Special Report: Cash-Only Lifestyles

Can you imagine shredding your credit cards?

After years of struggling with debt, that’s exactly what some people have done, including 56-year-old Doug Lively of Cary. He and his wife shredded their credit cards a year and a half ago, when they felt overwhelmed by a debt of about $7,500.

“I know that a lot of people have much higher debt than that. But we realized right around $7500 that this was really becoming an unmanageable debt,” Lively said. 

He changed his spending habits when he signed up for a Dave Ramsey Financial Peace University course at his church.

“I was a little nervous at first,” he said. “You don’t want to talk about, ‘hey, I’ve got all this debt and I’ve been undisciplined about the way I’ve been spending my money.’”

More than a million families have taken the course since 1994. When Ramsey spoke in Raleigh recently, more than 8,000 people showed up.

The course taught Lively that if he can’t pay for something with cash, he doesn’t buy it.

It meant he had to learn to live with less. He put off buying new furniture. He saves up for big purchases and looks for bargains.

“When you have cash and you’re paying cash you want to hold on to your cash a little more,” Lively said.

He slowly paid off his debt. He doesn’t get letters and calls from creditors anymore.

“It makes you feel a lot better,” Lively said.

But since closing his accounts, his credit score has dropped. That could make it more difficult to buy a home or car.

“We equate being a good citizen with having a good credit score. And that’s not necessarily the case,” he said.

A drop in credit score is common, says financial counselor Kenneth Long, because your score is based in large part on how you use credit cards.

“Some people call them necessary evils,” said Long of Vision Credit Education Inc. “If you can manage to use credit cards in a responsible manner, you know, you can take a step forward on your credit history. But if you get into trouble, you’re taking about ten steps back.”

He suggests keeping a card open just to extend your credit history, as long as you don’t pay an annual fee.

But some, like 35-year-old Krista Blackburn of Fuquay-Varina, are so committed to a cash-only lifestyle that they’re not concerned about credit scores.  

“If you’re truly paying cash for everything, then it doesn’t matter whether you have a credit score or not,” Blackburn said.

She does use debit cards. But experts say that’s not always a solution. If you’re traveling, some hotels, airlines, and car rental companies don’t accept them. Or they could place a hold on your account for much more than you expect. Experts suggest calling ahead of time and asking about options like paypal and travelers checks.

Blackburn and her family don’t do much traveling, as they work to pay off debts, but, “when we do get a new car, it will be because we want to and we can afford it, not because we want to make sure we’re impressing somebody else,” she said.

Credit card debt in the U.S. has decreased for 24 months in a row, according to the Federal Reserve. But Americans still owe more than $800 billion to credit card companies.