One of the biggest decisions I had to make when I wanted to get out of debt was whether or not I would continue using credit cards.  There are people who will say once they are out of debt, they will still keep a credit card around for various reasons. However, I had drawn the line in the sand and vowed never to use debt again.  Now I had to battle all the arguments against closing and cancelling my credit card accounts.

I had been told all of my life that credit cards were necessary, especially to keep my excellent credit (and credit score – who needs this if you aren’t going to use debt?) in good standing. And that I needed to have at least one card in case of an emergency – what would I do then if something happened? And, of course, the notion that I wouldn’t be able to travel without a credit card, especially international travel.  And that credit cards were “safer” to use than debit cards.

All of these statements turned out to be false.  They were just myths that were trying to justify my need to keep a credit card.  I made the decision that if I truly wanted to get out of debt and, more importantly, stay out of debt, I needed to say goodbye to all the ways and means that got me into my financial mess in the first place. When I decided to get out of debt in 2010, I made the bold move to cut up my credit cards and begin living on a cash budget (including the use of a debit card).  The picture attached to this post shows the actual credit cards I cut up and serves as a reminder of where I started on my debt freedom journey and where I never want to return.

Still not convinced to give up credit cards?  Consider the top three reasons I decided to stop using them:

• Disconnected Spending When you spend on with a credit card, you are creating disconnect between what finite financial resources (bank account, savings, retirement, home) you have versus what the credit card companies are allowing you to spend. It doesn’t provide a true picture of what you have available to spend.  It became so easy for me to rack up credit card balances because I could put off the pain of the whole purchase. The impulsive spending that got me in trouble with debt has now been curbed.
• Ease of Getting Back Into Debt I have heard people say too many times “But we always pay off the balance each month…” Really? What happens if you lose your job and you can’t pay the balance? Unexpected medical emergency? Wouldn’t it be better to have the cash on hand in an emergency fund (being proactive) instead of wondering how you are going to pay off the balance you have now incurred (being reactive)? This was the way I was able to justify my “responsible” credit card spending – until crisis happened.
• Control Who’s really in control of your spending limits and interest rates? The banks that issue the cards. I found this out the hard way.  I was a faithful Capital One customer who had paid my bill on time every month (at least the minimum payments). Suddenly the financial crisis of 2008 hit and by 2009, Capital One was lowering my credit limit and bumping up my interest rate to 18%! My balance to limit ratio dramatically increased and my payments became even more interest than paying down the balance. When you use credit cards, you are giving the banks power to control your finances – and they reserve the right to change the rules at any time.  I didn’t want to be at their mercy any longer.

My life without credit cards has been freeing.  I have a better handle on my spending and living on a cash budget has provided the transparency I need to build my financial future.  My hope is that I have given you compelling reasons and my own example to consider giving credit cards up for good.