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If you believe the credit card commercials, you're not going to be able to have any fun in life unless you use their card. Well, if you've ever carried a balance on your credit cards, you know that paying interest is no fun at all. Tack on a late fee or over-the-limit fee and the good times are really over. Although credit cards can provide immediate gratification, they're more likely to cause long-term stress in your life. Thankfully, there are alternative strategies for living life without credit cards.
Many people view their credit limit as extra income, and as long as they're not "maxed out", they feel they're in pretty good shape. The problem with credit cards is that it's a perpetual cycle - the more you have to pay toward your credit cards, the less cash you have to pay for things, which leads to charging more things on credit cards. Until you break the cycle and stop charging, you won't be able to escape from your dependence on credit cards. Many people who are considering credit counseling are reluctant to close all their credit card accounts when told that most creditors require it before they will provide benefits such as reduced interest rates. Some common objections are:
These are all valid questions and a credit card is convenient for all those purposes. But with a little bit of sacrifice and some sensible planning, they can all be accomplished without credit cards.
This may be where some sacrifice is required. Establishing an emergency fund can be difficult, especially when funds are already tight, but it's a necessity if you intend to stop your dependence on credit cards. Most experts agree that you should establish a fund that would allow you to pay for three to six month living expenses in case you were to have a medical emergency or lose your job. This may be daunting, so start out with a goal of one month, and add to it as you are able. You really need to examine your budget closely to look for opportunities to save. The article library on the CareOne website can help get you started with articles like:
Many people find it helpful to "pay yourself first" by having a small amount deducted from your paycheck into a separate savings account. As you learn to live on a lower amount you can gradually increase the amount deducted. If you don't see the money in the first place, you may not miss it as much!
If you are committed to living without credit cards, you'll need to save for things that you used to charge to your cards. You'll need a plan to save for these things. If you have some short-term goals like saving for a new outfit or bedspread - you may be able to get by with simple savings strategies since you are usually dealing with smaller amounts of money:
If you are saving for longer-term goals like the holidays, a vacation, a car, or a down payment on a house, you should find a savings strategy that allows you to take advantage of earning interest:
Many people have concerns about how they are going to pay for goods and services that require a deposit like car rentals and hotel rooms. This is where it's a good idea to have an emergency fund established. Many car rental agencies and hotels will accept a "debit card" with the Visa or MasterCard logo, but they may place a hold on funds for several days to serve as a deposit. This could amount to several hundred dollars, so make sure that you have adequate funds on hand so you aren't surprised when you go to withdraw cash. Policies differ, so you should always check with the company ahead of time by either calling a manager, or searching for information on their website.
For making on-line purchases, you could also use a debit card, or you could open a PayPal account that many on-line merchants accept as payment. PayPal accounts can be linked directly to a bank account and in addition let you receive money if you plan on selling anything on-line.
Some people are so used to using credit cards that they overlook some of the good old-fashioned payment methods that are still available:
Living without credit cards may not be convenient, but unless your circumstances allow you to pay off the balance each month, you are probably better off without them. By not using credit cards, you don't waste money on interest charges. This allows you to keep more money in your pocket, which is like giving yourself a much-deserved raise!
Are you only paying the minimum payment each month? If you increased your payment amount every month by as little as $10, you could pay down your debt much faster.
“CardHub.com, an online credit card resource, reports consumers piled on $16.8 billion in credit card debt in the third quarter of 2011, up 154 percent from the same quarter last year.
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