Living without a credit card may seem like one of the most daunting tasks on the planet. Credit cards have become so integral to most people’s lives that they simply cannot conceive of a life without them. While the vast majority of Americans have one or more credit cards, a new consumer paradigm has begun to emerge, a minimal or credit free existence.




living without a credit cardCredit: Lotus Head from Johannesburg, Gauteng, South AfricaA New & Better Credit Paradigm

The first decade of the 21st century has seen a decided shift in consumer attitudes toward consumer debt, In fact, the most prudent consumers taken it upon themselves to rid their lives of the unnecessary burden inflicted on them by credit cards and the associated usurious interest rates. To this end and to get a handle on their financial life, many consumers have embraced an essentially credit-free existence. Most start with the following five steps.


Make a Monthly Budget

Even the most traditional of money managers and accountants will counsel their clients to make a monthly budget. A monthly budget is, indeed, the foundation of a wise financial plan.  It is unfortunate, however, that included in most of these “traditional” budgets is a monthly allowance to pay credit card debt. Unsecured credit card debt is usually serviced at an interest rate of 18% - 24% interest. One wonders at what interest rate these so called money managers would advise paying off the debt. A far more prudent financial plan would advise the development of a budget that allows you to pay for all your expenses with cash.


Pay Yourself First

It is a relatively simple idea. Since you are the one who worked for the money, you should be the one to benefit the most from it. The essence of this concept is to have deductions made from your paycheck that fund YOUR goals. Contribute to IRAs, savings plans or whatever else forwards your interests. It is then and only then, that you should you consider paying others their due. Obviously, there are strictures on this advice as you should live up to all of your obligations. The point is that you should make your own interests one of your primary obligations.


Develop an Emergency Fund

Cash is King(105764)Credit: PsychonaughtMost people develop an emergency plan two minutes after the emergency. This course of action is simply unacceptable for anyone with an ounce of sense. An emergency fund must be a priority. Its immediate creation must be accomplished to the exclusion of all other ancillary projects. The vacation fund, the kids college fund and the new car fund must all take a back seat to be ready for the inevitable. Everyone will eventually have an emergency and it will take funds to properly manage the ordeal. Otherwise, you will have to depend on the kindness of strangers or worse, the unfeeling bureaucrats at some government funded institution.


Use a Pre-Loaded Debit Card

There is no doubt that a credit card is one of the most convenient devices created by the retail purveyors of the world. Therein, however, lays its utter cruelty. Its very ease of use is the straw that breaks the camel’s back. Instead of a credit card, every prudent retail buyer should use a pre-loaded debit card. It allows one to purchase items online, rent automobiles and, most importantly, avoid overdraft penalties, transfer fees and other, arcane bank charges.

In addition, a debit card with an absolute limit imposes a certain sense of self-awareness on the card user. One must remain aware of the balance to avoid awkward situations when the card dos not have sufficient funds. In short, it is an excellent exercise in self-moderation and responsibility.

Lastly, a debit card gives you greater flexibility and is especially useful for those who travel.. You’ll need one to rent a card or hold a hotel room. In addition, you will not have to carry around large amounts of cash to make sizable purchases. In short, a debit card is an invaluable tool in the modern world. No one is against an electronic medium of exchange, just the exorbitant fees and interest that banks would have you pay for the privilege of using them.


Stay the Course

In much the same way that the turtle finally overtook the hare, a consumer without any credit card debt will eventually amass more wealth than a similar person with a card. At first, it may seem that some of life is passing you by but the rewards will not be long in coming. For example, the purchase of a used car instead of leasing a new one will yield some considerable rewards. In two to three year’s time, the owner of the used car will have an asset that allows him you to trade up to a better and newer model while the lease holder has no equity and is faced with the need to provide another down payment.


The Bottom Line - Live Within Your Means

“Never leave for the morrow what you can put off until the day after tomorrow.” - Mark Twain

Credit card companies rely on the fact that most people will only pay the minimums on their credit card debt. The result is billions in interest income for these companies with little decrease in their customers credit balance. Do not get caught in this trap.

US Consumer DebtCredit: MartinDEach of the suggestions above is really just a tool for accomplishing the main goal of living within your means. As the title suggests, this means spending only what you earn and not the additional, temporary and expensive amount provided by an influx of high interest credit.

The use of credit to fund your lifestyle will eventually result in a much less affluent one with far less discretionary income. To paraphrase the old saying, you can pay them (a little) now or you can pay them (far more) later. Living without a credit card is the first step in avoiding the unfortunate fate and living a financially fruitful life.