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Just a few short years ago, it was inconceivable that American shoppers would start to give up paying with plastic. But in the wake of one of the worst economic crises in history, more people are choosing to kick credit cards to the curb. During last year’s Black Friday shopping, about half as many consumers paid with plastic as had the previous year, according to America’s Research Group. And credit card ownership dropped to 67 percent in 2010 from 71 percent in 2008.
What’s it like to live your life off the credit card grid? Is it liberating? Inconvenient? Will your friends think you’re weird? I chatted with a few cash-only converts to find out. Here’s what they said:
You’ll spend less. Ditching credit cards will re-tool your financial perspective like nothing else. All of a sudden, it’s literally impossible to spend beyond your means. If you don’t have the money, you can’t squander it — period. “There’s a definite difference in spending when you use a credit card than when you use a debit card,” says Adam Baker, 26, author of ManVsDebt.com and currently credit card free. “When you’re spending with a credit card, you say, ‘How am I going to pay this off at the end of the month?’ With a debit card, you have to say, ‘Do I have enough money for this in my account?’” In fact, this Bundler spent less after he froze his credit cards into a block of ice.
Read on to find out what it's like to live without credit cards.
You’ll probably save more. If you’re living without credit cards — and especially if you don’t own them anymore — you’re forced to come up with a safety net that doesn’t involve 16 digits and an expiration date (or 15 digits if you’re using an American Express card, but I digress). Without a plastic cushion, you’ve got to have actual cash on hand for that unexpected car repair, for a job loss, for a medical emergency. “A lot of people use their credit cards as an emergency fund,” Baker says. “So they don’t have savings. My wife and I have about $10,000 in an emergency fund right now. If we had $20,000 in credit card limits, we may not be as serious about it.”
Renting a car is more of a hassle. For most merchants, credit cards and debit cards are fairly interchangeable. Not so when you’re traveling, unfortunately. While most rental car companies accept debit cards, many of them will also place a hold on your available funds — enough cash to cover the cost of the rental car plus reasonable repairs if you return a dinged vehicle. If you’re living close to the edge of your bank account balance, that could be seriously inconvenient. But then, if you’ve got a monetary cushion (since you’re living a cash-only life, after all), this fact shouldn’t make-or-break your no-plastic policy. “Some people can’t get past that, and they use this one issue of renting a car to justify credit cards,” Baker says. “I feel that’s very dangerous, because credit card use may do much more damage than a four- or five-day $500 hold would do.”
Ditto for getting an apartment or a house. Like it or not, using credit cards may allow you to maintain a pretty stellar credit score. And without them — well, not so much. (Check out this Bundle comic on the subject.) Doug McLaulin and his new wife discovered that fun fact after looking for a new apartment. “One of the first things they want to look at is your credit rating,” he says. “We had to show them proof of income and proof of our financial stability. It just took a little bit more time.” And it may take a lot more time — or a co-signer — if you’re trying to buy property. Mark Bradley, 40, recently tried to acquire a home loan and had difficulty due to his lack of credit score. “At 40 years old, I shouldn’t require my mom to co-sign,” he says. “If someone who works for 20 years and has zero debt can’t get a loan, then who can?”
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