The Smart Way to Ditch Your Credit Cards

Written By Jeff Hindenach
Last updated September 3, 2019

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Credit
November 18, 2016

Simple. Thrifty. Living.

More and more people are opting to live without credit cards, since many of us get swept up in the convenience of the buy now/pay later mentality. That could be why the country is almost $800 billion in credit card debt.

Living without credit cards is not as easy as just cutting up your cards and never looking back. What about emergency situations? And renting a car, which is hard to do without a credit card? Or, worse yet, what will it do to your credit score? These are all valid questions, but if you prepare properly, you can still live without credit cards and continue to have a healthy borrowing history. Here’s what you need to do to live credit card free:

Have money saved for emergency

Having credit cards is especially helpful when you run into financial emergencies, like for expensive repairs to your house or costly medical bills. Before you completely give up your credit cards, make sure that you have an emergency fund tucked away so that if some of these emergencies happen, you won’t be stuck without a way to pay for them. Keep adding to the emergency fund whenever you can, since you never know when you could be forced to use it.

Don’t cancel your credit cards

It may seem like a smart decision, but it can be a big mistake. Granted, most people stop using their credit cards because they don’t feel comfortable having the option of using them, and not having them around will take away the temptation. However, this can have a major impact on your credit score. Your credit history is a huge part of your credit report, and all the good credit you’ve built up by having your credit cards for years will be instantly wiped out the minute you cancel them. This could make it more difficult to qualify for a mortgage, car loan or even be approved to rent an apartment.

Keep track of your credit

If you do decide to cancel your credit cards, make sure that you are consistently checking your credit reports and scores to make sure you haven’t dipped into a “poor” or “fair” credit rating. This is going to make it more difficult for you to receive any kind of lending or even be approved for jobs or rentals. If your scores do end up falling because of your cancelled credit cards, here are a few things you can do to boost your credit score again. If your score is already low even before you give up your credit cards, it can be harder to boost your score again. Considering employing some credit repair fixes either yourself or through a credit repair company that is reputable.

Keep a diversified credit portfolio

Luckily, your credit reports and scores are not based solely on your credit cards, which is good news for those who want to live without them. Before you give up your credit cards, make sure you have a diversified credit portfolio that includes a mortgage, auto loans and other types of lending. While this won’t completely keep your score from dropping, it’ll hopefully keep you in the “good” range of the credit scoring.

Try using a secured credit card

Yes, you want to live without credit cards, but a secured credit card is different. These cards usually have a much lower credit limit ($300-$500) and those are usually based off the amount of deposit you put down on the card, so you are essential using your own money to borrow against. The benefit of a secured card over a prepaid card is that most secured credit cards report to the three credit bureaus, so they can be used to keep your credit score up while diversifying your credit portfolio. They also can be used to rent cars and put holds on hotel rooms, which are more difficult to do with debit cards. Here’s quick roundup of some of the best secured credit cards.

About the Author

Jeff Hindenach

Jeff Hindenach is the co-founder of Simple. Thrifty. Living. He graduated from Bowling Green State University with a Bachelor's Degree in Journalism. He has a long history of financial journalism, with a background writing for newspapers such as the San Jose Mercury News and San Francisco Examiner, as well as writing on personal finance for The Huffington Post, New York Times, Business Insider, CNBC, Newsday and The Street. He believes in giving readers the tools they need to get out of debt.

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