Back in the day, people lived life without depending on credit cards to make day-to-day payments. Now, it seems impossible to do much of anything without a credit card. The problem here is that credit cards can be a total liability for people who struggle to control their own spending.
For a number of reasons, credit card use can lead to runaway credit card debt for millions of American card owners. That’s why, for those who struggle to control their own spending, living without credit cards entirely might be the best option.
It might seem impossible to do in 2018, but it’s actually quite possible indeed. Continue reading to take a look at the 7 tips to absolutely keep in mind if you’re considering a credit-free lifestyle.
Debit Cards to Replace Credit Cards
This one should be pretty obvious to anyone who wants to enjoy the freedom of a credit card without the potential downfalls of owning a credit card. Start using a debit card by linking it directly to your checking account. They can be used exactly like credit cards, in that they are accepted basically anywhere other plastic is. The difference is, is that while charges on your credit card are added to a balance, charges on your debit card are taken directly from your checking account.
The one important difference to be aware of is that while you can put charges onto your credit card as long as you haven’t maxed it out, you will likely not be able to make charges on your debit card if you don’t have enough money in your available balance. You could risk either not being able to make the purchase, or over-drafting your account, which can come with fees of its own.
Try using a prepaid card instead
Prepaid cards are another great option for people who want the freedom that credit cards and debit cards offer. The great thing about prepaid cards, is that instead of running the risk of over-drafting your checking account with a debit card, a prepaid card isn’t actually attached to your checking account. Instead, you add money to the card, and then use it just like any other card.
When you run out of the money, the card just stops working until you put more money on it. The best prepaid cards charge low fees, and some even offer cash back rewards just like credit cards do!
Saving instead of borrowing for emergencies
It’s smart to always save for emergencies, but it’s made even more important when you don’t have thousands of dollars’ worth of credit at your disposal like you would with a credit card. Save an emergency fund to serve as your safety net. Ideally, your emergency fund will equal several months of expenses. The best place to save this money is an online bank.
The reason for this is multi-faceted. First, online banks pay the highest rates on savings. That means you are actually making money while your emergency fund sits in your account. Additionally, it’s smart to separate your emergency fund from your everyday checking account because that makes it just a bit harder for you to access, and harder for you to be tempted to use it on everyday expenses.
Monitor your Spending
This goes for people who use credit cards or not, but it’s arguably more important for those who don’t have the financial safety net that comes with having a credit card balance. Make sure to monitor your spending attached to your checking account to make sure you have the money you need when you need it. It’s definitely something to keep in mind when you consider weening yourself off of your credit cards.
Paypal vs Credit Cards
This is great for users who make a lot of purchases online. Most online marketplaces accept PayPal. Additionally, PayPal offers a prepaid card that links directly to your PayPal account. This is a great option for a prepaid card if you don’t want to link a debit card to your primary checking account.
Plan for Car Rentals and Hotel Stays
You may have heard the myth that it is nearly impossible to rent a car or secure a hotel room without a credit card. While that isn’t true, it definitely does require added planning and responsibility. You can typically reserve either a hotel room or a car rental with a debit card or a cash deposit. You are, however, going to have to plan a bit to make sure that you actually have the money necessary to secure these rentals. Like other tips on this list – credit cards might make your life a bit easier in the short-term, but the extra hard work is worth it if you’re committed to avoiding the potential downfall of credit card use.
Ignore the Myths about Building Credit
There’s no doubt that building good credit is important. It helps you secure lower interest rates on car loans, mortgages, and more. A good score can also help lower insurance premiums.
While credit cards are definitely a good way to build a healthy credit score and credit history, they aren’t necessary.
You can build strong credit by making timely payments on any loans, including school loans, car loans, and more. You can even build good credit history by paying bills and your apartment lease on time. The fact is, credit cards can definitely help you build a credit score, but if you want to live a credit card-free lifestyle, you’ll definitely be able to find ways to prove that you’re a responsible spender without the use of a credit card.