Did it make you gasp?
I closed my last credit account.
I closed my one and only credit card remaining.
And I had a credit score of 800.
I have NO credit cards or credit accounts of any kind. My score is going to plummet. And I am not worried about it.
Call me crazy, maybe. But it is something I have been wanting to do for a long time. And the opportune time finally came about with a 3 paycheck month that would help pad my savings, an increase in income and a desire for a non-sleepy life out of the suburbs without the crutch of a credit card.
Credit Cards are not for Everyone
Not everyone is meant to have credit cards. I mean look at the overall credit card debt. At the time of writing this, credit card debt is a staggering $1.3 TRILLION DOLLARS!
I get the travel hack game, but that (in my opinion) is for the very few who are ultra responsible, keep up with their travel hacking spreadsheet, and have normal everyday expenses that make sense to accrue points (like if you own a rental, have high average expenses or travel 365 days of the year).
Otherwise it is very difficult or impossible to game the system. I remember listening to George Kamel on the Lewis Howes interview, mention how credit card companies study approximately 100,000 algorithms on how people spend their money! How do you beat that? You don’t!
Do I regret it?
I don’t. It’s been a few weeks and I still don’t regret my decision. I actually feel elated to not have it anymore. It feels simple.
My expenses, where a credit card could be charged, have never been significant to make accruing points worth it. I’ve tried and it’s just led to spending more than planned and/or leading to credit card debt.
A weird thing happened as a result
I have money in my accounts and I even bought shares in my brokerage account. What?! It is so cool.
When I did have a credit card open my money never stayed put in any of my accounts because I would spend on the CC and then pay it off with money in my accounts so that I would not accrue interest or hold a balance. Well, for as long as there was money in the account. And then there wasn’t. Then I was subjected to the credit card float. Until I fell past the float stage. Then compound the interest owed. Fortunately I didn’t get to the credit card float stage a lot, but when it happens, it happens solid.
Now, you better believe I am going to stick to my budget and build a healthy emergency fund. My accounts are divided into separate categories to help keep me in check. When my variable account is gone, I have to switch gears to find something free to do or sit by butt down until money is available again. I also have no guilt if all that money in that account is spent because that’s why I set that budget.
But what about traveling?
What about traveling? ATM fees? My trips are never very long in duration. So I would incur about $60 of ATM fees. That’s better than a 29% APR that compounds (as I know from experience due to a previous international trip I took with the use of my CC and wasn’t able to pay it off before the date needed).
But get this, my bank refunds ATM fee expenses each month. Also available is the Capital One’s 360* Checking account with a No foreign transaction fee ATM debit card. There are choices!
What about fraudulent charges?
In all the decades using a debit card, I’ve only come across one or two situations at the most when my card was compromised for fraudulent charges. One, my bank was great at identifying it when it went through and blocked it. Two, all I had to do was report the card as “stolen” and they issued me a new one the same day with a visit to the bank. I think the fear of it happening is bigger than the possibility.
In Closing
I know many of you want to know how my no credit account journey is going. How will I over come the situations where credit is normally needed (like securing a new home, buying a car or needing to cover an emergency that may be more money than I have available). At this time I don’t have any needs upcoming, but I will be sure to document those situations here on this site.
Let me know if you have any other questions. I would enjoy chatting about it.
~Frugal to FI
P.S., these personal financial experiences shared are personal and may not be applicable to everyone.
Book Recommendation
The Simple Path to Wealth: Your road map to financial independence and a rich, free life
From JL Collins
This book grew out of a series of letters to my daughter concerning various things—mostly about money and investing—she was not yet quite ready to hear.
Since money is the single most powerful tool we have for navigating this complex world we’ve created, understanding it is critical.
“But Dad,” she once said, “I know money is important. I just don’t want to spend my life thinking about it.” This was eye-opening…
The simple approach I created for her and present now to you, is not only easy to understand and implement, it is more powerful than any other.