When my wife and I decided to get out of debt, we did three things.
First, we created a simple to use zero-based budget.
Second, we established an emergency fund.
Third, we stopped using our credit cards.
Essentially, we put them on pause.
We didn’t cancel them and we didn’t cut them up. Instead, we simply stopped using them.
Here are the details:
Why did we stop using our credit cards?
We were spending more than we made, month after month, and we were using credit cards to finance our bad spending habits.
Easy-credit made it easy to overspend – and we did.
Getting out of debt became a priority. Putting away the credit cards – and the ease-of-use that they provided – helped us to reign in our spending.
What did we do with our credit cards?
We didn’t really “do” anything with them. We just stopped using them.
If memory serves, we did cancel one or two store-branded cards – but that may have happened long before I started No Credit Needed.
We put most of the cards in our home safe and we each kept one, major card in our respective wallets, for emergencies.
We also transferred a balance from one card to another, to take advantage of a zero percent interest balance transfer deal.
That’s it. We didn’t freeze them or cancel them or chop them up with a blender. We made a decision not to use them – and we didn’t use them.
How did we live without credit cards?
We used (and use) the envelope system to manage our cash.
We used a debit card, associated with a secondary checking account, for online purchases.
We used online banking to pay our bills – along with the occasional paper check.
What about now?
Now that we have our spending under control and have learned many valuable lessons about responsible management of our finances, we will, occasionally, use a credit card. We do so mainly for gasoline or groceries – and only for budgeted amounts. We pay off balances each month and avoid interest like the plague. Frankly, we find very little need for the cards.
What have we learned?
Getting out of debt can be a challenge. By putting our credit cards on pause – we gave ourselves a built-in spending limit. When the money ran out, the money ran out. This radically changed our habits – and eventually changed our lives.
At one point, we needed credit cards (or thought we did). Now, we don’t. And that’s a big difference.
We are in control – not our credit cards, not our spending habits, and not our debt.
In my old age, I’m a little less dogmatic than I used to be. In the beginning, I saw credit cards themselves as evil. Now, I see that what I really needed was a good dose of self-control. For me, that meant taking a radical step – of putting the cards on pause – so that I could really focus on debt reduction. This was a great move for me and for my family, one that I would repeat a thousand times out of a thousand. Be blessed.