How You Can Live Without A Credit Card

[eliza61]

So basically the article said the way to live without credit cards is to not use them, and save up and pay cash for everything.

Thank you, Captain Obvious

LOL,
That's why I could never get into Dave Ramsey, Suzy Orman or any of the other supposedly financial gurus. You pretty much give them money to tell you some thing a 75 year old grandmother says all the time.

 

[eliza61]

This has been an interesting debate and Ive enjoyed reading both sides of the argument. I have a few questions.

For those of you who use CC:
1. You say you pay the balance each month (terrific!) does that mean you have an emergency fund in place or would you just rely on your CC for emergencies?
2. Do you ever fear that you might lose a job and have a balance on your cc that you wouldnt be able to pay?


Not being judgemental to either side, Ive enjoyed reading both sides. I will say up front we use cash only, but we are irresponsible with cc and will not allow ourselves to have one again. With us, everything becomes an emergency or necessity so we just use cash and its harder to justify spending it.

We have an emergency fund and we have use cc for emergencies. For example, this year has been the year from heck for our emergency savings.
1) roof had to be replaced (7K)
2) air conditioner broke (3K) why does this only happen when it's 97 degrees and 90% humidity
3) washing machine and dryer died.
4) 5K IRS bill

We did not want to clean out our emergency fund so we used a chunk for the roof and the IRS. The ac, washing and dryer we went to sears and did one of those no interest for 12 months deal and committed to paying it off in 4 months.


No, I don't fear losing my job and having a credit card bill. If we both lost our jobs we would hunker down and go into survival mode. I can't see it being a big bill, as generally we don't charge more than monthly groceries but any big ticket item over 2K we talk about how it will be paid for.

 

[GJM]

Didn't read all the replies -

I have many CC, but I try and use only 1 or 2 - we have no credit card debt and yes we have emergency funds set up. If I do charge, I try and use my American Express because I get cash back. When I make a charge, I go online and pay it off.

I don't personally feel chasing the rewards the cards offer is a way I want to earn money

I don't have to do any chasing for the rewards. I use the card, they send me a check at the end of the year - pretty easy.

 

[MrsPete]

LOL,
That's why I could never get into Dave Ramsey, Suzy Orman or any of the other supposedly financial gurus. You pretty much give them money to tell you some thing a 75 year old grandmother says all the time.

What's that saying about nothing new under the sun? You're absolutely right that these guys don't say anything that hasn't been common for generations: Work, avoid debt, save from a young age, invest. It's not rocket science.

Regardless, it doesn't come naturally to many people. Probably because it's tempting and fun to spend, while the reward for saving is much less immediate. Also because many of us grew up in the 80s and 90s, a time when credit was pushed, saving was diminished (don't you hate it when you buy something -- Kohl's is the worst -- and they say, "You saved X amount today"? That's a lie. You spent money.). Too many Americans really don't have a good handle on managing their finances.

And, in all fairness, grandma's advice HOW to save may not be quite so "on the money" as it was 50 years ago. Credit cards, IRAs, and other financial options have changed. For example, savings bonds were a good idea back in grandma's day. Today, not so much.

I don't have to do any chasing for the rewards. I use the card, they send me a check at the end of the year - pretty easy.

Sounds like people have misconceptions about credit card reward points. It takes literally NO effort. The points accumulate, and you can sign on the computer to turn them into gift cards or whatever you want. The reward points are printed on your monthly bill. If you do nothing with them, they just sit there growing larger and larger.

You can make a good argument that not everyone is able to resist the temptation to spend, spend, spend when they have available credit at their fingertips . . . but you can't make an argument that getting the rewards is too much effort. It's just not true.

 

[Purseval]

This has been an interesting debate and Ive enjoyed reading both sides of the argument. I have a few questions.

For those of you who use CC:
1. You say you pay the balance each month (terrific!) does that mean you have an emergency fund in place or would you just rely on your CC for emergencies?

People who pay off their cards every month either have tons of spare cash or they budget well so it would be reasonable to assume that someone who runs their budget with cash only shouldn't be much different from someone who pays of their cards every month, except the person with the cards has one more tool in their belt.

2. Do you ever fear that you might lose a job and have a balance on your cc that you wouldnt be able to pay?

Assuming that the job loss came as a complete surprise you would only have to pay off the bills you had for that one month. Then you would go into hunker down mode just like anyone else facing an emergency.

We could live for a long time with no extra income. The biggest threat to us wouldn't be job loss at all, it would be inflation so bad that it makes what we do have saved worthless.

 

[bettymae1121]

This has been an interesting debate and Ive enjoyed reading both sides of the argument. I have a few questions.

For those of you who use CC:
1. You say you pay the balance each month (terrific!) does that mean you have an emergency fund in place or would you just rely on your CC for emergencies?
2. Do you ever fear that you might lose a job and have a balance on your cc that you wouldnt be able to pay?

DH and I put about $2k or so a month on our CC and pay it off. We don't have a large emergency savings account yet (working on getting some debt paid off this year and then ramping up the savings). But we are spending a ton of money right now on descretionary things like remodeling our home. If a job loss happened that would stop, things like cable and eating out go out the window and unemployment would get us through with money left over (not much, but a little bit). We own both our cars outright and we have a cheap mortgage payment, so our fixed expenses are rather low.

Also, we both carry short and long term disability insurance, and life insurance as well, so if a real disaster strikes, we'd still be okay.

So short term we feel okay without much of a safety net (we're child free at the moment too, which helps), though long term our goal will be to have 1 years expenses in the bank.

To me, a CC and cash are the same thing, only CC's give perks and protections that cash doesn't. I know some say that those with CC's spend more just because it's so easy to "spend just a bit more" ... and for some I'm sure that's true. All I can say is that for me, we have a budget and stick to it. I have X amount a week for groceries and that's what I spend. We budget Y amount for home improvement each month, and that's what we spend. Once we hit our limit for each budget catagory, we're done for the month.

 

[MrsPete]

People who pay off their cards every month either have tons of spare cash or they budget well so it would be reasonable to assume that someone who runs their budget with cash only shouldn't be much different from someone who pays of their cards every month, except the person with the cards has one more tool in their belt.

Perhaps people who are so anti-credit card have at some point had huge credit card bills, things that couldn't be paid off in one month, and they're thinking that everyone's bills are like that.

My credit card bill tends to be $1000-1500, depending upon the month. That's our gas, groceries, eating out, and all household spending. I'd guess that the average cash-spending person is spending that much -- it's just not in one lump sum. If you're paying it off every month, it's not building into some monster bill.

I think some people are missing the idea that the credit card bill IS our monthly spending -- it's not IN ADDITION TO our monthly spending.

 

[marie1203]

For those of you who use CC:
1. You say you pay the balance each month (terrific!) does that mean you have an emergency fund in place or would you just rely on your CC for emergencies?


2. Do you ever fear that you might lose a job and have a balance on your cc that you wouldnt be able to pay?
No because what we put in our cc every month is in our budget we just get rewards that way.

1.We have an emergency fund of 8 months (we don't really needed DH is military he can't really lose his job but better be safe than sorry). We also have 5 dogs so we have a dogs emergency fund just in case they need some major surgery. If for some odd reason we had to use all our savings money they we will rely on our cc.


2.No because what we put in our cc every month is in our budget we just get rewards that way.

 

[mhsjax]

LOL,
That's why I could never get into Dave Ramsey, Suzy Orman or any of the other supposedly financial gurus. You pretty much give them money to tell you some thing a 75 year old grandmother says all the time.

OMGm isn't that the truth, and I would much rather pay a little ole lady to get this advice than Dave or Suzy. They are getting rich off of people by giving them common sense advice.

CC aren't all evil in themselves, but CC companies are. I worked for one,a big one, they will try every way possible to mess you up so they can charge you something extra.

I don't think people with CC are financially irresponsible, just like I don't believe that people that pay only cash are irresponsible with their money.

My DF hated them refused to use one, he was one of the most frugal people I have ever met. Ok, he was cheap people. My mom had one but it no interest if paid off and that he was ok with, but he would not even talk about getting one and he never got into a jam by not having one, then again, lets remember, he was cheap at all costs, but when you grow up in the depression, I guess that happens.

 

[bookgirl]

This has been an interesting debate and Ive enjoyed reading both sides of the argument. I have a few questions.

For those of you who use CC:
1. You say you pay the balance each month (terrific!) does that mean you have an emergency fund in place or would you just rely on your CC for emergencies?
2. Do you ever fear that you might lose a job and have a balance on your cc that you wouldnt be able to pay?

For those who only use cash:
1. Why do you feel that CC are bad even if the person pays them off monthly?
2. If you ran through your cash due to a huge emergency or illness and needed essentials (food, gas) would you then use a CC to get them?

Not being judgemental to either side, Ive enjoyed reading both sides. I will say up front we use cash only, but we are irresponsible with cc and will not allow ourselves to have one again. With us, everything becomes an emergency or necessity so we just use cash and its harder to justify spending it.

I use credit cards, but only when I know I have enough cash to pay for it before the interest kicks in. I ususally pay out of my ready cash (checking account) but I keep a savings account with a minimum of 2-3 thousand in it as an emergency fund as well as several smaller 'funds' that are set aside for certain expenditures.

I never worry about not paying them off if I had a sudden job layoff because even if I make a cc purchase that will exceed my ready cash amounts, I avoid making charges that would exceed the amount of my other sources (emergency funds, small savings that I maintain for trips, big ticket items I'm saving for, or just a slush fund, kinda like envelope system, I have money set aside for things I'm saving for or just to have for splurge items).

The only thing I've bought on long term payments is my car. It was a huge splurge for me. However if I was ever the victim of a sudden money emergency you can bet that vehicle would be back on the lot and traded in for a cheap used car. And the money that I have in my different 'envelopes' would be used to cover the imediate need and I would forfeit my extras, before I ever put thousands of dollars on my credit card that I could not pay off imediatly.

 

[arminnie]

From the Visa web page:

Visa is a global payments technology company that enables consumers, businesses, financial institutions and governments to use digital currency instead of cash and checks.

Many people believe Visa issues cards, extends credit and sets rates and fees. We don’t.

Using a Visa card (debit or credit) is merely a means of using digital currency - i.e. a payment method. I find it so much easier than cash or checks, but if you don't that's your business.

I had a roommate (for a very shortwhile) many years ago who could not have a checking account as she would write checks whether she had any money in her account or not. I guess the people who can't control a piece of plastic have the same sort of issue.

I probably have at least a dozen accounts - and that's after closing a whole bunch a few years ago. I usually use 3 - 2 for me as I am notorious about misplacing one in my purse- I need a backup. 1 for my sister to use to buy me stuff (or for my dad when he was alive).

I have no issue with paying them off each month - it happens automatically with transactions initiated by the card issuers. I never even think about it except just to make sure I keep money in my checking account.

I don't spend money because I CAN - I spend money because I need to.

If anything I spend cash much more freely. No records to detail what I used it for. It doesn't count when I use cash.

 

[pamlet]

And to me it seems that the "emotion" generally comes from those that think CC's are the work of the devil and nobody should use them just because they themselves weren't responsible enough to use them (or Dave Ramsey told them not to!! ) in a way that would benefit the user and got themselves in trouble.

Hey, if you like paying cash go for it....and I hope you enjoy paying cash for the hotel or airfare you just bought as well. I, a responsible cc user, will be using my points and getting it for FREE (which, btw is even better than using cash)!!!

Nothing's "free" .. I use a debit card .. (AND get points ) ..have access to my money when I want it .. invest what I'm not budgeted for ... MAKING money on my money ..

 

[pamlet]

Just because you use a credit card doesn't mean you don't have the money to pay for it.

I don't know how many times and how many different ways that can be said.

Some people still don't get it.

I realize not ALL people don't have the money - but let's face it MOST people pay the minimum payment .. As I said - credit card companies wouldn't be in business if they did .. sure merchant fees account for some of their income - but merchants pay fees on debit transactions as well ..

When I say I pay "cash" - it's digital cash - but it's a transaction that is taken directly out of my account .. I'm not floating my money until the end of the month ..

 

[arminnie]

I realize not ALL people don't have the money - but let's face it MOST people pay the minimum payment .. As I said - credit card companies wouldn't be in business if they did .. sure merchant fees account for some of their income - but merchants pay fees on debit transactions as well.

55% of cardholders carry a balance. Some of those may be paying more than the minimum. Those are the stats from 2009.

You are technically correct, but I don't want people to assume it is something like 80 or 90% who don't pay off their cards.

Merchants fees (debit and credit) are not insignificant. I've paid off my cards for years (decades) - but even in these tough times I get offered new credit cards and credit increases constantly. I am a profitable customer.

Also since I'm retired my only "income" is social security. I am not a high dollar earner.

 

[Purseval]

Nothing's "free" .. I use a debit card .. (AND get points ) ..have access to my money when I want it .. invest what I'm not budgeted for ... MAKING money on my money ..

Debit cards have their own unique set of dangers. If you don't know what they are you can always do a search. Probably one that people don't think of is that if you do use a debit card and ever want to switch to a credit card the debit card does not build a credit history. So you could pay your bills off on time each month, be totally responsible and be rejected for a cc because as far as the credit bureaus know you don't exist.

 

[LovableGluttons]

I do understand that my husband and I have an unpopular way of managing our money. For us, it has worked well. If we needed or wanted, we could stop working now and live off his military requirement and interest income. But we both enjoy working more than loafing. We also want to be good examples for our children how life without loans and credit cards can be quote rewarding and your chosen profession can be more than a job. I help people in my community every day. I contribute to making the world a better place.

There is nothing a credit card has that helps me with my mission in life.
As far as FICO scores, we don't have much of one due to no activity other than inquiries. No mortgage, no loans, no credit cards. DH even has a top secret security clearance and it had no impact on his ability to get nor keep clearance. Over the years, I have always told prospective employers who mentioned pulling credit reports about my lack of credit history and have had no problems.


I just don't like borrowing money even if someone paid me to do it. It feels restrictive to me.

 

[eliza61]

Regardless, it doesn't come naturally to many people. Probably because it's tempting and fun to spend, while the reward for saving is much less immediate. Also because many of us grew up in the 80s and 90s, a time when credit was pushed, saving was diminished (don't you hate it when you buy something -- Kohl's is the worst -- and they say, "You saved X amount today"? That's a lie. You spent money.). Too many Americans really don't have a good handle on managing their finances.

And, in all fairness, grandma's advice HOW to save may not be quite so "on the money" as it was 50 years ago. Credit cards, IRAs, and other financial options have changed. For example, savings bonds were a good idea back in grandma's day. Today, not so much. Sounds like people have misconceptions about credit card reward points. It takes literally NO effort. The points accumulate, and you can sign on the computer to turn them into gift cards or whatever you want. The reward points are printed on your monthly bill. If you do nothing with them, they just sit there growing larger and larger.
.

Around South Jersey and Philly we have a furniture store called Raymond and Flanagin, I absolutely hate their ads. every commercial screams about how you can get a room full of furniture and not make any payment until 2014!!. I can't begin to imagine how much interest you rack up on a balance for 4 years.

For me, the dis is a perfect example of the mind set you talk about. each and every year we get the post about how the Op, can't really afford a trip (or it will be a really tight swing) but since the "kids are only little once" and we can get free dining we should go. (and sorry fellow parents, I loathe and despise that excuse. I firmly believe we use it to simply manipulate our way into getting what we want, damn the consequences)
When did an expensive( and disney is always costly) vacation become a requirement for childhood.?

We have over the last 30-40 conditioned ourselves into the "I need" or "I deserve" mindset.

 

[bettymae1121]

I do understand that my husband and I have an unpopular way of managing our money. For us, it has worked well. If we needed or wanted, we could stop working now and live off his military requirement and interest income. But we both enjoy working more than loafing. We also want to be good examples for our children how life without loans and credit cards can be quote rewarding and your chosen profession can be more than a job. I help people in my community every day. I contribute to making the world a better place.

There is nothing a credit card has that helps me with my mission in life.
As far as FICO scores, we don't have much of one due to no activity other than inquiries. No mortgage, no loans, no credit cards. DH even has a top secret security clearance and it had no impact on his ability to get nor keep clearance. Over the years, I have always told prospective employers who mentioned pulling credit reports about my lack of credit history and have had no problems.


I just don't like borrowing money even if someone paid me to do it. It feels restrictive to me.

I think it's just that those of us that use CC's and pay them off each month just don't really see it as debt. Since we pay in full each month and have the money sitting in the bank until we send the payment in, it's no different than using a months worth of electricity, water, etc. and then paying the utility bill.

It's not that paying cash-only is a bad thing, if it makes sense to you then you should do it. It's just, as with most things in life, there is more than one way to do things and neither of them is wrong, just different.

 

[ICF]

Nothing's "free" .. I use a debit card .. (AND get points ) ..have access to my money when I want it .. invest what I'm not budgeted for ... MAKING money on my money ..

really?? Tell me how much I've paid on all those FREE hotel nights I've gotten...including 6 this year?

Trust me, they've never gotten an annual fee or interest from me. It's FREE!!!

 

[pamlet]

Debit cards have their own unique set of dangers. If you don't know what they are you can always do a search. Probably one that people don't think of is that if you do use a debit card and ever want to switch to a credit card the debit card does not build a credit history. So you could pay your bills off on time each month, be totally responsible and be rejected for a cc because as far as the credit bureaus know you don't exist.

I realize that a credit history is not being built - but I think it's a mindset that you HAVE to have credit history .. for OUR lifestyle we don't really need one. Our home is paid for - we don't plan on moving .. we purchase vehicles used .. we only purchase what we NEED ..

The only danger w/debit cards I can think of is fraud access to our accounts .. but even then there are steps in place w/our credit union and bank that protect us.