A Life Without Debt: You Can Be Debt Free and Still Use Credit Cards

Several financial experts (most notably Dave Ramsey) preach that, if you want to become and remain debt free, you must not use credit cards. Ever. Their reasoning is that, a) it is too easy to get into the debt trap when using cards and, b) that you spend more money (around 25% more) when you use a credit card than when you use cash. Well, as a debt free person, I’ll tell you that it is entirely possible to use credit cards and remain debt free. The trick is to be disciplined and responsible.

I have used credit cards from the time I was in college and yet have never accrued any debt that I could not immediately pay off. How is this possible and why not just use cash? I choose to use cards because of the convenience, protection and, of course, the rewards. Using credit cards and accumulating the rewards is a great way for me to stretch my purchasing power a little bit further. However, I only use the cards for things I would buy regardless of the payment method. Gas, groceries, clothing, etc. all go on the cards. Even some utility bills are paid on my credit cards. I remain out of debt because I never use the cards to buy anything that I could not pay cash for on that day. I pay the balance in full every month and pocket the rewards.

I am very disciplined when it comes to credit card use. I do not view them as a way to pay for things I could not otherwise afford. That is a sure path to debt. Instead, I view them as one of many tools I have in my financial toolbox. They are simply one more way to pay for the items I need, and I evaluate in every situation whether or not a credit card is the right way to pay for something. If it is a high cost item (that I have saved and budgeted for) that will yield a lot of rewards, or if it is something on which I’ll want additional consumer protection, I go with the card. I use the card when I travel (but, again, the travel has been budgeted for) because you just about have to use a card when you want to rent a car, reserve a hotel room, or book a vacation package. I use the card for emergencies and when things crop up like broken appliances, car repairs, or medical issues. But even then, I have the money saved in other accounts and the credit card is merely a payment tool, not a financial crutch. I use it on everyday expenses that I have to buy, regardless of payment method, like gas, groceries, or household items. Even though I’m using the card and reaping the rewards, I still shop for the best deals, use coupons, and try to keep the price of items as low as possible.

I don’t use credit cards for things that I just want. If I want something that isn’t in the budget, I’ll use cash because cash makes me rethink the purchase. I have to stop and ask myself if that item can be covered in the budget and what kind of damage it will do to my budget. It makes me think about whether I really want the item or if it’s a passing fancy. Sure, I could just plonk down the credit card and pay it off at the end of the month, even if I had to transfer the money from savings, but that is the path to overspending and debt. I also don’t use a credit card if I can negotiate (or the retailer automatically offers) a cash discount.

Despite what the financial experts say, I don’t find myself spending more when I use cards than when I use cash. I’ve lived life both ways. I’ve had times where I paid cash for everything and I’ve had times where I used the cards for almost everything. In each situation, my spending has remained constant. As I noted above, whether I’m using cards or cash I actively seek out the best deals, use coupons, and shop sales or the used market. Since I rarely buy things I don’t need or that have not been budgeted for, there is little impulse spending with either method. If I don’t have the money for the item that day I don’t buy it, regardless of payment method. Period. The reason people spend more with cards than cash, I think, is because they do not exercise this discipline. They see a credit card as a chance to spend more or to relax their hunt for bargains because it’s so convenient to use the card. However, if you are disciplined in your spending regardless of the payment method, there is no reason why a credit card with a good rewards program can’t be a valuable addition to your financial toolbox.

If you want to use credit cards and remain debt free, you must read the fine print and stay involved with your account. Credit cards are notorious for changing payment due dates, raising and lowering limits, and changing rewards programs. While the interest rate may not matter to a debt free person, you have to keep watch on your account every month so that you don’t get tricked into missing a payment by a new due date or get socked with an over the limit fee when the card lowers your credit limit. You have to know all of the rules of your account and keep up with the changes. Yes, this is a worry you don’t have with an all cash lifestyle, but cash carries it’s own set of worries such as theft, no consumer protection, and it can limit your travel and Internet purchase options. No payment method is perfect and they all require your vigilance and involvement. Credit cards require your attention to be used wisely, but honestly you should devote attention to all of your financial tools.

A credit card is not inherently evil or an automatic debt creator. A credit card is a tool that can be used wisely or abused. If you are disciplined with your spending, a credit card can let you accumulate extra rewards and provide you with some convenience and protection you don’t get with cash. There is no need to spend more with credit than with cash. A debt free life revolves around a budget that you adhere to, regardless of how you pay for your expenses. Cash or credit only matters when the item is out of your budget and you don’t want to get carried away. Using credit in that circumstance is what starts many people on the path to trouble. Otherwise, if you are responsible and disciplined, it is completely possible to be debt free and use credit cards.

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18 Responses to A Life Without Debt: You Can Be Debt Free and Still Use Credit Cards

  1. Julie says:

    I pay my card off each month also. I use it mainly because it pays me cash back. I have gotten at least one $50 check each month that I have used the card.

  2. Pepper says:

    I pay everything that I can with my credit card, and you’re right, the rewards and protection are worth it.

  3. CashAholic says:

    If you are disciplined you can use credit cards and remain debt free. Unfortunately, I found I overspend when I use a credit card.

  4. Kate says:

    I would love it if I could use my credit card more often. But I can’t. Although I am disciplined enough to use it and pay it off, my husband is not. He has many great strengths and attributes, but he has an inability to stop himself from uttering the budget killing “I’ll have the money soon…” phrase. I love him and I’ve learned to deal with this by being the example and adhering to the use of cash myself. By being strong on this issue and giving up the convenience of credit cards myself, I help him–and us!

  5. simpleyme says:

    I am debt free and rarley use credit cards ,not because I have ever had problem with them i just do not like to get bills so i just pay as i go,I am really not going that fast 😉

  6. A Marino says:

    Credit cards are a good tool for those that can use them responsibly and in the ways that you suggested.

    There are those that have spending problems and credit cards are a no-no for them.

    It is probably a good idea to not use credit cards for those who are climbing out of debt. It’s just too much of a temptation.

  7. Marie says:

    I pay my card in full every two weeks after we get a paycheck and then I dont have to worry about them changing the billing cycle. We get 3% back in Target, Home Depot or Amazon gift cards that we use to pay for diapers or home maintenance. It sure has helped with kids costs.

  8. bRobert says:

    Those that Dave Ramsey deals with (like myself) are not disciplined enough handle credit cards responsibly. Just like an alcoholic cannot trust themselves to just have one small drink. I just used the cc on my vacation last week, and while I am out of debt, the temptation was there to just make payments rather than pay it off in full once I got back. My cc debt was over $30k two years ago.

  9. I pay my card off every month. I wish it were that easy with student loans too.

  10. Nagel says:

    I was advised by a friend long ago that credit card use on Internet purchases offers protection against theft and fraud, so you can dispute it later. However, that may be changing. My friend tried to purchase music gear online last month, using Chase credit card. The Chase statement issued notified him that they are disposing of responsibility on their part of any problems resulting with online purchases – so basically they are washing their hands of that consumer protection feature. Has anyone else ran into such an issue recently?

  11. Jackie says:

    Since I don’t practice the envelope system (or any system) when it comes to cash, I actually spend cash faster and with less accountability than I do with my credit cards. If I have $20 in my pocket, then I spend $20 – usually on fast food or fountain drinks at the gas station.

    With my cc, I write each amount in my check register then recogncile it when the bill comes. This way I always know how it’s impacting my checking account, more like a debit card in how I treat it. My main cc is also a rewards card, so I use it for just about everything I can. Now my cc company has an online tool that will break your purchases down into categories over months/quarters/year and this also helps me to see where I need to cut more spending.

  12. I use my credit cards to get out of debt. If i had cash and a $100 budget for food that $100 all gets spent. When i have $2.35 left in cash it gets spent on junk food or disappears for other reasons. I don’t buy junk food with the credit card so i pay all $100 to the credit card and get $2.35 closer to being debt free. These small amounts add up.

    I also suggest setting up your budget with cash if credit cards have been trouble. Move the cash from one envelope to a “spent” envelope when you buy things on the card and use the cash to pay your bill.

  13. justme says:

    gahhh kills me to hear people cannot handle cash

    I am not anti credit I just do not use it much because it is a bother for me to do so,if you just find credit convienant thats one thing but if somehow you just can’t control yourself with cash I would work on that

  14. Jackie says:

    Justme … lol, i agree. I do need to work on my accountability with cash but as long as I get more rewards/convenience with credit cards then I’m not too worried about it. If credit cards went away or there were significant enough rewards for cash, then i think I’d be just fine – but until I *have* to, my issues with cash are pretty small.

  15. GREENBACK says:

    I’ve used credit cards for years and hardly use anything else except for real small purchases like a pack of gum. You need the experience of using cash when you’re young I believe but as you get older and your financial house is in order I think using cc’s is fine. Some folks never learn how to handle money so I make these statements to those who have the discipline and self control to view that piece of plastic the same way they would dollars in their pocket.

  16. Gail says:

    For those wanting to use cash but get credit card rewards, many debit cards now offer rewards. You have the convenience of no bill at the end of the month, but still racking up reward points. I try to never keep more than what is needed in the checking account (which the cards are tied to) so the temptation to overspend is gone, and actually you have to be careful not to go over what is in your checking account.

  17. Chetwyn says:

    Thanks so much for this post. I’ve always been a cash-only supporter, but recently I’ve been grappling with whether or not to get a credit card. My job includes a fair amount of traveling and I’ve found myself with at least 5 different currencies in my wallet at some point in time. Coupled with all the coins, the option of a credit card certainly is inviting as a tool to help manage that, and to ease those theft-worries you certainly mentioned. Thanks for providing another point of view to consider!

  18. Nicola Dupont says:

    yes use credit cards,
    leverage debt to pay debt.
    I’m not against buying the LCD 62″ TV you paid $ 4000 and you got an item for $ 4000 dollars.

    just get smart and don’t pay interest on top the price that is when you start getting in trouble, buying things and paying more in interest than the original value.

    check movie maxed out will help to get an idea of the Credit Card industry

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