Using credit cards seems to be the norm these days. In most cases, all you need to do is give one quick tap with your credit card and you can be on your way with your new purchases in-hand. Credit cards have become an essential part of doing everyday transactions for many people, so you have to wonder if it’s even possible to live without a credit card these days. The answer is a big resounding “yes!”
According to the Canadian Bankers Association (CBA), 95% of Canadian adults have at least one credit card and that credit cards account for approximately 5% of total household debt. While credit card use is definitely widespread with more and more people depending solely on plastic (rather than cash) to make their purchases, is it even realistic to think that you can go against the herd and live without credit cards? Well, about 11% of Canadian adults seem to be doing just that. We’ll show you how you can join this illustrious group and successfully live without depending so heavily on credit cards.
Planning and Budgeting are Key
By managing your money, you can live within your income and not need to rely on credit to meet your expenses. It is important to budget for all of your expenses, including the occasional ones. For example, if you spend $600 a year on clothes, then you need to put $50 a month away into savings so the money is there when you need it. What about car repairs? They’re an emergency expense, aren’t they? Nope. If you own a car, there will be maintenance costs, so you will need to budget and save for those expenses every month as well. That way when these expenses do come up, you can simply take the funds from your savings account versus pulling out your credit card. If you need help putting your budget together, one of our counsellors can do it for you, for free! Just call 1-800-267-2272 to set up your free appointment, which you can do over the phone, too.
Balance Your Income and Expenses
If necessary, you could decrease your expenses by tracking your spending for a month using our monthly budget tracker. Then take a look at what you’re spending your money on and identify any areas you could cut back on. For example, do you really need all the bells and whistles that you have on your phone, internet, and TV? I suggest to people that they look at the “money gobbler” expenses to see where they can realistically cut back. Our budget calculator can be a useful tool for this exercise.
Use Your Debit Card Instead
To avoid using credit cards, you don’t need to carry the money around in your wallet. Pull out your debit card instead. You will feel relief when you don’t have to open the credit card statement when it arrives in the mail or your inbox.
Monthy Automatic Debits
If you’re unsure about leaving the money in your savings account for fear of spending it, you can introduce automatic debits and pay as many things as you can every month. For example, you can have a monthly automatic debit for your car insurance, and pay your property taxes in an escrow account with your mortgage or arrange for a monthly payment. Another option is transferring the funds for these occasional expenses to a separate account that isn’t attached to your debit card, so you avoid the temptation to spend it.
Use Gift Cards
You can buy gift cards on a regular basis and use them as needed. But don’t forget about them, or fees eventually will be deducted from the balance.
Use a Prepaid/Secured Credit Card
If you need to book or buy something online, you can use a prepaid or secured credit card, which is essentially a card that you load with your own money. So you’ll be using your own money – not the bank’s! Plus, it helps to 1) control your spending because you can only spend up to the amount you have put on the card, and 2) adds an additional layer of security by not linking your personal credit card or debit card to an online account.
At this point, some of you might be thinking, “Well, I’d like to try living without a credit card but I also want to travel, and that requires a credit card.” If that’s you, then what you need to do is budget and save for your travel goals on a monthly basis, all year round (see step one.) Then, when you’re ready to travel, pay as much as you can before you leave. The money for expenses that can’t be prepaid is in your account because you already budgeted for it and can be accessed via your debit card.
If you can’t commit 100% to no credit cards, you can decide to have one credit card with a low limit, which will allow you to book hotels, flights, rental cars, etc. Although the confirmation is on the credit card, you can use your debit card to pay the bill at checkout. Voila! No credit card bills to come home to. You may not be living without a credit card but at least you’ll be living without credit card debt.
Do you really want to spend years paying back the $3,500 you put on your 18% interest rate credit card? That amounts to about $3,000 in just interest payments alone! You can live without credit cards if you plan and budget; our certified credit counsellors are here to help. Call 1-800-267-2272 to book a free appointment. And don’t forget to check out more great tips and tools from our website to help support you along the way.