Using credit cards can be a convenient way to manage your financial obligations. The American Bankers Association reports that approximately 75 percent of Americans use a credit card. The truly disciplined and financially fortunate families are able to pay off their balances in full every month; others are not so lucky. Credit cards can become a false sense of security; what you spend you, you need to pay later, and the total can become daunting. Deciding to live without credit cards is a lifestyle choice that can free you of the debt and help you build your future.
Step 1
Pay off all existing credit card balances, starting with the card with the highest interest rate. Suze Orman explains that to manage your debt, you need to pay off your credit cards one by one and promise yourself to not get into a well of debt again. Once you have repaid all of your financial obligations, then you can begin to live without credit cards.
Step 2
Set up a budget that includes all of your monthly expenses, including mortgage or rent, utilities, food, transportation, clothing and entertainment costs. Financial expert Dave Ramsey offers detailed budget forms on his website, designed to open your eyes to what your expenses really are and how to plan for them (see Resources).
Step 3
Look at your lifestyle and decide what you can do without, if needed. The American Banker's Association reports that 46 percent-- close to half --of all Americans who use credit cards carry a balance from month to month. This means that they are spending money they cannot afford to pay back. Living without credit cards could mean sacrificing short-term gratification in order to reach a long-term goal. A February 2009 article in "The News Advance" (Lynchburg, VA) reports that people who do not use credit cards usually end up spending less money, whether by conscious choice or necessity.
Step 4
Get a debit card if you miss the convenience of a credit card. Debit cards are attached to your checking account; when you use the card, you are spending money you actually have in your bank account. A debit card that carries a credit card symbol can be used at thousands of retail establishments, eliminating the need for you to carry cash. The advantage of using a debit card is that the money comes out of your account instantly; there are no debts to reconcile the following month.
Step 5
Commit to building up your savings, even if you can save only $20 from each paycheck. Suze Orman calls this type of saving "creating your future," and with good reason. Emergencies come up from time to time; living without a credit card makes a financial cushion all that more important. If your car breaks down or you have unexpected medical expenses, you can use your savings to pay the bills instead of resorting to a credit card.
Things You'll Need
- Budget
- Debit Card
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