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.
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.
Im with you on this one I also like the way you look at renting
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!
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!
Thanks for the linky! And great post!
What an interesting perspective! If you pay with cash, you don’t need a credit rating:-)
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!
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.
@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!
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. 😉
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!
@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. 😉