How to Avoid Ever Needing a Credit Card

There’s a growing trend of ditching credit cards among the younger generations. I’ve hit 30 and so far I’ve managed to avoid needing a credit card. I don’t think it’s too hard to live without a card, especially if you make a couple of lifestyle changes.

The idea that you need a credit card to built your credit history is false. That was a great rumour started by banking sales reps. I’ve had no trouble getting a home loan without any credit history. In fact, not having any big debt from a credit card probably made the process a lot easier.

Setup an Emergency Fund

Unexpected expenses are just that — Unexpected! While you won’t be able to predict what will happen in the future, you can soften any future blows by starting an emergency fund.

An emergency fund is a stash of readily available cash that can be used for any emergency expenses. Things like a broken appliance, travel to see sick loved ones or medical expenses. These things tend to come out of nowhere and if you’re not prepared you could be forced into debt.

In an ideal world, you would have enough money to cover 3–6 months of living expenses. But even just having $1–2k could make a huge difference. Keep your emergency fund in a savings account and only use that account for the fund (no dipping into it for the next holiday).

Save to Spend

If you own a credit card, you spend first, then save to pay it off. If you don’t own a credit card, it forces you to save up first. It does a really good job of stopping impulse buys. If there is something I really want, I need to spend time working towards it. Sometimes after a little while I realise I don’t actually want whatever I’m looking to buy.

Alternative Credit Cards

These days you can find alternative credit card products. In Australia, for example, Commbank has a card called Neo. It’s a zero interest card. Instead of paying interest you are a charged a monthly fee if you have a balance. The catch is much lower credit limits. Which could be a good thing. I wouldn’t use this card for everyday purchases, but it might come in handy to cover unexpected expenses.

Don’t Abuse Buy now, Pay Later

The alternative to credit cards are buy now pay later services. This is what young people are using instead of credit cards. These services shouldn’t be used for everyday purchases. They should only be used if you actually need something right now, and want to pay for it over the coming months due to cashflow issues.

Living without a credit card isn’t hard

So far I’ve managed 30 years to do it. And I think it’s only getting easier with all the new financial and budgeting tools available. My biggest tip — setup that emergency fund. That’ll save you from getting into debt. And then it’s just a matter of changing your mindset from “buy now” to “save now”.