Here’s a scary statistic: The average family has $9,000 in credit card debt! Well, some people have decided that they’re tired of dealing with debt and all of the stress that comes with it, so they’re living a cash-only lifestyle. According to MSNBC.com, some people are cancelling their credit cards and becoming part of a small – but growing – “debt-free” movement. They’ve decided they’re going to pay cash for everything, so debt isn’t even an issue. For example, one woman mentioned in the article decided to live “debt-free” after she and her husband were struggling to pay the bills and had $50,000 worth of credit card debt. She sold her home, paid off the family’s debt, and moved to an area where it was cheaper to live. Now she uses cash and debit cards only, and has no debt.
So why are people deciding to live these “cash-only” lifestyles? Denis Cauvier, a financial psychologist, feels that times are tough – and people want to take control of their finances. When people look at things like the ups and downs of the stock market, housing prices, and unemployment sky-rocketing, they get a sense that things are out of control. However, if they cut up their credit cards and pay cash-only, they can “take control” of their finances.
A cash-only lifestyle isn’t always easy. Another person mentioned in the article – who stopped using credit cards – has had to be creative when it comes to making certain purchases. When his wife decided to visit someone in another state, they had to ask a friend to pay for the plane ticket with a credit card and then paid back the friend in cash. Living debt-free could actually hurt your credit score, because having NO credit history can be as bad as having a bad credit history. Why? If you don’t have any kind of credit history, lenders won’t know if you’re a person who pays their bills on time, and they may hesitate to give you a loan. However, one way to solve this problem would be to set up an automatic monthly payment – like a small bill you know you can pay off every month – to keep your credit card active and maintain your credit history.