by Jennifer Wallis
For some people, credit cards seem to be an extension of their hand. I once worked at a retail store and had a customer that obviously had an issue with overspending. She swiped her credit card so often that her magnetic strip was worn out. Finally, her husband took away her credit cards to curb her spending. She was not going to let that stop her so the next time she came shopping she just had her account number written down on a piece of paper. Thankfully, it was against company policy to let someone charge without a physical credit card so we had to turn her away.
* * *
Sometimes, when temptation is just too great, the only way to stop spending is to have plastic surgery. Cut up the cards and live on cash. It may seem drastic but sometimes, it is necessary to regain control of your impulses. In and of itself, credit isn’t a bad thing. In fact, it can be very helpful when it comes to making a major purchase, such as a home or car. However, if you just can’t stop yourself from charging, getting rid of the credit cards can be a huge help.
When some people talk about living on a cash-only basis, they mean straight cash-no checks or debit cards. Unless you have a problem with writing hot checks, too, I believe that checks and debit cards are fine to use. Without a bank account, you will have to pay to cash checks, carry a lot of cash, and use money orders for bill paying. I would never want to live without being able to pay my bills online or by check. Therefore, when I recommend living on a cash basis, I am not suggesting that you close your bank account. I am talking about ditching the plastic for a while.
Here are the steps you need to move to a credit-free lifestyle and regain control of your spending:
Make a Pile-O-Plastic:
Gather all of your credit cards. Take them out of your wallet, out of your drawers and place them all in one pile. You can either choose to actually cut them up or give them to a trusted friend or family member to hold them. The important thing is that you get rid of ALL of them. No, you can’t keep one for emergences. No, you don’t need one to rent hotel rooms. If you are going to make the commitment to stop charging, you have to do it completely. Go all the way and give up every card.
Explore What’s Been Stored:
If you frequently shop online and have your credit card information stored on sites like PayPal and Amazon, change your stored card to your debit card and delete the old credit card information. That way, you won’t be able to continue charging on the cards you no longer possess. Yes, I know all of the tricks. I have been a credit counselor for a long time.
Drop the Department Stores:
Some department stores will look up your credit card information for you if you provide ID and they will let you charge on your account without a physical card. Close those accounts so that you are not tempted to shop.
Preserving Your Credit Rating for Future Use:
If you are interested in preserving your credit because you plan to use it again, there are some ways to do that. First, you can cut up the cards but leave the accounts open. They will only be closed if you call or write the credit card company to request it. You can always request new cards later after you have regained control of your credit. If you do close the accounts, be aware that it may lower your credit score. If you don’t plan to buy a home or car soon, it may be fine to do that.
Develop a Saving Plan:
Since you will not be able to charge items “for emergencies” you will need to have some money in savings. This way, you don’t have to borrow to cover those emergency expenses. You can just take it from your savings. You will need a good savings plan because you will have unexpected expenses at some point. Prepare yourself ahead of time. It is also a good idea to save for periodic expenses that come up throughout the year. You may need to set some money aside for things that just come up every once in a while such as tires, home repairs, car tags, and medical bills.
Develop a Spending Plan:
If you have been charging everyday items such a groceries and gasoline, you may need to get a little more organized. It may help you to figure out when you get paid and when your bills are due so you can identify the times of the month when you have extra money. It may help to move some due dates around by calling your creditors.
Examine Spending Trends:
Some times of the year are more expensive than others. Christmas, back to school, birthdays, and summer vacation may all be especially tough on your budget. It is a good idea to sock away some extra money to help you pay for these difficult times of the year.
Major Purchases Need Major Planning:
Even though it would be great if you could pay cash for a house, most of us will never have that luxury. Sometimes, credit is necessary. If you know that you will need to finance something, start developing a plan 6-12 months ahead of time. It may be a good idea to start establishing a recent credit history if your credit is completely inactive (you have been living debt-free). You can charge a small account on one of your credit cards and pay it back over a several month period of time. This could give your credit a boost by showing a recent positive credit history.
Even though living without credit cards may seem like you are working without a net, just tell yourself that you can do it. Build up savings so that you will have a little cushion to help you when you need it. It isn’t nearly as scary as it seems. If the credit Merry-Go-Round has your head spinning, try getting off for a while. You may find that you really enjoy the view.
* * *
Return to Credit Cards and Debt
Copyright © 2007 by Jennifer Wallis. All rights reserved.
