Jessica.

  17. I KNOW that I spend less at the grocery store if I don’t use a debit card or credit card. Last year at this time, we were still using our credit card. While we paid it off every month, we weren’t gaining any ground in our savings account.

    I decided that I’d take cash and cash only to the grocery store. I was able to cut our bill down drastically because of this. Anyone who is hesitant to stop using your credit card or debit card, try taking cash to the grocery store for one month and see what happens.

    We have a credit card which we use very infrequently. It’s convenient though when my husband has to charge things for work that he’s reimbursed for later. We have NO desire to go splurge and use our credit card. For those who have that as a temptation, I believe they have to get rid of them completely.

  18. It’s inspiring to read about people who have actually been there-done that. We are climbing out of debt slowly, but we are no longer using credit cards and are trying to switch to the cash only system. We are spending less, for sure.

    I have read, though, that it’s not good to use your debit card for internet purchases, even if it does carry the logo, because if it gets swiped, they can drain your checking account. I have been putting off purchasing on Amazon because they don’t take PayPal. Several months ago, I did buy some things online and got a call from the fraud department asking if I’d purchased $300 of books from Japan. Um, NO! They caught it and closed my card and reissued another one, but it left me leary of doing any online purchases again.

    Any advice?

    • Jessica Fisher says:

      @Cheri, we got those kinds of calls when we were using credit cards, so I don’t know that makes a difference. Security told me that someplace where I had swiped the card had made an imprint and a new copy of the card. The fraud had been perpetrated with an actual card, not just the number. So, in fact, it was face-to-face use that led to fraud, not an online purchase.

      Visa says that the “Visa debit card” has the same protection as a regular credit card.

      JessieLeigh (below) says that there are some holds on debit cards. I’ve not had that problem yet. But, I live in a cave. :)

    • @Cheri, While debit cards are protected just the same as credit cards when used online, something like this might ease your mind. I’ve heard of many people that set up separate bank accounts that they can easily transfer money in an out of. They then get a debit card for that account. When they get ready to make an online purchase they simply move enough money over to the account attached to that debit card and make the purchase. That way, if something were to happen with online fraud, they won’t lose money that’s in their account.

      Hope that’s helpful!

      • I know this is an old comment, but the commenter is right about not using debit cards online. I used a debit card online, and the next day my debit card was denied when I went to the grocery store.
        Went home and looked at my bank account, and it showed several amounts pending for transfers to Spain! All the money in my account!
        The bank had caught it though and everything was straightened out, and I got my money back.
        From now on though I use paypal or a credit card online – it’s just not worth it to use a debit card. You don’t want thieves accessing your bank account.

  19. I just found your site. Nice place. I will be returning. Yes, living without credit cards has its challenges but for me, it IS the best way.

  20. There’s nothing here I don’t agree with. :) That being said, I do have a credit card and I don’t believe I’m enslaved by it. I use it for gas or to reserve hotel rooms/rental cars. I just don’t like the holds that those places can put on debit cards. There’s nothing “wrong” with using a debit card for those purchases, but it’s not my preference. I do not spend any more money on gas this way than I would any other way… I’m not prone to lots of senseless trips w/ three little kids in tow. ;) Great post and something we all need to think about.

  21. Jessica, this is such a great post with valuable guidance!! We still use our credit cards even though we are NOW debt free of consumer debt (as of February this year, after we met at Blissdom actually).

    I think what hit me is that you felt you were still a “responsible” credit card user. I feel that way too because we pay stuff off each month (which is huge when you just did it the way we did before). I mostly do it for rewards though, not because the money isn’t there. I am thinking of implementing another system though so I don’t have the on fell swoop to pay each month. But, I can see how the “responsible” mentality can lead one back into the same behavior.

    I’m glad you mentioned the credit score thing too. I know some financial experts say not to cancel them. But, I have issues with that. We will keep what we feel is necessary for emergencies, but the others we paid off and want to burn, we closed them. Honestly, we weren’t worried about our credit score either because our mindset is quite different now. Actually, closing the cards didn’t affect our credit score either since we just saw received a report and it’s the highest it’s ever been! That is probably not typical logic for finance experts either. But, then again they were the ones who told me not to close them in the first place. Oh well!

    • Jessica Fisher says:

      @Andrea @ MommySnacks.net, congrats on paying off all your debt! Awesome!

      I have to say something about “the rewards….” ;) Research says that you spend at least 12% more using credit than paying cash, though the number can be as high as 17%.

      We ran an average of $40K through our credit card each year, paying it off every month.

      12% of $40K is $4,800. There’s NO WAY I got that much in rewards. But, paying cash and saving that 12% is a much better reward.

      Just another way of looking at it. ;)

  22. I love that you pointed out the security features of a Visa debit card – our Visa debit has all the same protections as a credit card. It really annoys me when money “experts” say differently.

    And our Visa debit is also a rewards card. Which means every so often my husband and I get a free Starbucks gift card (there are lots of rewards, that’s just the one we choose).

    We’ve never had a credit card in our 11 years of marriage and have not had trouble doing anything people assume you can’t do with debit (online purchases, renting a car, holding a hotel room, etc). We’ve also never had any debt other than our mortgage. Coincidence? I think not. ;)

  23. I’m interested that you don’t own the house you live in considering your posts about the cost of living not being such an issue in California. (And I don’t mean that snarky.) A few years ago my husband applied for a few jobs in CA and one thing that terrfied us was high cost of real estate. We had been in our current house for only 1.5 years and would have taken a huge hit trying to sell it. And we bought a house we can easily afford. While we’re glad those job opportunities didn’t work out for other reasons I feel like the biggest plus to us staying in Wisconsin was financial.

    • Jessica Fisher says:

      @Beth, thanks for clarifying your comment. Here are some of our reasons for not buying — and my dad’s a realtor ;) (And I don’t mean them in a snarky way, either, just explaining our rationale.)

      ** To rent is not to be a 2nd class citizen. Yet, I think our culture has confused home ownership with responsible living and status. So many ppl have walked away from homes “they owned” because they got in over their heads.

      ** While homes have dropped dramatically in CA, they continue to drop. We know many ppl who bought during the boom who are 100s of thousands of $ upside down on their homes. My husband’s contract is not yet permanent, so we are hesitant to buy and then be upside down on a house that we can’t sell should we need to move.

      ** While we love being home owners, we also realize the cost of upkeep. We have never owned a home without completely renovating it. That’s just how we roll and so we know a home would cost us more than the purchase price. There are extra costs to owning. Currently, we just pick up the phone and call the mgmt co to fix something.

      ** We feel compelled to put a HUGE down payment on a home instead of taking out a mortgage. We are leary of debt now because of the freedoms we feel being debt-free.

      ** Rent is “affordable” compared to a mortgage, upkeep, and home improvement costs. We are able to save each month instead of paying the interest that a new mortgage would entail. And I think our savings is bigger than what we’d be paying principal. Since our job isn’t as stable as it could be, this works for us.

      ** Our family at this stage in the game would need a very large home to accomodate us. (Our current rental is 3000 sq ft. 5 BR). If we save for the next five to ten years, we may be close to paying cash on a smaller home because we won’t need such a big house a few years down the line. If we bought now and mortgaged 80% of it, we’d be paying huge interest just to “own a home.” Renting is renting, whether you rent the house or rent the $.

      I’m sure somebody has counter points to all of these. I am just sharing to explain where we are at and what works for us.

      And I guess I would also have to clarify, “the cost of living not being an issue in CA.” Do we pay more in CA than we did in Kansas City? Yes, but my husband makes a ton more at his job plus he gets benefits. We’re closer to family and we’re where we want to live. We’re home. These things make it worth it to us. I’m not making the case that everyone should live in CA, but that it is possible to make ends meet here, depending on how you want to live. Does that make sense?

      • @Jessica Fisher,

        Sometimes I think this mania for land ownership is a Midwestern thing. :) A lot of friends and family pressured us to buy a house the year before we actually did even though we didn’t feel financially ready. When my husband was applying for the CA jobs we wished we had waited but things turned out for the best. Renting is a lot easier in many ways. People often get hung up on the building equity part of owning a house but forget about the maintenance costs. We’ve added a parking slab, redone the floors, painted everything, and replaced the refridgerator, furnace, and air conditioning. I don’t know how we would have done this if we hadn’t bought as conservatively as we did (instead of using the extra $100K of credit the bank would have given us!).

        It just depends what is right for each family. I’m so glad we have our house for many reasons but I completely see how your family made a different choice. Especially with six kids!

  24. We’ve been implementing D. Ramsey’s get out of debt philosophy for a new garage loan and have been through the financial peace university so we know about the cash philosophy. There were a lot of great ideas- mind blowing ones, really, that we have embraced. We did not get rid of our one credit card, though. And statistics for spending more are just that, folks – numbers. As in many areas the stats don’t always tell the whole truth (especially for things like gas- how do you spend 30% more there?). I wish there were stats on where the money goes when I have cash in my wallet! I swear, it just gets whittled away and I have no idea where it went. :-)

    Other than our first couple years of marriage more than 20 years ago, we have never carried credit debt and whether I use the debit card OR credit card, I see the money coming out of our acct- they are no different to me. Within a day or two it has been entered in our budget. And I like the rewards for things like buying gas that happen anyway.

    Now the point about purchasing first and then paying is relevant, and it would be the only thing that would make me want to go to cash. However, I think an emergency fund would cover this- it’s all a matter of planning.

    Thanks for the great insight!

  25. What an interesting perspective! If you pay with cash, you don’t need a credit rating:-)

  26. Thanks for the linky! And great post!

  27. Rachel P says:

    Great post and I highly agree, we did the same thing, but there was once trouble. We live and Phoenix and flew over to LAX for a day trip to Disneyland (I work for the airlines and we had free admission). My husband had recently canceled all of our cards and we were living off of cash. I had a great deal on the rental car, $15 for the day. We went to pay for it and we were denied. We had the cash to cover what we needed for the day but the rental car company charges $400 dollars on your card until you return it. After that we did get a CC for travel. Just a word for the fellow travelers it is good to put your car on a CC for the reason stated above and lots of cards offer rental car insurance. Thanks for the great post!

  28. We don’t use credit cards, either. At this point we have only a small student loan and our mortgage to pay off. Should do it in our early 30s, assuming we don’t find our dream home before then. Though we plan to. :)

    We recently switched to an envelope system too and found it instantly saved us a ton of money. We use still use debit and online bill pay for things that don’t change like our mortgage, insurance, etc. But we use cash for all variable expenses like groceries. I find I plan much more carefully and stick to my list when I know that I only have a certain amount to work with. I also feel more control over my money, because I really am “telling it where to go” when I physically place it in an envelope and write down what it’s for. I’ve ordered a few things online lately and been so excited because I’d set aside the money for it in advance and I knew it was totally paid for and fine to order!

  29. Im with you on this one I also like the way you look at renting

  30. Yep. That’s the way to do it. We’ve been using cash for everything for about 2 years now. We’ll have paid off $43k in debt by Nov 1, 2010. Cash is King and boy how your perspective changes when you slam greenbacks on the counter instead of plastic.

  31. I JUST paid off one of my credit cards today! I am so giddy I can barely work! It’s as if there were invisible shackles on me that are now demolished!

    I don’t normally use credit cards, but I unfortunately had to pay for a medical expense. Some things are worth the debt!

    Ladies, I would encourage you all to follow Jessica’s advice. I never want to be in that bondage again!

  32. I guess it depends on what “responsible use” means. I agree with all of your points, but I really don’t think that it’s possible to be credit card free in this day in age. We travel frequently and budget for it. However, car rentals and hotel reservations often do not take debit cards. Some used to do deposits but many are moving away from even that, although most only require the reservation to be on a credit card and the payment can be debit. I prefer to just keep my cards at home stored away and not to use them except in such an instance or a true emergency. Debt is such a slippery slope and it’s so easy to slide down it. The problem isn’t the credit cards, but our attitude and the sin that causes us to want things that we can not have. For many, getting rid of the temptation all together is the easiest thing to do.

    • Preparedmom says:

      @twyla, I love this line in your post, “The problem isn’t the credit cards, but our attitude and the sin that causes us to want things that we can not have.”

      I am probably in the great minority here, but after 20 years of marriage and adult life experience, my husband I have come to the realization that we spend MORE when we have cash! I have much better self-control when using a card then when paying cash. I know that is hard to believe and that many of you will strongly disagree, but I know it works for us. We live well below our means and part of that is because for our first 4 years of marriage we were living well below the poverty level (husband in grad school, me unable to get a full time teaching position in the area where he was in school) and had to budget for every cent. I am able to stay in or under budget for everything now even with the use of CCs. When either of us has cash on hand we’re much more easily “nickeled and dimed,” even using an envelope system. Just as there are different love languages, learning styles, etc. I believe there are different styes of money management. For us, avoiding a big CC bill every month (which we pay in full), is motivation not to charge it. I’ll buy something impulsively for less than $5 if I have the cash, but I wouldn’t put that amount on my CC.
      I hope this post isn’t offensive, it isn’t meant to be! I just wanted to share what works (and doesn’t) for us.

  33. Great post! I just posted about using the envelope system today and how it works for us.

    The only thing we would potentially want to get a credit card for is for car rentals. Some do not take debit cards and many will check your credit if they do accept debit, which could affect one’s credit score if it’s checked too often. Or so we’ve heard.

  34. I use a credit card like a debit card – always paying it off. I know that isn’t the Dave Ramsey way but it works for us. I linked about finding Farmer’s Markets in weird places.

  35. Great post. We have not used credit cards for a 1 1/2 years and think it is the way to go!
    I would agree with others that cash is even better when possible. I notice I tend to spend a little more with my debit card than with hard cash.
    Still working on paying off some of our credit cards, can’t wait to be debt free!

  36. I appreciate this post, but have to disagree with a point you made: Visa debit cards do not have protections that Visa credit cards have–by law they are not required to offer the same protections that the credit card companies do. Any protections offered are provided by the issuing bank, so it’s important to make sure that your issuing bank does offer that protection. Also, if your card is compromised, you still may be on the hook for up to $50.

    More importantly, if your debit card is compromised, the money is coming straight out of your bank account. If someone hacks your card, they could potentially wipe out your REAL cash, and it could take you up to a week or more to get it back (if you get it back at all). If you don’t have any credit cards either, you could be in a very serious situation.

    I agree that it is possible to live without credit cards, but if you’re buying online, Paypal is definitely the way to go.

  37. Shannon says:

    When we first got married amost 10 years ago, I had 2 credit cards that I used responsibly. (Only balance was wedding dress and 1st set of groceries, other was not activated) I then lost my job and shortly after my husband lost his. We activated the other card for “necessities.” We became out of control with our spending. We found ourselves buying things we didn’t need such as a paintball gun with all the accessories (for hubby), a pool stick with case, etc. It didn’t take long for us to become buried in debt. By the grace of God, we have always had what we need but it took years for us to recover. We haven’t had a credit card for a long time and our lives have improved dramatically. We don’t buy large items without much thought, research, and prayer. We don’t always have what we want when we want it but it means so much more when we get it because we worked for it. Now we are in the process of saving money and couponing to build an emergency fund. It hasn’t always been easy but it has been worth it. Right now we are not living like everyone else so we don’t have to live like everyone else.

  38. Great post! Hubby and I are in a ton of debt right now and I’m thinking of somehow managing to start a savings account. He’s also planning on closing our accounts. I’m a huge shopaholic so struggling now with not having a credit card (we’re doing debt consolidation) is such a challenge. But a very good lesson that I know I have to learn!

    I hope to one day not be dependent on credit cards!

  39. I love this post. I have only owned one credit card and the account was closed due to “inactivity”. I only used it twice and paid off the balance with the bill was due. My husband has a credit card that is used for traveling out of the country and renting cars. We save for whatever big expense we want. I recently began carrying cash to the grocery store and I am so pleased with it that I am going to continue with this. I only buy what I need and I am not near as tempted to grab things that are not on my list off the shelf. We both have debit cards that we use to buy gas and such, but it is nice to know that we are not creating more debt. Alot of our friends are constantly going out and stuff, and it is hard to say no to many of the events, but we know they are in debt while we are not. However, we have the best vacations because we actually save up for the vacations while our friends complain about their cheap vacations! Our friends actually think we are “well off”, but that is not so true, as we are “not in debt”. We only have a mortgage and a small student loan. This is done by God’s help and grace as we are both scared of going in debt, and we also want to be available to use more of our money for the Lord’s service.

  40. Great post! We are now living with zero credit card debt :) Our only debt is our house which the plan is a 15 year payoff.

    I use cash for everything-have my lovely envelopes and I also just carry a debit card and store loyalty cards. We do have a credit card that we use on vacation. I know it sounds silly, but I feel that if it’s lost or stolen on vacation I’d rather someone steal from my CC and not have to deal with utility bills bouncing. I know I’m weird but it makes me feel better.

  41. I’m curious how using debit cards instead of credit cards really makes any difference. From my perspective, it’s the exact same money getting used, but with credit, we get rewards back.

    I guess I can understand if you don’t already have the money in the account, but overall, I don’t see there being much, if any, difference between the two if you don’t spend what you don’t have…

    • Jessica Fisher says:

      @TuxGirl, well, usually people are spending their cash on hand on the things that they bought on credit 60 days ago. After grace periods, etc, you’re paying for stuff that is up to 2 months old. So, it’s not exactly the same thing. You’re two months behind. If someone pays it off each month, they are still counting on the pay check at the end of the month to get them out of hock.

      It may be different for you guys. But, I think this is how it is for a lot of people.

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