About 25% of Americans living a cash-only lifestyle prove that it is in fact possible to live a life without credit cards. For the rest of us relying on the convenience of credit cards and the access to money when we may not have the cash flow available – we wonder how it's possible to sustain a life in these modern times without using plastic.
The creators of the FICO credit score, Fair Isaac Corporation, claims approximately 20 to 25 million people in the US do not have credit, with another 35 million living in the US with a very limited credit history. These numbers boil down to some surprising statistics: one in every five Americans do not have access to credit.
Of course, there are two groups of people in the category of non-credit card users: people who don't have credit cards because they don't want them; and those who just can't get credit cards because they have bad credit, or due to their immigration status, or other reasons.
The Federal Reserve Board Survey of Consumer Finances of 2004 showed that 58% of households having credit cards had balances on their cards. With the current state of the economy, studies have been showing that the use of credit cards is declining (whether that is due to inability to get new credit or a desire to avoid getting into (more) debt is unknown).
“In college, I got my first... and second... and third credit card. Every where I turned their were people set up on campus giving away free stuff if we applied for their credit card. I mainly used my credit cards to fill in where student loans left off and my own income wasn't quite enough when it came to paying for college tuition and required textbooks – but after four years of relying on the credit cards to fill in those gaps, I graduated with about $6,000 in credit card debt,” says Stacy Jamezegour. “The credit card debt was on top of the $45,000 in federal and private student loan debt!”
Jamezegour goes on to explain that some of the credit card debt also came from repairing the vehicle she used to get to and from work and college – since all of her full-time income was paying for college and living expenses she was unable to establish an emergency fund. She believes that she would not have been able to finish college had she not had credit cards available to “fill in” the gap of what she needed to pay and what she had available through student loans and her income.
Others who have used credit cards and then paid them off later vow never to go into credit card debt again. They are able to live a credit-free lifestyle, and once adjusted, say there is really no need to carry a credit card in your wallet. “I used a home equity loan with a low interest rate to pay off my high interest credit card debt,” Jason Michaels explains, “instead of making multiple payments to several credit card bills each month, I just make one, lower payment. I will never use credit cards again.”
Like many people who have sworn of credit cards after bad experiences or have decided never to use them in the first place, Michaels uses a debit card with a MasterCard logo connected to his checking account to handle any purchase that would traditionally be done on a credit card – like reserving a hotel, or to pay for items online or by phone. This counters the argument of credit card users that you really need them for certain expenses or reservations.
Credit card companies have made billions upon billions of dollars off consumers using credit cards incorrectly. As people began relying on credit cards as “additional income”, forgetting that it would have to be paid back, or otherwise allowing the debt to become too much to handle – interest payments and over-the-limit fees and other finance charges we a welcomed result by the industry. As consumers become more knowledgeable and take better control over their financial situation – consumers and credit card companies alike may discover that it is in fact, possible to live in a world without credit cards.