Life Without Credit Cards And The No Credit Needed Experiment

I want to thank those of you who have clicked over from Money Magazine. Author Donna Rosato interviewed me a few weeks ago and yesterday, her article, Life Without Plastic, was published on the Money Magazine website. My family and I are profiled on page 6 of the article. The print version of the article will be in the July issue of Money Magazine – on newsstands this week.

(If you missed it, please click here to read my original welcome message, written yesterday when the article was first posted on the Money Magazine site. You’ll find tons of general information about me and my websites.)

Since so many of you are new to my site, I thought you might like a little background information.

Thee years ago, in April of 2005, I sat down at my computer. I was depressed and worried. I had two kids and a great wife, but our finances were a mess. We had less than $500 in our savings account, I was barely funding my retirement, and we were almost $12,000 in debt. Feeling frustrated, I decided that I was tired of being broke – and I determined to do something about our situation.

For months, I had been listening to Dave Ramsey talk about debt reduction. I decided to follow his ‘Baby Steps’. But, I didn’t really know anyone else who seemed interested in talking about debt reduction and I really wanted a way to connect with like-minded people. So, I found a site where I could start a ‘blog’ for free – and No Credit Needed was born.

Since that day at my computer, my life has changed, dramatically. I managed to pay off all of my debts, build up a decent emergency fund, fully-fund several retirement accounts, purchase a newer automobile with cash, and live without using my credit cards. Now, instead of living life worried about bills and paperwork, I look forward to planning for my future and managing my finances.

No Credit Needed is more than a blog. It’s an experiment. Can a modern family of (now) 5 live without borrowing money? And, my honest answer is, I don’t know. But, for more than three years, I’ve managed to not only live without debt, I’ve managed to thrive without it. So, until further notice, I’m still rocking on, No Credit Needed!

I’ve written several articles about credit cards and why I don’t use them, including –

I Do Not Use Credit Cards

Preparing For Life Without Credit Cards

Philosophical Reasons For Not Borrowing Money

How I Live Without Credit Cards

For those of you considering this way of life, let me assure you of two things – it can be done and it does take a lot of work. I strongly recommend that you live on a written budget. My preferred budgeting software is published by the good folks over at You Need A Budget.

I’ll remind you that I am not a financial professional. Instead, I’m very much just a regular guy. I have an awesome wife, three great kids, a job, bills to pay, and a future to plan for. No Credit Needed is my attempt to share my own story. And, hopefully, from time to time, it will inspire or encourage someone else.


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19 thoughts on “Life Without Credit Cards And The No Credit Needed Experiment
  1. Sam

    While I do have a credit card (used only for business expenses [reimbursed by employer] and travel) I agree that life without credit card debt is the way to go. Most people think its crazy to live without credit, they don’t think it can be done, but it can.

    We paid off $55,500 in debt using Ramsey’s baby steps (we are on step #3, fully funding our emergency fund) and big part of our TMM was to stop using credit for day to day expenses. We cut up our CCs, switched to using debit and gave ourselves and allowance each pay period for variable expenses (gas, food, dry-cleaning, personal care, entertainment, eating out, etc.) and when the money was gone we stopped spending. Even though we paid off all our debt (except the mortgage) we still use the allowance system.

     
  2. Paul Slonaker

    Years ago I was going for my degree in Criminal Justice, a teacher who was an ex-FBI agent ask us if any of us had ever been involved in a money making scheme, either as a victim or as a co-conspiritor – all denied they did, Then he asked if any of us had ever been the victim of a pyramid scheme, all said they hadn’t.
    He explaoned that a pyramid scheme happened when a few “fat cats” in charge of a financial situation make a lot of money from a lot of “insignificant” people they set up underneath them. The people under them are called the base of the pyramid. The many are always used to make massive amounts of money for those at the top!
    In the credit card syetem there are two base sections to the pyramid; 1) the credit card customers; and 2) those who set up savings accounts at their local bank. (Especially large banks that also isssue major credit cards).
    As a customer using credit cards you get suckered. You really get very little if anything in return for what you pay: basically you get the temporary use of low sums of money that you must pay back in full (fool) at the very least.
    You may also get to pay yearly membership fees, service fees, late charges, overlimit fees, late payment fees, as well as other fees and fines too numerious to list. All this adds up to making the people at the top more and more wealthy. (as one credit card CEO had said, “I need your money, 20 million dollars a year doesn’t go as far as it used to; even a good Cuban cigar now costs $200.oo each, and I go through a box of 20 a day!” The people at the top make out well, while the people at the bottom suffer.
    Those with certain savings accounts suffer as well. Where do you think the credit card companies get the money to finance credit cards from?
    Say millions of people have a savings account with XYZ national bank, if they are lucky they will get a gererous five percent APR in earned interest – sounds good right!
    Wrong; since XYZ national bank has its own label major credit card, they appropriate wealth through charging excess member fees, yearly fees, late fees, over the limit fees, and service fees – they will be caharging their credit card customers at least 12 percent, and sometimes as much as 32 percent (Depending on the customer’s so called credit score or rating). Yet the holder of the savings account only gets a return of five “BIG” percent for the credit card companies use of their money. Just imagine where the other seven to twenty-seven percent ends up, not in the pockets of savings account holders, and the savings account holders are some of the people who are technically lending the money to the credit card companies.
    A banker friend once told me that the wealthy don’t earn five percent interest on their savings and other bank accounts, many earn 25 to 30 percent APR (many banking professionals claim this is because wealthy people’s accounts are uninsured after a $10,000 deposit – and is a high risk account) And that the wealthy are charged less for credit, no fees, never a penalty, and interest as low as five percent APR (They are preferred customers).
    A real kick in the head is that if a wealthy patron refuses to pay their account, no collection agenyt will come after him or her; especially since they have the money to hire lawyers and defend themselves. One collection agent told me that it is easier to write off a rich persons debt, then it is to persue a debt of $20,000 only to spend and lose another $40,000 in doing so.
    Even more disturbibg is the fact that after losing a lot of money to a wealthy patron, the credit card company will send out a pre-approved card to what they consider “a rich deadbeat” in an effort to continue doing business with them, and regain their loss from a “preferred customer.”
    Personally, I really don’t want to be a part of this pyramid scheme game, especiially when there is no way for the average person to win the game – or even to break even!

     
  3. cinzea

    Living debt free CAN be done. I’ve been debt free 7 years now and counting. All I need is my Visa/Mastercard/Debit/Check card with the actual cash to back it up and I can use it and go anywhere. If I don’t have the cash, I stay home/buy nothing/wait till I do!

    Do you realize there are no books written on what it is like to live debt free? NCN…….start typing.

     
  4. Angela

    I can definately see through reading your article why people shouldn’t use credit cards. I use reward only credit cards that don’t charge annual fees. Last month our gas bill was $824 and we earned 5% cash back on that. I have always paid our credit card bills off in full every month. I do have a budget and we stick to it. I check our credit card bills online daily to verify correct charges, etc. So I guess for me this is working but I could see how it could be difficult for others. Last year we earned over $900 in rewards from our credit cards and used it to fund our family vacations.

     
  5. "Mo" Money

    What a great testimony you have. That alone should inspire people. Congratulations on living debt free. That what 75% of the folks on “Forbes 400 list” stated on how they became wealthy!

     
  6. "Mo" Money

    What a testimony you have, that should inspire those who know your story. Like 75% of the folks on the “Forbes 400 List” you have a good chance of accumulating wealth by being debt free.

     
  7. Cathryn Sykes

    I just love the current set of credit card commercials with a line of customers doing a conga dance to the check out–and then here comes someone writing a check and the whole line comes screeching to a stop, with everyone glaring at the check-writing offender. How ridiculous! I usually pay cash (I keep my checks to pay utilities) and I don’t know how many times I’ve waited and waited in line while some credit card user reswiped their card a half-dozen times, tried to make the signature pen work, etc. etc. And given a choice between have the $100 or so I normally carry stolen and a half-dozen credit cards stolen (with the accompanying risk of identity theft) I’ll chose to lose the $100!

    The reliance on credit cards has helped to make this a nation of debtors and the only people who benefit are those who run credit card companies.

    Cathryn Sykes
    Publisher and Editor
    MoneyToSpare.Net

    Learn the financial skills
    you need to cut debt,
    increase your financial
    security and have
    “money to spare.”

     
  8. Moose

    Beautiful family! And great read. I’m not 100% against credit card usage but I do agree that without them, we’d probably all be better off. What ever happened to the mentality that “don’t buy it if you can’t afford it?”

     
  9. Dan

    You should bring your A-Game and turn the tables on Credit Card companies
    by getting a cash rewards card and then paying your balance off in full every month. It’s a nice little interest free loan for the month too. Just leave your money in a high interest savings account until you pay the bill. I earned more than $400 dollars doing this last year. Now,
    $400 dollars a year times 50 years, compounded. Very Nice!

     
  10. MoneyS

    I could not disagree more!!! I went through the whole of University (sorry I’m english – college) without touching credit cards, I was very pleased and satisfied that I was good at managing money. Then I graduated and went to get a mortgage….one problem…I had no credit history…younger people especially need to know that they are better of with a credit card (paid off in full monthly by direct debit) than they are living with out a credit history…If you never take credit then financial companies have nothign to base the risk of lending to you when it comes to things like mortgages. Because I was told not to use credit cards I paid the price by have not credit history and therefore paying more interest on my mortgage. Stop being so extreme…keep the credit card…pay it in full, use the cas thats out on credit for the month to gain your own interest…beat them at their own game.
    I’m sorry but any younger people trying to make it in the financial world will shoot them selves in the foot by not having a credit card!

     
  11. kitty

    I do believe that not having a card is a valid choice. Certainly, if you cannot trust yourself not to overspend with card you shouldn’t have one. I also respect if someone chooses not to have it for philosophical reasons or out of principle.

    But this sounds quote sounds to me pretty extreme. It also sounds a bit like shifting blame away from yourself:
    “As a customer using credit cards you get suckered. You really get very little if anything in return for what you pay: basically you get the temporary use of low sums of money that you must pay back in full (fool) at the very least.”
    What does “fool” in parenthesis mean? That people cannot pay in full? A lot of people can. I’ve been using credit cards for 20-something years, never paid a penny in interest, but collected cash back. Not to mention that I get free interest during grace period while my money are in the bank.

    “You may also get to pay yearly membership fees, service fees, late charges, overlimit fees, late payment fees, as well as other fees and fines too numerious to list.”
    Most cards don’t have yearly membership fees or service fees. Don’t pay late and you will not have late payment fees or fines. Most cards offer automatic payment in full then they will just take the full balance on the due date -this way you are guaranteed to always pay in full and always on time. If they are so bad, why do they even offer this option?

    Frankly, I don’t understand why so many people are even tempted to spend more with cards. Didn’t you learn in childhood that if you borrow money you always have to pay it back? Doesn’t matter if it is a credit card or $2 borrowed from a friend. If you have leard this rule, you’d know that you are always spending your money whether or not you use cash or plastic. It “hurts” the same way. The only choice with cards is if you have to pay what you borrowed or a lot more. But the choice is entirely yours.

    I do sympathize with those who are in debt because of unpaid medical bills. Or legal. But everything else is your own fault.

     
  12. NtJS

    Love the blog! Consider us in the same ‘experiment’ – consumer debt-free for 2 years (yay!) and living without credit cards for ~4 years. We wouldn’t have it any other way.

    cheers!

     
  13. macky

    2 years ago I just graduated from college and I was a broke young lady. I had a chunky $5000 debt, I paid it off slowly and I had $3000 debt last year. I realized I needed to get out of debt as soon as possible, so I broke out from my laziness, struggled a little bit and found a much better job. Today, I am 23 years old young, I have no debt, and even when I have to use my credit card I pay any balance in full and on time. In addition to that, I have some remarkable savings for my future that I really never thought I would have. :) When I started to work in the new company, I set a goal for my savings. Not only I reached it, I have far more than that. Setting goals are very important! Trust me :)

     
  14. Karin

    We charge everything… and PAY for everything when the bill comes in. It is only to get all the rewards. Discover had 5% on groceries and gas this past quarter. That earned us a whopping amount of money in just 3 months. I do agree…if you cannot pay your credit card when in comes in, don’t use it. Getting on the other side, not owning money… it is nice to feel in “charge” of this stuff… no pun intended.

     
  15. Henri

    I honestly think it’s one of the best financial blog around. Thanks for your advices.

     
  16. Walking Proof

    I have never used credit cards, yet have a credit score near the mid 700s.

    I’m only 24 and am walking proof that you don’t need a credit card to have good credit.

     
  17. Izzi

    oh my gosh – i found you!! I love this Blog – I have had it on my heart to reverting to live back, this way, for quite some time and am so thrilled to have come across this blog…thank you so much for sharing a piece of your life…
    please don’t go away..we need all the encourement and likemindedness as much as possible and I am so so glad to have found you!!
    Sydney – Australia

     
  18. Richard

    I had credit card years ago and paied on time until, unbenounce to me the monthly due date was rolled back to 10 days earlier. As a result, late fees were added and the intrest rate went up from 3.5 to 19%. Not on just that card but the 3 others I was carrying! Got rid of the cards years ago. “Cash is king” R.

     
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