I Stopped Using Credit Cards For 30 Days

It’s no secret that I love credit cards, but for all of last month, I decided to take a break from them. Now, normally, I’m cycling through maybe 4-5 credit cards at once, opening new ones, earning points for free travel, and increasing my credit score all at the same time. But honestly, the truth is that credit cards are dangerous for many people, and some personal finance experts say you might be better off just staying away from them entirely. So I wanted to put that whole anti-credit card view to the test, which is why I made the decision to just stop using them for the entire month of May, so that way I could talk about it for this blog.

The way I see it, there are basically two ends to the credit card spectrum. On one hand, there are people like me and many of you watching this who are using credit cards strategically and essentially profiting by earning points and cashback. On the other hand, there are those who overspend and carry high-interest balances, essentially funding the entire point and cashback system. It’s really interesting how it all works, but I think that in order to win with credit cards, we have to talk about not only why credit cards can be good, but also why some people just choose to avoid them entirely. So for all of last month, I decided to lock away my credit cards and document my first-hand experience of only using cash and my debit card to pay for all of my expenses.

To start back, at the beginning of May, I had to change up my wallet setup by removing all of my credit cards and adding more cash because my first rule was not paying with credit, but my second rule was that I had to try to use cash whenever possible. There are some highly debated benefits to only paying in cash that has been strongly pushed by a few personal finance experts like Dave Ramsey, primarily because he talks about how paying with paper currencies has a greater effect on the pain center of your brain than paying with a credit card. And so, because we could feel more pain if we were using cash, on average, people might actually spend less as a way to avoid that pain. Now, right from the start of the month, I did quickly notice a few negatives from using cash so often.

First, I noticed that it actually made it harder for me to track my spending. Now I’m someone who takes budgeting very seriously, and over the past few years, I found that credit cards can actually be an incredibly useful financial tool for keeping my cash flow organized digitally. That’s because I could just log into my accounts to see exactly how much I’m spending, where I’m spending it, and if I’m actually on track with my budget for the month. Normally, it takes maybe 30 minutes every week or two to update the budget that I created in Google Sheets.

However, when I was mostly using cash, it took much more time to track and then update all my expenses because the only real record that I had of all my purchases came from all these paper receipts that I had to keep a pile of on my desk. So I definitely felt much more disorganized overall. But you know what, I think all that extra effort is sort of a small price for some people to pay if they’re self-aware and they know that they’re more likely to overspend with a credit card anyway. The second negative that I found when paying in cash is something that might depend a little bit more on the person and where you live, but that is the fact that carrying cash actually made me feel more unsafe and at risk. So at any time during the month of May, I probably had between $200 and $300 in cash in my wallet, and whenever I started running out of it, I would just head over to a fee-free ATM to withdraw some more.

The problem that I have with this is that if I ever lose my wallet, well, that money is just gone forever unless someone finds it and then mails it back to me. But honestly, we all know that’s pretty unlikely. At least if I ever lost a debit card or a credit card with my wallet, I could just easily call up the issuers, lock those cards, and request new ones without having to worry too much. But even then, a credit card is probably the least risky thing to lose because most credit cards come with zero liability protection. So if someone ever used my credit card without my permission, the credit card issuer would be able to just remove that unauthorized purchase from my statement and I wouldn’t be responsible for paying that back.

But with a debit card, even though the bank is still going to investigate a fraudulent purchase and I’ll probably get my money back at some point, the downside to that is that my debit card is essentially a direct line to my checking account, so any money that goes missing from my account is actually gone until the bank looks into it and that could take anywhere from maybe a few hours to a few weeks depending on the bank and the situation. So if you need that missing money to pay a bill right now, then that could be a problem for you. But anyway, basically only carrying cash and a debit card made me feel a bit unsafe at times depending on where I was.

Honestly, I got used to it, and it wasn’t that big of a deal in the end. It’s just something to consider. So when it came to tracking my cash and my receipts, I ended up with a few dollars of change at the end of the month that I didn’t really know what to do with. So I just took that over to a machine and then redeemed it for an Amazon gift card that had no fees. And actually, it’s funny because I remember growing up, my parents would mostly pay in cash for things. So pretty much every two to three months, they would take all the coins that we collected in a jar in our kitchen, count them all up, and then exchange them for paper bills so we could all go out to a nice dinner.

So thanks to mom and dad for doing that while I was growing up. I always thought that was a cool little psychological reward for anyone who uses cash and collects a lot of change. And I’m curious, what do you want to buy with all that loose change that you currently have saved up right now? Let me know in the comment section below, and I’m going to pin the comment that has the funniest answer. Now, I think that my method of paying cash last month wasn’t exactly the most efficient. So one other method that I think could actually work better for some people using cash is called the cash envelope system.

Basically, the way it works is that at the beginning of each month, you just budget using actual paper envelopes for different categories of spending, and then you put some cash in each envelope for things like groceries, dining, entertainment, or really any other category that you want. And after that, you can only use that cash in each envelope for spending in that category for the month. So, if you have $300 in your grocery envelope, you can only spend $300 on groceries, or you can take cash from another envelope, such as entertainment, and spend a little less on entertainment that month.

I think doing something like this, if you’re using cash, probably would work a little bit better than what I did. However, it also really does limit your spending, but I mean that might be exactly the kind of discipline that some people need if they’re living paycheck to paycheck or if they’re on a really tight budget for now. Personally, for me, as someone who takes my finances very seriously, I’m only using credit cards as basically a cash replacement, meaning I only buy things that I know I can pay for in cash right now if I wanted to.

I’m not buying something on credit and then waiting for future income to come in so that I can pay off my balance. What I made sure to do is save up for several months’ worth of expenses, slowly over time, so that now I have this cash safety net that I can use to pay for my expenses. But instead of paying in cash, I just swap in a credit card that earns rewards and builds my credit. That way, I get all those benefits from those things, and then I pay off my credit card balances with that cash on time and in full each month.

Nothing changes in my budget or in the way that I spend, I’m only substituting one payment method for another. So going back to using only cash for the whole month made me feel like I was missing out a bit. Maybe now that the month is over, we can jump over to my budgeting template here where we added a few extra columns to track what credit cards I would have used for different purchases and what that would have earned me in points. So I had a conservative 1 cent per point valuation for my Chase points and my Amix points from all those credit cards that I typically use.

In total, I missed out on about 6,360 combined points that are worth a minimum of about $63.60. Now again, that’s just out of 1 cent per point valuation, but those points could easily get me around 2 cents per point, which would make them worth twice as much at around $127.20 for the month. So obviously that’s not life-changing value, but it does add up over the course of a year because if I were earning $127.20 per month on average, over the course of 12 months that’s going to be over $1,500. And that just goes to show part of the reason that I’m able to use those points to go on trips almost completely for free sometimes, and that’s not even counting any of the larger signup bonuses that I usually get on top of that.

So to quickly recap, using credit cards for me is more about them being a preferred payment option that I use instead of cash. I only use my credit cards to pay for things when I know that I have enough cash already set aside in my bank account and then I stick to a budget, pay with my credit cards like I’m using cash, then I pay off my balances on time and in full each and every month. So I’d say that the big secret to getting all the positives from credit cards without all the negatives like overspending and getting into debt is really all about having self-awareness around things in your own personal financial situation. That is, without a doubt, much easier said than done.

If we look at the average person, most people don’t budget, and most people don’t always live below their means or save up enough cash before using credit cards, so we all really need to take a good look at our own situations to decide if credit cards are a risk that we can afford to take. If you really don’t feel comfortable using credit cards, then don’t use them. I can say firsthand that paying cash and using my debit card worked just fine last month. I personally don’t think that paying with cash was any more painful than paying with a credit card because honestly, paying for anything makes me feel some sort of pain just because I’m already pretty frugal and minimal, and I mean, sure, I missed out on some points and a few other things, but I was still profitable for the month of May, meaning my income was greater than my expenses when I tracked all that, and I was still able to automatically invest in some things like index funds and my Roth IRA, and those are all things that matter much more than credit card points anyway.

I’ve heard others say this before too, but credit card points and stuff like that are really just a bonus on top of any other personal finance goals that you should have. Now aside from those points that I can use to pay for travel, there are also two other very important reasons why I still prefer using credit cards after this month of not using them. So the first reason is because of all those protections you get with credit cards, like that zero liability protection I mentioned earlier as well as some other things like purchase protection, extended warranty protection, and even travel insurance. For purchase protection, that has to be covered against theft and damage, and it usually covers the first three to four months of a purchase where if something bad happened to something that I bought with a credit card, I could just call up the issuer and they should be able to reimburse me for that.

For extended warranty protection, that has me covered for an additional year past the expiration of a manufacturer’s warranty. So if something that I bought breaks after a longer period of time, I know that my credit card issuer can usually have that replaced too. Now, luckily, I personally have not had to use any of these things yet, but I know plenty of people who have, and it just saves time and a lot of worries, and it really gives me some peace of mind knowing that I’m covered when I’m paying for things with my credit card. But, once again, if you’re living paycheck to paycheck and don’t trust yourself to use credit, or if you’re working really hard to get out of debt, I think it’s reasonable to avoid credit cards for the time being because those extra protections are nice, but your ability to do things like get out of debt is far more important. And then the other main reason why I still love using credit cards is one of the most important reasons that I mentioned before, and that is to build my credit score.

So your credit score can be so useful for a ton of things in your life. Your future employers can take a look at it; potential landlords might want to see it to make sure you’re likely to make your rent payments on time. And of course, a good credit score is going to allow you to get the best interest rates for different types of loans like a car loan or a mortgage, and those lower rates can save you tens of thousands of dollars in interest charges over the years. So getting your credit score up to a good place is a big priority in your personal finance journey, and credit cards can be one of the easiest ways to do it if you’re using them responsibly.

The big question that some people might wonder about me only using cash and a debit card for the month is: Did I actually end up spending less than if I had been using credit cards? And the honest and straightforward answer is no. I spent more in the month of May than I have in any other month so far in 2022, but it really had nothing to do with the payment method that I was using. May just happen to be a month where I had a few one-time expenses that I normally don’t, and I had a few other business-related expenses as well. But I’m not putting the blame for that higher spending on my use of cash on the debit card because I still spent my money very intentionally and I was still within my budget overall. So in the end, I think this little 30-day experiment was fun to try. It definitely forced me to have an open mind with how I approached my spending, and I can really see how paying in cash can help some people based on their own situation.

I think that swiping a credit card really does feel effortless sometimes, and sometimes the best defense against that is either to not have a credit card at all or to set aside cash as a safety net first to have to pay off your credit cards and then set up a budget to help you spend more intentionally too. So, of course, I can say that after not using credit cards for a month, I’m still very pro-credit card, but hopefully, I’ve made my point here that there’s no one right payment method. Like anything the responsibility falls on you to have self-awareness and to take the necessary steps to reduce the risks for anything related to your own personal finances including credit cards.