How to Live Without Credit Cards
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Wondering how to live without credit cards? It’s totally possible. And you’ll feel so much better knowing things are paid for.
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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 to pay the bill.
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 our getting out of debt and learning to live within our means.
If you’re struggling to get out of debt, you have to get off the ferris wheel. You can’t keep acquiring new debt and expect to wipe it all out. This book is also a good one to read.
A friend called one 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, right?
Photo Source: Dplanet
Live without credit cards? How? We’ve done it now for eight years. We live better now than we did before, so I have zero regrets.
Here’s how we make it work:
How to Live Without Credit Cards
1. We don’t carry any credit cards.
There’s plenty of plastic in my wallet, but it’s my debit card, 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. That’s easy.
Some people freeze their credit cards in a glass of water and store it in the freezer. That makes it hard to get to. Some banks will allow you to turn the card on or off in your account.
2. We closed all our credit card accounts.
Yes, yes, we did. Once the accounts were paid in full, we closed them. We made it as difficult as possible for ourselves to go back to our old credit-spending ways.
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 VISA 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.
When I swipe the card, I know that I’m paying with my own money and not the credit card company’s.
Photo Source: mangpages
4. If we buy 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.
We saved our pennies for two years in order to fund our trip to Europe. Rather than spend money we didn’t have, we knew that everything was paid for. This made the trip so much more enjoyable than coming home to a stack of bills!
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. I know from experience, the envelope system works.
Since we paid off all our debts, we’ve gotten a little more relaxed about the envelope system. We have a budget and keep our spending in check.
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 one a false sense of having more than we really do.
7. We are saving 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.
Currently, 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’ve been squirreling away extra money so that as the FishKids head to college or we really do find the right house, we are 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.
One instance when a credit card can be a good idea: International Travel
When we went to Europe, we needed to be able to access our bank account from abroad. We certainly weren’t going to carry thousands of dollars in cash, and traveler’s checks are a thing of the past.
While we did use our VISA debit cards overseas, those transactions were subject to fees. Prior to our departure, we opened a travel credit card account that was only for the trip. We paid for our on the ground travel expenses with a combination of cash (pulled from the French or English bank via our debit cards) or credit card. Since then, the card has sat in the safe, awaiting our next trip overseas.
In anticipation of our next trip, we’re looking into a Charles Schwab Checking Account that provides fee-free international transactions.
To live without credit cards may seem radical. But, it is very doable. And it can save you money.
Do YOU live without credit cards?
*This post was originally posted June 24, 2010 and has been updated.
“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.”
THIS IS 100% FALSE!!! Not true at all. Ask your banker. As a banker myself, I know this to be completely untrue. No fault of yours, it’s is as one assume to be true and if it were true it would make sense. It’s a very common misconception. Credit cards and debit card, even with the Visa logo, are governed by different rules. If fraud takes place on your credit card, very easy fix. If fraud takes place on your debit card— well it can be a nightmare to get your money back.
This is what VISA says about their debit cards:
This has been my experience with my Bank of America VISA debit card.
We pay off our credit card every month, but agree that we spend way too much. What I do now, is put my cash in an envelope system, then bring my credit card receipts home. I attach the money to the receipt. Then when the card is due, I take all the cash to the bank. A little more time consuming, but a good step for us until we finally cut the cord on the cards.
Sounds like a good strategy! The deal with cards that bugs me is that you’re always a month “behind” if you know what I mean.
I am a credit card user and appreciate your input and point of view. For many people it certainly is wiser to eliminate them completely. But… we had an experience within the last three months in which having used a credit card saved us literally thousands of dollars. We had purchased classes through an online academy for our home ed high school students for future use. Unfortunately, the academy was forced to close its doors before we were able to use all those class. Because of the buyer protection built into our credit card, we were able to file a dispute and were able to recoup the unused portion of our investment. Sadly, families who paid in cash have absolutely no recourse and have started massive losses. In this situation particularly, I am so thankful we paid using our credit card (which, of course, we always pay off in full). Although an extreme example, sometimes the protections are well worth it.
Thanks for sharing your story! Believe it or not, VISA debit card holders get the same protection. That’s how our Bank of America cards work, so we can file a dispute in the same way and our money is guaranteed. I’m not sure how other debit cards work, but that’s how ours does.
I love your blog and have been reading it for years (you were living back in Kansas when I first started reading!)., Anyway, I think there are some people for whom credit cards don’t work, and others for whom they are fine. When I was in college my dad insisted that I get a credit card to build up credit. Then he explained that I should never put things on it that I could not afford to buy with cash in my account.
I have never strayed from that advice, and I only buy things that I have money in the bank to pay for. In other words, I don’t buy things with next month’s paycheck. I got that first credit card back in 1988 and I still have it in my wallet, along with several other credit card I have gotten since then. I’ve never been “in debt” always having money in the bank to cover what I owe. I live frugally and evaluate every purchase.
I don’t think that having credit cards for the past 28 years has hurt me in the least. My husband and I have managed to save 7 digits in that time period on mostly one decent, but not incredible, income. We have 3 children and lived in a high COL city (DC) for 22 of the past 28 years. I don’t say that to brag but to show that there are people for whom credit cards are not a big temptation. I never looked at them as a “free ride” to buy whatever I want, and I haven’t been burned by them. I don’t think that everyone should have them, but for others they are perfectly fne. Just another point of view. Thanks again for your great blog!
As a commercial bank employee I have to disagree with one point — you shouldn’t use your debit card for online purchases. I see at least two people a week who have had their debit card stolen and while they are not responsible for the fraud (if reported in a timely manner) it can take up to 90 days to get your money back. That’s 90 days without whatever money was stolen from you missing from your bank account. Since most people live paycheck to paycheck even without credit cards going that long with money missing is a true hardship. At the very least use a pre-paid debit card that is not attached to your checking account.
Thanks for the input, Mendy. I wonder if it depends on the bank. I’ve never had that problem with BofA. Mine was part of the Target hack and subsequent hacks and I’ve always had my money credited back to me immediately. Are yours VISA debit or just plain debit?
Ours are Visa debit. I had a lady two weeks ago whose debit card was stolen on Wednesday night — $2200. It took five days (Monday) to get the money credited back to her. In the meantime the bank held her paycheck as collateral in the dispute so she had no money during that time.
That IS a disappointment. I’ve not had that experience with BofA. I guess they’re good for something after all. lol!
We have been living without credit cards for over ten years and it is so wonderful! No worrying about payments and interest. To be honest, I don’t even like writing checks because some people sit on them, which is extremely rude and unfair. I am just fine with cash and my debit card and we’ve never had a problem, even overseas. DO IT…GET RID OF THE CREDIT CARDS! It is so freeing; you’ll be so much happier!
I love this post! We’ve been without credit cards for about 10 years now, and it’s one of the best financial decisions my wife and I ever made!
It was just too easy to use, and carrying a balance was always a nagging issue that caused a lot of stress in our marriage. Since we stopped using them and got total control over our money, we’ve paid cash for BOTH of my wife’s college degrees, two cars, and now we’re paying cash for our son’s tuition. We will never go back to using credit cards again!
I agree that for almost all people, it’s best to not have credit cards at all. Having said that, we do use credit cards, but I pay them off weekly (or sometimes even as soon as I get home from shopping), and then I use the cash rewards earned for special purchases or save it for our vacation fund. I truly don’t think we spend more than we do with cash because I’m fanatical about our budget and saving and my bill is paid before it’s ever printed. But as a budget counselor I see that it’s true for the majority of people we counsel… once they start the cycle of using a credit card, it often gets out of hand in a hurry! We also live debt-free except for our home and it will be paid off in 5 years or less!
Great job keeping tabs on things!
Good Morning Jessica, just got off the live chat with the Charles Schwab bank. We have accounts in Europe and here and international transactions with no fee sounded too good to be true. They said if you transfer money internationally between bank accounts there is a 25$ fee but if you withdraw money from your American account on a ATM anywhere they will reimburse the fees. thought you might like this info. have a great day
Thanks, Verena. That’s what I thought.
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…
@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.