Six years ago, I decided to cut credit out of my life.
But not before they got me in a heap of trouble.
I grew up believing that a credit card was something you needed to be a responsible adult in this world, so I was thrilled when my parents opened up my first credit card for me in college. I felt like I had arrived.
Working as an entry-level assistant in the television industry, trying to make ends meet in New York City, I quickly realized that my $29,500 salary alone wasn’t going to cut it. To make up the difference, I opened up three more credit card accounts over the next three and a half years.
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Credit was my security blanket. Instead of opting out in the name of financial responsibility, I could spring for the next round of drinks with my friends. Or take a trip to Costa Rica and charge it, even though my stomach churned when I saw the prices. Or avoid asking for the raise I know I deserved, because I was fine—I didn't need more money. Credit was my crutch.
I told myself it was better to use cards. I was building a credit history. And think of the rewards! With credit, I didn’t have to think about what came in and what went out. I was impulsive with my decisions. If I wanted something, I just bought it, and I carried all my cards with me all the time “just in case I needed something.” Something always came up.
This was before the financial crash of ’08. Credit flowed freely and it seemed everyone was living on borrowed money. I figured, “If the banks are letting me borrow this much, I’m sure it’s fine.” (It wasn’t.) And I rationalized that I was investing in my future by using credit to make up for my lack of cash.
My Own Personal Financial Crash
In 2007, I was two months late on one of my payments. I had never really had a system to pay—or keep track of—my bills, and this one escaped my notice for too long. As a result, my interest rate jumped and my minimum payments quadrupled overnight. Before that moment, I’d never looked at the fine print—in fact, I'd never really considered that credit was a contractual obligation.
Suddenly, I didn’t feel so free.
I plopped down on the floor with a calculator and all of my bills to total everything I owed, and the numbers shocked me into reality: I was almost $30,000 in the hole, which, at the time, was 95% of my after-tax annual income.
Quite frankly, I was pissed. How had I let it get this bad? I realized that if I was going to get out of debt, I’d have to end my addiction to plastic. This wasn't a minor realization; it was a turning point in my financial life.
Suddenly, I was determined, resolute ... and scared as hell. I was terrified that some catastrophe would strike and I’d regret that I didn’t have my cards to save me. Even so, that night, I cut up all of my cards—except for the one my parents opened for me in college.
I took that card, placed it in a Tupperware container of water and stuck it in the freezer so I couldn’t use it.
At first, going all cash was terrifying. Venturing out into the world without my cards made me feel exposed. I thought for sure some horrible event was going to occur where I’d be without money. It felt like my very survival was at stake.
I created a simple spreadsheet that helped me track when I got paid and which bills would be paid out of each paycheck. Most of my bills came out of the first paycheck of the month, leaving me with no cash left over, which was part of the reason I was carelessly racking up debt in the first place. I balanced my payment schedule so that half of my bills were due in the first half of the month and half my bills were due in the second half, and I split my rent payments in half each month so that it wouldn’t be an enormous payment coming out of just one paycheck.
To free up more money to pay off my debt, I moved in with my sister and I temporarily pulled back on shopping—but I made sure to build rewards into my budget to keep myself going when things felt rough. If I stuck to my spending plan for two weeks, I would buy myself a new book from Barnes & Noble or take myself out to lunch on payday.
At first, going all cash was terrifying. Venturing out into the world without my cards made me feel exposed.
I also stopped doing my taxes myself and hired an accountant to help me get the maximum tax return, which was a huge relief. He had a system where I could pay him out of the tax return, so no money was physically exchanged. My tax returns went directly to paying off the balance on my cards.
After a few months, the initial shock wore off, and I realized I really could survive on cash alone, with a bit of planning.
If there was something I needed, I would save up for it. If I didn’t have the full amount of cash on hand, I would negotiate payment plans, or I would just wait until my next paycheck to make a purchase. Sometimes, I would ask myself: Do I even really need this? I was surprised by how many times the answer was "no."
Over the next 18 months, with the help of tax returns and careful planning, I systematically paid off every balance and closed all my accounts except that one in the freezer, to which I assigned my fixed expenses: cell phone bills, gym memberships, utilities and transportation. That way, I could plan what I’d be spending on the card in advance while paying down the balance, to preserve my credit as I did damage control elsewhere.
Why I'll Keep Living Without Credit
Living this way forced me to be honest about what I truly needed and say no to the rest. I discovered that books, classes and learning new skills fed my soul more than cabs, eating out and large amounts of cheap clothing. It also taught me a lesson that has served me well: how to delay gratification.
Sure there were a few hiccups along the way, (booking car rentals and hotels can be tricky without a credit card, but if you call ahead with plenty of notice and ask about using a debit card, they can usually make it work) but nothing that I couldn’t plan for in advance.
Six years later, at 31 years old, I’m debt-free with a growing savings account that makes me smile. I’ve settled into a “mostly no credit” way of life. I have one card with a modest credit limit that I use for recurring monthly bills and pay in full every month. I check my credit score every once in a while and it keeps rising.
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The best lesson I learned from giving up credit was how to focus on what’s most important to me when making decisions. With credit, I spent unconsciously. Without it, I’ve learned to live in the “financial present” and be awake for every purchase. For me, living without credit is a freeing experience. It’s definitely not for everybody, but it’s how I intend to live for years to come.
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Jillian Beirne Davi lives in Weehawken, NJ just across the river from New York City and is the creator of Abundant Finances, where she writes about getting out of debt, amassing savings and living an abundant life.