Ready to Kick the Credit Habit? Here’s your Strategy

The irony about building a good credit history is that you need to use credit to build a history. So, it’s not really possible to stop using credit altogether. But if you can limit your credit usage to your car loan, a mortgage, and maybe one installment loan, you should be able to get by in life without adding debt through credit cards. The reality is, if you have established the proper budgeting habits, and you are setting aside a sufficient amount of money in an emergency fund, you really don’t need to use a credit card. Challenge yourself to see if you can go one year without using a credit card. You’ll probably never use one again, except on rare occasions.

• Carry big cash: Studies have shown that you will spend more money when you use a credit card. And, even with a debit card, you will spend more than if you use cash. The trick to limiting your cash use is to carry big bills, like 50- or 100-dollar bills. Studies show people are less likely to break a big bill than if they carried a bunch of small bills.
• Owe yourself, not the credit card company: Rather than whip out that card to pay for your next big purchase that’s not in your budget, grab some money from your emergency fund, and then set up a repayment plan for paying yourself back with interest. Just make sure that you do.
• Use a shopping list: The biggest budget killer is the impulse buy. Whether it’s going for groceries or to the home improvement store, bring a list. And do not deviate. If you are tempted, you need to ask yourself, “Do I really, really need this?” The average American can save as much as $1,000 a year by stopping impulse buys.