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Every day as I leave the house, I pat down my pockets to double-check that I have the essentials:

• phone
• keys
• wallet

Without any of these, I’m just not going to have a good day. The major passengers in that wallet, besides the drivers license, are those plastic cards we can swipe everywhere to buy whatever we want!

This is the story of how I managed to go a full year without using credit cards.

First, why bother?

60.5% of Americans had a credit card as of Q1 2019, according to Experian.

It’s a super-easy way to pay for things. You swipe, and you’re done. That ease comes with a price, though – guess what the average credit card balance in Q1 2019 was? $6,028 (Fun fact – what’s the state with the highest avg amount of credit card debt? Give up? Alaska. That was surprising).

Without digging much more into the figures, this indicates many are paying interest because they don’t pay their balances off each month, and it’s a sky-high rate. (Per CreditCard.com’s recent report, the average interest rate on those cards is 17.41%!) My wife and I were no exception. As you saw in this post, in our 80k of total debt there were approximately 15k of credit cards. No major purchases, just your usual “spend slightly more than you make” syndrome.

After we listed all our debt, I began to understand the power that credit cards held. “Debt by 1,000 cuts” explained our way of consistently managing to spend slightly more than our goal, never on any big tickets, but faithfully over-spending, month after month. This led to a regular stream of anywhere from $60-$150 in credit card interest flowing out each month. The stress, for one, is the interest itself. The below image shows what paying a minimum $50/month payment on a credit card balance of $1,000 @ 18% interest rate.

You can see it would take 24 months to pay it off that way, because only $35 of every $50 goes to pay the principal, the rest goes to interest. By the end it would wind up costing you $1,197.84 to pay off the $1,000 – almost 20% more than if you used cash/debit card. That’s like everything you purchased costing 20% more. Extrapolate that scenario over the “Average American” credit card balance of $6,028 discussed earlier, and you have a gigantic hole getting bigger each month. The other stress was the lack of control I felt over the situation. If it happened so easily for us, I am scared to think how commonplace this must be. (Link – you can calculate your balance and payoff timeline here)

But I knew that to really get fired up, I would need to make changes. Fortunately, I landed on the resource of Dave Ramsey, someone who knows more about money than me.

Second, What to do?

Immediately I cut up my credit cards.

This was extremely nerve-wracking, as I had come to view them as “insurance” against emergencies. After all, at least 1 credit card came along with me in my wallet every day of my life since 2004 when I acquired one for the first time. What are these “emergencies” I had been prepared for for 15 years?

• The car breaks down on the side of the road needing towing to a mechanic’s shop where they say it needs a new transmission or something major? Credit card.
• A sudden death in the family out of state and everyone needs plane tickets for a funeral last minute? Credit card.
• A medical emergency and they won’t receive me and start giving treatment until I pay a $500 at the emergency room counter? Credit card.
• My buddy calls me about an ‘exclusive deal’ on a ski cabin next week in Colorado and the price is only good if they receive payment today? Credit card.

The reality is, it was more likely that the last bullet point was what I used the card for, and none of the true emergencies. Note that the Dave Ramsey plan has you keep a $1,000 emergency fund when you’re paying off debt, which would cover any of those 3 true emergencies listed above that could potentially derail your finances temporarily.

So I took a very sharp pair of shears to my Chase Freedom, University of Miami Bank of America, and Chase Amazon Rewards cards. On September 1, 2017, for the first time since 2004, I left my house to face the world without a credit card. Cash and a debit card only.

We are still talking credit cards, right?

Was cutting the cards drastic? Couldn’t I just commit to not using them? Well, could the Spanish conquistador Hernan Cortes have defeated the Aztec empire without burning the boats? Maybe. But in my modern-day “point of no return” story, not having the crutch or the temptation of a credit card absolutely shrunk my spending. I found that just the presence of the credit card in my wallet turned off a part of my brain that actually figures what each item I was adding to my cart costs, and if I could afford it or not. The word ‘afford’ doesn’t exist in credit card land! There’s no pain with the swipe of a credit card! And if your Apple Pay, (which is amazing) is linked to a credit card, it lessens it further. Tap-Tap and its yours. Having that credit crutch also discouraged creative solutions to problems. Often “what” it is that you need can be acquired through lots of different ways, not always the knee-jerk “buying that thing”. We’ll have a future post exploring that subject more.

How do you get by without credit cards?

It is actually pretty simple! I planned how much per week I would need for variable expenses like groceries, gas, meals out, clothes I needed to buy, etc. The variable expenses, not the fixed, recurring bills like rent/mortgage/phone/internet/car payment, etc. I input what a typical 7 day week should look like in Excel, and that was my total budget. Since I tied that number directly to how long it would take us to pay off our overall debt, I had strong incentive to keep it low. With my long commute to work it was hard to reduce fuel costs, but I found there’s always room for optimizing food, both groceries and going out.

When I got paid bi-weekly, I would pay the usual bills, and then leave 2 weeks worth of cash in my checking account. I also added a small cushion to make sure I didn’t overdraft, which would counterproductive.

Example. Your weekly variable expenses are $200, so each 2 weeks you leave $400 in your checking account, plus maybe another $50 as a cushion. You use your debit card for those purchases, until you get down to $50, and then you get paid again and do it all over. Congrats! You learned how to survive without credit! Having literally no other money, except the $1,000 in the emergency fund in a separate bank, forces this to work. You can only spend that much. I used a simple, free app from the App Store called “Spending” to set my weekly budget cap, and also developed the habit of manually entering purchases as I made them.

Then what?

After 1 full year, I ended my “no credit cards” policy, and resumed using them. I set the goal of 1 year to prove to myself that I could be responsible, and pay off the balance 100% each month. This sounds very basic to me now, but it was definitely a challenge at one point. The benefits of travel rewards are so great that if you can control your spending, it is definitely a strategy to try and incorporate (although not Ramsey approved!)

Final takeaways

• Using a credit card is only recommended if you pay off the balance 100% every month.
• Using a debit card WILL reduce your spending.
• If you set a goal, that means at one point YOU agreed it is a worthwhile goal. You owe it to yourself to stick to it. Hard work and discipline pays off – you get closer to reaching the immediate goal (debt payoff) and along the way you’re developing the willpower that it takes to reach even greater goals later.

How about you? Do you use credit cards? How about tracking your spending? Let us know in the comments below!