Living Without Credit Card Debt

It seems that the harder the economy gets the more that people turn to credit cards as the solution. The problem with this is that credit cards only provide temporary relief but actually cause greater financial distress later in life. There is a way to use credit cards to survive but to live credit card debt free.

Living without credit card debt requires a good amount of diligence and some will power and dedication as well. You need to commit to a life that is not dependent on credit cards by controlling your credit cards instead of letting them dominate you.

While this seems easier said than done, you can change your situation around sooner than you think if you commit to some simple rules. If you are not already in credit card debt, then following some basic guidelines during tough economic times can help you stay out of credit card debt.

Avoiding Credit Card Debt

If you have been able to avoid credit card debt thus far, then you have made it far down the path of financial success. If you struggle daily with financial decisions, you may not feel very successful, but rest assured, you are well ahead of the long term recoup that many others will be facing when they try to pay down their high interest credit cards.

There is no reason to start accumulating credit card debt if you have been able to stay away from it until now. The best way to avoid credit card debt is to create a budget and stick to it. You can plan your expenses based on your income and factor in unplanned costs as well.

For example, you should put money aside with every paycheck for emergency funds. A simple 5% to 10% from every paycheck won’t be missed drastically, but the savings can add up fast so if your need to replace all four tires or your refrigerator then you can afford to take care of necessary business.

Do not use your credit card to pay for unnecessary or frivolous items. Instead, use it sparingly to keep your credit score high and pay off your balance every month in full. Full monthly payments are crucial to keeping yourself out of credit card debt because once you start making installment payments it becomes very easy to continue doing so, which leads to accrued interest and continuing debt.

Reducing Credit Card Debt

If you have already amassed credit card debt, do not despair. Many people have resorted to using credit cards during difficult economic times and are now drowning in credit card debt. It takes perseverance and determination, but it is possible to reduce credit card debt.

Bankruptcy should always be your last resort because it leaves a scarring history for a very long time. A poor credit history is much better than a bankrupt one. Instead, work on a pay down plan to slowly reduce your credit card debt and become credit card debt free.

Depending on how much credit card debt you have, it could take as few as 3, as many as 7, or many more years to pay off all of your credit cards. However, if you eliminate your credit card use entirely then when you are done with your credit card debt you will be financially free.

The first step to living without credit card debt is to live without credit cards. Cut all of them up except for one spare card to use only in dire emergencies. This same card can later be used to restore your credit. If possible, choose the card with the lowest interest rate, then lock the card away and forget you have it. Do not cancel the credit cards as this can have a negative impact on your credit score.

Reduce your debt by paying off more than the minimum every month. This amount can be small, such as $10, but it should be consistent. Then choose the card with the highest interest rate and start to make even higher payments on that card every month. Pick a dollar amount that is manageable. Even $25 extra can help to start reducing your debt.

Once that card is paid off, find the next card with the highest interest rate. Take the entire payment you were making on the credit card you just paid off and start to apply that entire amount to this next card in addition to the monthly amount you are already paying.

In this systematic way you will slowly start to reduce your credit card debt. By not continually using your credit card and adding to your debt and by paying down your balances over time, you will become debt free. Once you are debt free, bring out the locked credit card and use it for a small purchase once a quarter, but no more than once a month. Avoid making it a habit to use it for payments. When your bill arrives, pay it off in full right away. This will help you start restoring your credit card history.

Existing With and Without Credit Cards

You can exist without credit cards. However, credit history plays an important role in very specific matters, such as how much to charge you for your car insurance or how much to charge you for your cell phone plan. Your credit history impacts all major purchases you are going to make, including car purchases and the purchase of your new home. Therefore, you should use credit cards with the intention only of building credit and not with the intention of buying things you can’t afford. Even the convenience factor of a credit card is no longer applicable with the availability of a debit card. Life does not require credit cards and you can get through it fine without them. They do make it easier to establish a credit score, however, so they can be useful when they are used strictly as tools. Live without credit card debt and enjoy making guilt free purchases with shopping decisions you can afford.

Bio: Tara Stephens is a financial consultant and credit card debt counselor. She enjoys helping people out of credit card debt and giving them the power of financial freedom through her guest blogs.