Wow. It’s been two years since we had our credit cards, and we’re still alive. We made it two years without borrowing! But was that the best financial decision?
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My Credit History
I remember my very first credit card. It was a Chase card. Oh, how I thought I was special when I received it in the mail. I was ready to enter into the realm of fiscal responsibility, become an adult, and pay off my credit card in full every month.
And I did. I always paid my credit card on time, every time.
In preparation for marriage, my soon-to-be wife and I sat down with a Wells Fargo representative and was sold on the idea of getting another credit card. This time, it was for “overdraft protection” so that anything we overspent in our checking account would be transferred to our credit card. This was intended to save us overdraft fees, of course. Or was it?
That’s about the time I read Dave Ramsey’s 7 Baby Steps.
A New Beginning – Without Credit Cards
A New Beginning – Without Credit CardsEverything changed. All of the sudden I saw money in a whole new light, and started understanding the dangers of credit.
Although I had never gone into any credit card debt (besides what I owed each month), I identified two ways having credit cards was holding me back:
- I didn’t have an emergency fund. I thought that if we got into a bind, we would always have our credit cards to rely on. This might have plunged us into a sea of credit card debt.
- I didn’t strive for a better job. Because of the false sense of financial security my credit cards gave me, I didn’t see the value in getting a higher paying job.
So in a Dave Ramsey style ceremony, I cut up the credit cards with the largest pair of scissors I could find – with my wife’s approval, by the way.
That day was a turning point. We set our course on something we felt was better. But was it the best decision?
20-20 Hindsight Tells All
Looking back, we find that we don’t regret our decision to destroy our credit cards! It pushed us to follow a financial plan that kept our household financially secure.
The pressure of not having a safety net pushed me to find a different job: one that nearly quadrupled my income. We paid off our student loan debt, and built a fully funded emergency fund! We also were able to save some money toward an account designated for my wife’s continuing college education.
Sure, we might have achieved some of these goals without sacrificing the cards, but I’m pretty sure not all of them – and not as quickly as we have.
What About Credit Card Rewards?
We certainly missed out on some sweet credit card rewards. But later we learned about a financial institution that had a cash back debit card. We signed up, and are enjoying over $550 in perks every year.
What About Building Our Credit?
Our goal is to have a zero FICO score. Weird, isn’t it? Let me ask you this: if you don’t plan on borrowing in the future, why would you want a good credit score?
Although we may pay a little more for on our insurance premiums, it’s well worth not having the risk of going into debt.
We do plan on getting another home in the future, but plan on a mortgage with a company that can look at other factors besides credit score.
Are You Ready To Cut Up Your Cards?
You might not be ready to cut up your credit cards like we were. But let me tell you, two years of being credit card free has been nothing short of wonderful.
Meet me in the comments and let me know your thoughts! It’s okay to disagree!
If you can get organized enough, credit cards are not needed. I wish I could get that organized.
Wow… interesting… because I don’t think I would want to live without my card. How about the insurance benefits it provides for purchases?
I live in Canada and have also taken the Dave Ramsey course. Great concept however in Canada credit cards are required to buy anything online, to book a hotel or flight. Our debit cards operate under a different model and so can only be used with either a card or chip reader machine. That being said I never put on my card things I could just pay cash for. I also always pay off the balance when due. So they are pretty essential here, but the onus is on me to manage the credit well.
Congratulations for living without a credit card! I know a lot of people have done so and I would also be like one. From three credit cards, I now have only one, which I rarely use and keep the balance paid off. So, I know I am on my way to being debt-free and credit card-free.
I struggle with the extremes. Obviously, one can paint a picture of the guy/gal paying 20% interest and making minimum payments each month. Pretty bad.
If my approach to card use is to start, say, with the “envelop method” and charge only what is sitting in cash for each budget item, and then pay in full, I think that matches the intent of your goal without forgoing the potential benefits.
The product insurance has some value, 5-10% in the case of certain high tech items. (This is where the card doubles the warranty, and adds loss/breakage. I smash an iPad, Amex covers it. Apple won’t) The other benefit is the credit score. I don’t know the process the bank will use to give you a mortgage. In our case, we’ve had multiple refinances that chipped away at the rate we paid on our mortgage. Each refi was no point no closing, and our credit report was a record of our credit worthiness.
In the end I’ve come to understand one thing. For some, credit is to these people like alcohol is to the alcoholic. “zero” credit use is right for them.
I’d not call you wrong, whatever works for you. Really, it’s when one’s habits make them miserable or those around them miserable they need to rethink their actions. The fact that you’ve pondered the topic at all puts you well ahead of the average person. I look forward to the update describing the first mortgage you get. Be well.
Yes, I have lived without a credit card. However, traveling is one of my priorities, and although travel is possible without a credit card, there are downsides to using debit cards or cash while traveling. Prepaid tours are too expensive and restrictive for a frugal budget while independent, self-planned, pay-as-you-go travel is inexpensive and exciting.
Fuel purchases, lodging reservations, public transportation reservations, and car rental reservations are much, much easier with a credit card in my opinion. I have a cash back credit card, and purchases are paid for right after I charge them. I have transferred money from a money market to my credit card with no problems while traveling in the U.S., Europe, and Canada. My credit union credit card also lets me put what I have budgeted for a trip onto my credit card as a credit before I leave. Money will be deducted from this credit as I make charges. Yes, this is a credit card, not a debit card. Not all credit unions offer this type of card. You have to search to see if you are eligible for a one offered in your area. A good online resource is http://www.creditcardconnection.org/
If you travel without a credit card, please share your tips for making travel easier without a credit card.
Disclaimer: I am not employed by a credit union, just a satisfied member.