Cash, Credit, Money Management

Preparing For Life Without A Credit Card

I made a decision two years ago to stop using my credit card. Here’s how I prepared for life without a credit card.

I established a $1000 emergency fund. Instead of using my credit card to pay for unexpected expenses, I use my emergency fund funds. I needed to remove the “need” to use credit card. If I have an emergency fund, I have removed a ready “excuse” for using my credit card.

I opened a secondary checking account, funded it with about $500 dollars, and I use the debit card associated with this account to make online purchases. The secondary checking account does not allow for over-drafts. I realize that debit cards do NOT have the same built-in protections as credit cards have, so this is my self-designed debit card protection method. If some gains access to my debit card information, the most (hopefully) that they can take me for is about $500. I hope that, in the future, all debit cards will be afforded the same protection as credit cards already have.

I designed a personalized envelope system. In the beginning, I used PHYSICAL envelopes, allocating cash amounts to the various envelopes, and carrying those envelopes with me where ever I went. Now, I have my budget memorized, so I simply carry a week’s worth of cash with me, wherever I go. Again, this means that I keep about $200 to $400 “on me” at all times. Worried about “safety”? I’d simply carry a day’s worth of cash.

I had to learn how to PLAN for the week, and not just stumble blindly from expense to expense. Personally, I use YNAB Personal Budget to manage my personal finances. (Site Sponsor) Basically, unless you are thinking about your expenses, you WILL find yourself in a situation where you will “need” a credit card. Running low on gas? Charge it! Out of milk? Charge it! Hungry? Hit the drive thru… No cash? Charge it! I not only create a MONTHLY budget, I create a WEEKLY spending plan.

36 thoughts on “Preparing For Life Without A Credit Card

  1. I’ve been without a credit card for 6 years and I have no emergency fund and I’ve gotten by.

  2. That “second account with $500 for debit card use” is a pretty great hack to get around some of the downsides of debit cards. Obviously I don’t have a problem with using credit cards myself, but I have to admit that’s pretty clever.

  3. It’s nice to see someone establishing financial goals and sticking to them. However, I hope that you didn’t close out all your credit cards as simply leaving them open does build you credit history. I hope that you’ve simply sworn off using credit cards to fund your expenses but not credit altogether as years down the road you might be interested in investing in real estate or buying your own home where having a credit history plays a big role.

  4. Minimum Wage,
    I have a wife and two kids and I can’t imagine NOT having an emergency fund. I have a 6 month fully-funded emergency fund. Without it, I’d find it much more difficult to go to sleep at night!

    Laughs, I plan to pay cash for a home, but I do check my credit report regularly. Right now, I have a very, very good credit score.

  5. But don’t you need a credit card for making hotel reservations and for booking airline tickets?

  6. Sean,
    I’ve reserved a dozen hotel rooms or so… and always just use my debit card, and then pay with cash…
    As for an airline tickets, I’ve not flown in the past 2 years, so I don’t know… but you could always RESERVE with a credit card, and then just pay with cash..
    (Some rental cars companies have a no- debit card policy, but I’ve only rented one car in the past 2 years, and that particular company took my debit card…)

  7. Great plan. I am following a very similar plan that is outlined by Dave Ramsey.

    You might want to check with your bank on the debit protection. My debit card is protected through VISA the same as a credit card. The only caveat is if the pin # is used they will not protect those transactions. That is why I always use my debit card as a credit transaction.

    Have a great day. –

  8. @ Sean

    You can book hotel reservations and rent cars with a debit card. Although I find some charge you a $10 surcharge for debit cards.

    I fly and rent cars with my bebit card. I do not have a credit card.

    However, some companies prefer you to show them a roundtrip airline ticket if you are going to rent they cars with a debit card.

  9. quitting colt turkey (just like quitting smoking) is the way to go.. congrats on making that happen!

    as for myself.. i still carry a cc with me.. although i always pay it in full every month

    cc’s are always safer to use for online purchases than debit cards.. and like someone mentioned before.. some rental car companies don’t take debit cards (and vacationing is my thing)..

    if you have the discipline.. then cc’s aren’t bad

    there was one incident a couple of years back where my cc came in handy.. my mom’s suv broke down.. and needed a new transmission.. the total for repairs and service was almost 7k.. we didn’t have the cash at hand.. so i used my cc.. that’s the biggest purchase i’ve ever made with a credit card.. of course my mom helped me pay it off after a couple of months

  10. As far as liabilities on the debit card go, I just got an email from ING Direct today (since I have a savings account with them) advertising their new electric orange checking. Their new checking account has no liability for unauthorized purchases. It’s also supposed to have free bill pay, free “electric checks”, free ATM, 10x average interest, and comes with a MasterCard Debit Card.

    I have been very happy with ING Direct although I’m sure there are other zero liability checking accounts from other banks. My point is simply that safe debit card options do exist.

  11. We also swore off credit cards a couple years ago in a fruitful effort to eliminate debt and straighten out our finances. We didn’t look back…UNTIL…I made a recent cross-country trip for a wedding and had a HUGE problem renting a car thru Enterprise since I was using a debit card rather than a credit card. Over the phone, an agent directed me to an out-of-the-way Enterprise office for the car rental. When the agent saw my debit card, he said he couldn’t rent me the car at that location using the debit card and that I’d have to go to the airport location. This turned into a huge hassle, although everything worked out in the end. This is the first time in two years of not using credit cards that we’ve run into this sort of problem. The debit card has been accepted every other time. This is just a warning to those of you who, like me, don’t plan on using credit cards anymore: Have a backup plan when traveling, and make sure your vendors (hotels, car rental agencies, etc.) aren’t going to screw you. Oh, and by the way, be sure there’s plenty in your checking account to cover the sizeable deposits these companies often require. ARGH, they get you coming and going!

  12. “debit cards do NOT have the same built-in protections as credit cards have”

    The reason I have not switched from debit to credit is that you can’t issue a chargeback with a debit card. If you get screwed over by an online service or store, there’s nothing you can do about with a debit card.

  13. Some might think going cold turkey on credit cards might be the only way to get their finances in order, but that alone does not address the poor money management that got them into financial trouble in the first place. After all, credit cards are only as irresponsible as the folks who use them.

    I, for one, LOVE my credit card. No debit card I have ever used has ever let me keep my money in a high-yield interest bearing account for the entire month, nor has one ever given me 5% back on my purchases. Have I ever made a purchase online that I might not have had I not had a credit card? Perhaps. But that money was accounted for in my budget, and I am surely not losing sleep over it. I still advocate for the plastic and say the better solution is to make a budget and stick to it, whether using paper, goats, wampum, marbles, or plastic. Good food for thought though!

  14. I have stopped using my credit card, been about 4 months now, and have found it to be an easy switch. The only time I use it is for an online purchase, but the money is posted right on the CC immediately from my chequing account.

  15. It is a business of credit card holder whether to use card or not, or even do not have any card at all. As for me, I use my credit cards only for purchases and satisfy with this convinience. I will try to live without credit cards and pay cash, but only because of the interest to see the difference.

  16. I was accompanying a friend moving to another city and was purchasing furniture for her at a department store with one of the two credit cards that I when I travel so that I don’t have to carry cash. The purchase was denied so I used the second card successfully. The next day I attempted to purchase a vacuum for her and the purchase was denied. In both cases I had to show my picture id, before the merchants ran the credit cards. After calling the first and approving the purchases, the card was unblocked and then when I attempted to purchase food at a restaurant the purchase was denied. For the second card, the number on the card said it was not in the correct area code and could not be completed. So I am not at home and the two cards I use when I travel are both blocked. After returning home, I contacted both credit card companies and was given 30 minute lectures on what they do for me so that I don’t have credit card fraud. The lesson for me is that I am naive to think that I can use credit cards when I travel in this age of credit card fraud. The companies are protecting themselves from losses, although in many cases the consume can be held responsible, in addition to the inconvenience of replacing identification and credit cards. I have been reluctant to carry cash. Travelers checks are often not accepted at merchants due to fraud and counterfeits, so I haven’t used them for a while. And now it appears the only solution is cash. I think the best way to approach this change is to rely exclusively on cash.

  17. My solution for the “denied because the chage is from an odd place” problem is to have my (used for internet sales and travel only and paid off with allocated money when I see the charges hit online) VISA card issued by my local credit union. They are small enough and personal enough that I can just call up and say, “I’m heading out on vacation on Friday. Look for charges from Florida….” Never had an issue, and the rates are WAY low (not that I carry a balance).

    I don’t like the way the car rental places can put these huge holds on your checking account if you use a debit card. I have enough bills on auto debit that I don’t want to mess up. So I use that one CC still, but for very specific things and seldom have a balance carry over. (Once in the last four years.)

  18. I am so thankful I found this site. I have decided to try to manage without a credit card as well. So far it has gone well. I am staying out of debt because I just don’t impulse buy anymore. I may not have that new flat screen TV I want…yet. But I go to bed everynight with a peaceful mind.

  19. It is made very awkward to shop online without a credit card, particulaily for hotel bookings and car hire. As far as I can see there is no easy way round the need for credit cards for travel products- or does anyone else know a way? Also credit cards offer good protection against supplier failure – but its easy to get into debt!

  20. Hotels swipe your credit card when you arrive, will they accept you if you haven’t got one.

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