Whether you’re living without cards by choice or necessity, here are some tips on how to survive without a credit card:
offer debit cards with cash back programs. You may only be familiar with Discover and American Express as credit card providers, but they’ve branched out into the debit space too.A credit card-less lifestyle goes against the mainstream grain, so it can take some planning. That’s particularly true when it comes to travel. Renting a car or reserving a hotel room has traditionally required a credit card since these services put a hold on your account.
Make sure when using a debit card that you have two forms of valid ID—one should be a driver’s license—and enough money in your account for any costs that you might rack up. Warning: A car rental company may place a hold against your account of up to $200 as a deposit in addition to the estimated rental charges. So your hold could easily total $500 or more.
When you use the card, you’re required to make a monthly payment—it’s not taken automatically from your deposit. In that way, you can build up your credit history and score. Moreover, you can use a secured card if you don’t want to use your debit card for car rentals or hotel reservations. As with other cards, the amount that’s charged as a hold against your account won’t be available to you. But that’s not a problem if you’re only using the secured card for this purpose.
In addition, closing a credit card could affect your credit utilization ratio. That’s the ratio of your outstanding balances to your credit card limits. A low utilization ratio has a positive effect on your credit score while a high ratio can be a negative. If you have $5,000 in total credit limits and you owe a total of $1,000 on your cards, your ratio is a low of 20% . However, if you close a card with a limit of $3,000 and you still owe $1,000, that increases your ratio to a not-so-hot 50% .
Some people use their credit cards once a year and then quickly pay off the balance to help their credit score. This helps keep your payment history in good standing but also prevents your bank from closing your account because of inactivity. Others rely on installment credit like auto or student loans to help build their credit score.When credit cards are out of sight, credit reports can be out of mind. You don’t want your credit report to go unmonitored.
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