As interest rates increase and finance fees seem to cost more than your minimum payment for credit cards, it's no wonder many people are considering moving to a cash-only budget system. People who are frustrated with how the credit card industry has been raising interest rates and lowering credit limits to reduce their risks lately have been considering cash-only budgeting – would you benefit from it? Is it even possible?



For those who rely on their credit cards to make ends meet, you may be thinking, “you can't possibly be serious!” But there is a small percentage of people who already live without using credit cards, proving it IS possible – but is it right for you? Here's how to decide:

Active or Passive Opt-Out

Passively choosing to live without credit means you live the ultimate cash-only lifestyle. You don't finance anything, in addition to avoiding credit cards, which means you don't get a loan for a car or a mortgage for a home, for example. If you already have these loans, it means working hard to pay them off and avoiding all other credit sources in the meantime.

Passively opting out of the credit system means that you no longer participate in the credit system. You'll pay the bills you have, but will not create new debts by taking on new sources of credit. Your credit history will become dormant as you pay off existing debts and not use any other credit - and as a result, your credit score will probably go down as well.

Living without credit means if you have to buy ANYTHING at all, no matter the cost, you must buy it with cash – including large purchases like automobiles and homes. People who choose this lifestyle tend to be very good at saving money, so that they have it available when they need to make a purchase. They also tend to have higher incomes than people who become over-ridden with debt but it is definitely possible to live a cash-only lifestyle on lower incomes as well (and very beneficial!)

Some purchases are difficult to buy without a credit card – things like airline tickets, car rental or hotel rooms for example. People who live cash-only lifestyles simply get a debit card with a Visa or MasterCard logo connected to their checking accounts and use this in place of credit cards whenever necessary.

Actively removing yourself from the credit system is just about impossible. If you are already using some form of credit or financing, you will not be able to get rid of the details on your credit history and would simply have to wait until your payments have all been made to existing credit before you could have no credit history (and it would take several years for the information on your credit report to “go away”).

While it's admirable to want to live a cash-only lifestyle, it may be better to use a small amount of credit and pay your bills on time. This will enable you to have a good credit score without carrying a lot of debt, and should you ever need financing for emergencies or other purchases – you should have no difficulty getting it.