Living without a credit card

By Helen Fowler

Living without a credit card seems like a thing of the past. But if you're working on paying down credit card debt, giving up your cards for a while may not be a bad idea. According to research from the UK Cards Association, 39% of the UK adult population lives without one, which raises the question: How do they do it?

Once you're used to having a credit card, giving it up won't be easy, but you may see benefits down the road.life-without-credit_card

Planning your spending is much more important without a card. Every time you leave the house, you'll need to consider whether you need to buy petrol, parking tickets, food or other purchases that you might not even think twice about with a credit card. Instead of paying your bill at the end of the month, your daily expenses will come straight from your account, so you will need to make sure you have enough money in your bank account.

Don't worry. Eventually, this planning will become a habit. (Just ask your grandparents - they likely remember when this was the only option.)

Being a cardholder  has benefits, to be sure. Besides convenience, using credit cards responsibly helps you build your credit record.

But going card-free has advantages, too. Not having a credit card may help control spending. People tend to make more frequent and higher-priced impulse buys when paying by credit card than by debit or cash, according to research from the Massachusetts Institute of Technology's Sloan School of Management.

Plus, you'll have a much better idea of exactly how much you might be spending unnecessarily. When you see cash disappearing from your wallet with every purchase you make, you're likely to pay much more attention to how much you're spending.

If you're ready to make the plunge into a credit-card-free life, here are a few options to smooth the way.

Savings
Make sure you have instant-access savings for emergencies. If, say, your car has a flat tyre, you'll want to be able to replace it fairly quickly. If you don't have enough money available in your current account, you'll have to take that money from your savings.

"As long as you can access money quite quickly by moving savings into a current account for example, you will be OK," says Andrew Hagger, of MoneyComms.

Prepaid cards
Another alternative is prepaid cards. You can load funds onto such cards and use them like a debit card. Prepaid cards can be useful when you're shopping online or you need a large sum of money -- for instance, if you are travelling or planning to make a large purchase. Beware, though: Some come with high fees.

Cash and cheques
You can also try good, old-fashioned cash. However, it is not wise to carry large sums around on your person.

Turning to cheques might not be the best bet either. According to the UK Payments Council, cheque usage has been in decline for more than 20 years, falling by 79% since 1990. At one point, cheques were even on the verge of being abolished altogether. They've been given a reprieve for now, though you'll be hard-pressed to find a retailer who will take them. Still, some people use them to pay tradesmen or send money through the post. 

See related: Fact or myth? Test your credit rating knowledge, How to prioritise your debts

Published: 8 January 2014