I can’t prove this but I’m pretty convinced that my father lived without credit cards – at least for most of this life. For that matter, I believe that most people in his generation lived without credit cards. Many of them had lived through the Great Depression and didn’t trust banks let alone credit card companies. However, today just about everyone has a credit card and a lot of people carry five, six or even more cards. Unfortunately, this is how many people get into trouble with debt. But believe it or not, you could live without a credit card if you just put your mind to it. Here’s how to make this work.
Plan for everything beyond what you normally spend
If you want to not have any credit cards, the first thing you’ll have to do is plan for how you will pay for everything beyond your normal spending such as gifts, car repairs, vacations and unexpected healthcare emergencies. This means you will need to set up an emergency fund with at least three and ideally six months of living expenses. You can do this almost painlessly by having a set amount of money transferred from your checking account to your saving account each month.
For your healthcare
You may be able to create a health savings account at your place of employment to take care of your health care costs. The money you save in this account will be pretax, which is a good thing. You could also open another savings account to pay for a vacation and give it a special name so you’ll remember its purpose.
Layaway big ticket items
You probably won’t be able to pay cash for everything so you need to think about other ways to pay for stuff. One of the best ways to do this is to use layaway. This is where the store holds the item and you make payments on it until you have paid for it in full. Then you get to take it home.
Use a debit card
Second, you could have a debit card. Just make sure you track your spending very carefully so that you won’t go into overdraft. Using a debit card is very convenient because it’s like writing a check without the hassle of actually having to write a check. You could tie your checking account to a saving account, which would protect you from overdrafts.
Get a PayPal account
This is where you transfer money online into a PayPal account and then draw from it using a debit card. Most merchants now accept PayPal cards, including airlines. You could tie your checking account directly to your PayPal account and then transfer funds to your PayPal account on a regular basis.
Prepaid cards
If you like the convenience that credit cards offer but don’t want to have a credit card, you could get a prepaid card. This is where you load funds into the card and then use it like a debit card. Just about any place that accepts Visa or MasterCard will accept these cards. You use it like a credit card until you’ve used up all your funds. At that point you can either stop using it or load it up with more money and start all over again.
The one downside of not using credit cards
There is one negative related to not using credit cards that you need to be aware of. It’s what it would do to your credit score. This score is based on how well (or how poorly) you’ve handled credit. This means you would not have a credit history, which could hurt your chances of getting approved for a mortgage loan or an auto loan. Of course, if you plan to live without credit cards forever this would not be a problem.
