You think you can live a life without credit cards? It is possible but admittedly quite different from what you are used to. There are a lot of challenges when you decide to stop using credit cards.
We have gotten so used to the idea of using cards for purchases. In fact, a study done by JDPower.com revealed that credit card users are quite satisfied with their respective issuers. Out of a scale of 1,000 points, the respondents had a satisfaction level of 790 – an increase from 778 in 2014. The satisfaction measured credit card companies in terms of customer interaction, billing and payments, rewards, benefits and services, credit card terms, and problem resolution.
If the issuers are being graded so well by their clients, it is probably safe to say that a lot of people will not agree to live a life without credit cards.
The same can be said for other studies done about credit cards. In a separate study done by NextAdvisor.com, credit cards remain to be the second most preferred payment option by consumers. The study revealed that for everyday expenses, 38% of the respondents revealed that they use credit cards. It is only slightly behind debit cards (42%) and way beyond the use of cash (17%). This survey also revealed that people who are 51 years old and above prefer to use credit cards.
Of those who preferred credit cards, 40% said that this is their chosen payment tool because of the rewards they get after using it. Not only that, 40% of all the respondents say that they feel safest when they use their credit card for purchases that they do in person.
Obviously, our society is not ready for a life without credit cards. You cannot blame them because it is a convenient way of spending. You are not putting your cash in danger and you are also able to buy expensive items that you normally wouldn’t be able to afford with a cash payment.
However, there are instances when we need to stop using your credit cards. For instance, when you have accumulated too much credit card debt and you need to pay them all back, it is advisable that you stop using credit for purchases. If you are also trying to increase your credit score by improving your credit utilization rate, you may also have to stop using your card. Sometimes, being in the midst of a debt relief program like debt settlement or debt management would require you to stop using your cards too.
Regardless of the reason why you want to start a life without credit cards, one thing is for sure – you need to make a lot of adjustments especially when you are so used to it.
Tips to help you survive even without credit cards
The digital age that we are now in makes it difficult to live without your cards. A lot of things are safer when conducted electronically instead of in person. When you carry cash and you lose it, that is usually gone forever. But when you lose your credit card, you simply have to alert your issuer and your money should be safe from theft – at least if you act on it immediately.
To help you with all the adjustments that you have to make, here are the scenarios that will be affected in case you decide to pursue a life without credit cards.
When you need to maintain a good credit history.
Not using your credit cards do not mean you have to be stuck with no credit history. A credit card is not the only way that you can build up your credit score. If you owe student loans, mortgage or a car loan, these will also be recorded in your credit report. You can maintain a good credit record through these and you do not have to worry about not using your credit cards.
When you need to rent something.
It is true that rental companies require a credit card before allowing you to borrow a car or item from them. However, there is an option to put down a security deposit in cash. The card is only meant to secure the company in case something happens to what you rented and you refuse to pay for it. The cash that you gave as your security deposit will be returned – as long as you return the rental without any damage.
When you need to book a hotel.
This is another transaction that is easier to do when you have a card. However, if you are tied to a life without credit cards for now, that does not mean you cannot book a hotel room. Some hotels will accept a debit card instead. The hotel will put an authorization hold on the debit account for the charges that you will incur while staying in the hotel.
When you need to buy something online.
According to the study done by Next Advisor, 50% of their respondents admitted to using credit cards to make online purchases. Well, buying online is still possible. You simply have to open a PayPal account or another payment merchant equivalent. Your purchases will be limited, but there are items that you can still buy online. When you want to buy something from Google Play, you can have it charged to your phone bill. This is an option that is accepted in a lot of countries.
You see, choosing a life without credit cards do not have to limit your financial transactions significantly. If you have to do it because you are working on credit card debt elimination, then you should know that this is only temporary. As soon as you get your card balance low, then you may be able to resume using it again – as long as you have learned your lesson when it comes to smart credit card use.
When is it wise not to use credit cards?
According to a press release from Lending Tree, there are people who really choose to live a life without credit cards. When analyzed by generation, the study revealed that Millennials are the ones who will most likely live without these cards. 1 out of 4 Millennials who responded to their survey said that they do not need a credit card. These people believed that if they do not have the cash, they should not spend anything.
The truth is, there are instances when you are encouraged to live without credit cards. At least, there are more reasons to do so even when you do not have a lot of debt to your name. Here are some of them.
- You cannot control your spending. If you have poor self-control, you need to reconsider having a credit card in your wallet. Be honest with yourself about this trait of yours. If you really want to own a card, make sure to leave it behind whenever you have to buy something. Bring it with you only when you have plans to use it. When we say plans, it means you have the credit card spending in your budget plan.
- Your income cannot afford to incur additional payments. Those who are living from paycheck to paycheck will do well to live a life without credit cards. The temptation to buy that extra item is strong even if your cash cannot afford it. If your monthly income is just enough for your needs, do not buy anything on credit. You will be giving yourself a problem the next month when the credit card bill arrives.
- You have a hard time understanding the concept of a credit card. New credit card users end up in debt because they failed to understand how the interest, finance charges, and late penalty charges work. For instance, you should know that paying within the grace period will help you avoid finance charges. Know the best practices when it comes to credit card use before you purchase something with it.
Here is a video from CreditCards.com with tips on how young adults can use their credit cards safely.