I have not used a credit card since 2010. That’s when I drew the line in the sand and decided that I was no longer going to use consumer debt again. Not only student loans and car loans but credit cards as well. Since then, I have only used debit cards as a way to stay on a cash plan without using actual cash. It has served me well, preventing me from making bad financial decisions. For me, credit cards became my financial heroin and fed my impulsive spending behavior. My impulsive spending got me into thousands of dollars of credit card debt, so I had to create guardrails around my spending by getting rid of credit cards completely.
People have many seemingly benevolent reasons for using credit cards. Many use it as a financial float for funds that they don’t currently have but will in the next thirty days. Travel hacking has become a whole subculture in the personal finance world to use credit card points to travel for free. For me any many others, the intention to pay off that purchase that I floated goes out the window with the next purchase I am chasing to float. It becomes a vicious circle that causes people to rack up credit card debt. And as for travel hacking, it would feed my impulsive spending so that I could increase my points to get something for “free”. Besides, how do you think those “free” flights using credit card points come from? It’s paid for with the interest paid by those people who carry balances on their credit cards. I don’t want to be part of the problem by continuing to encourage credit card use that would benefit me.
The biggest reason I don’t use credit cards is that it allows for disconnect from my purchases. It doesn’t immediately hit my bank account so there is a false sense of security that there is money available to spend. And once you have paid using your credit card, you still have to pay the credit card bill. It made me feel like I was paying for something twice, even though that was not the case. It’s very easy to slide down a slippery slope with spending when you have access to credit when you have no stopping point with the funds you currently have. Proactively saving the funds to pay for something and having an emergency fund are the ways I choose to manage my money instead.
The biggest questions I am asked about credit cards revolve around travel, specifically airfare, hotel, and car rentals. I can tell you airfare and hotel have been no issue when it comes to using debit cards. Car rentals, however, can be a little more restrictive when it comes to using debit cards. I share my experiences with car rental companies and which ones are more debit card-friendly in a previous blog post. However, with ride sharing services like Uber and Lyft, it can actually be cheaper to use these companies for your car needs than renting a car.
So here is my challenge to you. Try not using your credit card for 30 days. One month. Do it as a test to see if your spending habits change. If nothing changes, then go back to using the credit card (yes, I actually said that!). However, if you find yourself making better spending decisions or realizing that your credit card has become a financial crutch, it may be time to stop using it. I think it is a worthwhile exercise that, if nothing else, will help you better understand your spending habits.