For most Americans, the thought of living without credit cards doesn't seem possible, even if it seems like something that might save money over time. No over-the-limit fees, no interest payments, and no keeping track of statements each month seems like a good way to go, right?
After the end of the Great Recession, many Americans found their credit cards cancelled, their credit limits slashed, and a lot less buying power than they had before the economy's tailspin dive. But how realistic is it to live without credit cards?
Consumers Embrace a Cash Lifestyle
According to a story on Reuters, some consumers have embraced a card-free lifestyle after major cyber attacks on retailers like Neiman Marcus and Target put people's cards and identities in jeopardy. Some of the suggested benefits of less plastic have included:
- Fewer pieces of junk mail
- Not as many bills to pay each month
- Lower cost of living
It's also more difficult to rack up debt and arrive at the possibility of bankruptcy if you don't have those avenues available to increase debt in the first place.
Some consumers have even gone further and given up their bank accounts to live a fully cash-dependent lifestyle; however, a complete lack of accounts is unrealistic for the majority of Americans. People who don't have credit cards will still use their bank account to make purchases because technically it's cash and not purchasing using credit.
Making the Jump to Cash
Before cutting credit cards out of your life completely, you'll need to do some planning and figure out if the lifestyle is really something that will benefit your finances. As a way to reduce debt and remove the temptation of excessive spending from the budget, getting rid of credit cards is a solid option to think about.
Consider thinking about the following if you decide to transition to a card-free life:
- Keep one card for emergencies and holding reservations
- Create a spreadsheet for bills so as to keep track of cash flow and income
- Consider keeping a checking account for safe storage of savings and paychecks
- If you don't want a checking account, think about a savings account
Tip: If you go completely card-free and can't book a hotel online, try calling the hotel directly. Most hotel managers will not only accept your reservation, but they might even be willing to negotiate a better deal!
Drawbacks to Living a Card-Free Life
A lack of credit cards might lower the level of debt you accumulate, but it could also make it more difficult to obtain some types of debt that aren't so bad. Qualifying for a mortgage or a car loan when your credit report is an empty bastion of nothingness is actually a little harder than getting a major loan when you have some evidence of credit use on your report.
Many people who decide to forgo credit cards end up using a MasterCard or Visa-branded debit card for activities like renting a hotel room, but the drawback is that the hotel might put a huge hold on that card as a "just in case" during your stay. Although the funds get released once you leave the hotel room without destroying it, that large hold might not be the most convenient way to begin a vacation.
According to an article on MSN's Money channel, living without credit cards requires that you live life with a little more preparation than the average person who has a few credit cards in their wallet:
Living without a credit card means you'll need to do a bit more financial planning than folks who put everything on plastic do. Every time you leave the house, you need to have an idea of how much you'll spend while you're out so you can make sure you have enough cash in your pocket, a sufficient balance on your prepaid card or enough money in your bank account to cover your debit card purchases without incurring overdraft fees.
Experiencing Financial Problems? Don't Know Where to Turn?
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