Living with Debt: Should You Forego Credit Cards?

There’s a funny thing about life. There are so many different ways to live it, and many myths about what you need and what you don’t. Among these is the one that says you need a credit card to navigate the modern world. However, rather than living with debt, it’s possible to not use credit and still live comfortably.

So, should you forego credit cards altogether?

Cutting credit card - neccessary?

Debit Cards Have Shifted the Paradigm

Before the advent of debit cards, you pretty much had to have a credit card to rent a car or get a hotel room. Today, rental car agencies and hotels are happy to accept debit cards as security against damage or incidental charges.

Of course, you’ll have to make sure you have enough cash in the bank to cover the expenditure. You’ll also need to be comfortable with a hotel or car agency placing a hold on your account for a certain amount—typically in the neighborhood of $100 or so.

On the other hand, if hackers or thieves compromise your debit card, the money will come directly from your bank account. If you go this route, you’ll have to be very careful about protecting your card and PIN, as well as keeping a close eye on charges.

What About Unforeseen Expenses?

Financial gurus will tell you establishing an emergency savings account is a good idea. They usually say to build up approximately six months of living expenses in case you lose your job, or some other financially debilitating incident occurs.

With a solid emergency fund, you won’t need to depend on credit. You’ll already have cash on hand to deal with whatever comes up. Then, instead of repaying a credit card company, you can put the money you’d spend making payments back into your emergency fund—free of interest and fees.

Credit Cards Improve Your Credit Score

This is only partially true. After all, you do have to have a track record that can be tracked to calculate the score you’ve earned. What’s more, there are other ways to build your credit score without credit cards.

Pay off debts quickly to get rid of bad debt
photo credit: Morgan / Flickr

What if You Already Have Them?

Do not despair; there is life after plastic. If your spending has gotten out of hand and you need to reset the clock on your financial situation, consider working with a company like Freedom Debt Relief to help you clear up those debts. They may be able to save you a significant amount of money and resolve your debt faster. Yes, your credit score will be temporarily impacted, but having debt hanging over your head is a lot worse.

So, if you want to avoid living with debt, should you forego credit cards?

It depends. A debit card with a healthy balance behind it will carry you through any situation a credit card would these days. This means it’s entirely possible to live without a credit card. Further, if you can make it work, you’ll be a lot better off financially.

Yes, credit cards have their benefits too but it’s not necessary to “survive” modern life.