Could you survive on cash only?
The average American has 4 credit cards—and $7200 in credit card debt. Even in the down economy, our culture puts a high priority on being able to spend more than our cash on hand. (Think of mortgages, which almost no one pays for in full and in advance.). The truth is we love swiping—we just hate those bulky statements and the dreaded debt that follows.
So what if we did away with our credit cards? It sounds crazy, right? But about 25% of American families don’t have a credit card at all—and they’re not Unabombers or weirdos. Most of them are everyday people who decided they don’t want to live with a cloud of debt over their heads anymore. So they chucked their cards and chose to live on an all-cash diet.
You may wonder if living card-free will hurt your credit score. While having a credit card helps you establish a credit score, it’s not the only way. If you’re paying off a car loan, student loan, or mortgage loan regularly, then you’re still establishing a credit history that contributes to a good score. And the #1 most important thing, whether you have a card or not, is that you pay all your accounts on time.
What if you need to make a big purchase? The best way is to save up until you can afford the item, and then buy in cash. Remember: This is what our parents and grandparents did for years! You could also borrow money from family or friends. Or, if you want to get a loan, find a small bank that will do manual underwriting, meaning they’ll base the loan on your job, income, and assets rather than your credit score.
That said, I don’t encourage people who have a card to necessarily get rid of it altogether. Having a long-established line of credit that you use occasionally and pay off in full every month helps establish a good credit report, which everyone from prospective employers to future lenders could be interested in later. If you have a card already but the idea of going credit-free intrigues you, it might be more useful to go *almost* credit-free: Consider putting one small purchase a month on your card, paying it off in full, and using cash for everything else.
Could you live on cash only?