Can we live without credit cards?

Victoria Maydanik Life advice from bankruptcy attorney 1 Comment

Yes. Really, we can.

This is a question prospective clients often ask in one form or another. After all, if you file a bankruptcy petition, your credit cards would usually be cancelled by the banks, and you would have very limited access to credit while the case is open.

Banks condition us that we need to have credit. Credit cards are advertised as (1) convenient; (2) more safe than debit cards; and (3) well, as a source of credit – a cushion between our needs and wants and our available resources.

Actually, we can get all of these perks without the credit cards, and have more money by not paying ridiculous interest and fees.

Are credit cards really the only convenient method of payment?  Many debit cards can be used the same way as credit cards.

Do credit cards offer unsurpassed safety? There are other ways to keep you safe. Use cash if possible when you are going out. Check your bank records daily to make sure there are no suspicious transactions and you have not been overcharged. If you are making purchases online, the bank which has your checking account may generate a single-use account number to be used for an online purchase, or may ask for a password whenever you are trying to use your card online. These are pretty common available safety features; check with your bank to see how you can sign up for them, and to see if any other features are available.

Do credit cards offer the best cushion for extra expenses? The proven way to provide financial security for your family is to build up your savings. It’s tough to save, especially when you are experiencing financial hardship, but you should always try. Saving may be more important than investing or paying back existing debt. If you pay off one debt but fall into another because you did not have enough left for rent or other basic expenses, you usually end up owing more, and are worse off in the end.

Also, plan ahead. Some emergencies are true emergencies which you have no control over, but luckily they are far and between for most people. Most “emergencies” fall into the category of ordinary expenses that do not occur on a regular basis (for example, having to pay for car insurance, new tires, or school supplies at the beginning of the school year) or events we can more or less control or predict (for example, an occasional sports injury if you play sports). Figure out how often these events and expenses have happened on an average basis, assume they will happen again, and build them into your budget and savings plan.

If you are going to be filing bankruptcy, think about ways to make your budget work for you without credit, so that you truly get a fresh start and get liberated from debt. Despite what credit card companies want you to believe, the world does not come to an end if you have no credit or limited credit.  Living without credit cards is entirely possible, and gets easier with time.

 

Comments 1

  1. Great article,

    I often try and let my clients know they don’t need credit cards to survive. If you have enough money, then they can be convenient for building credit, but after going through bankruptcy, it’s just not the time.

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