Can You REALLY Live a Cash Only Lifestyle?

Miranda Marquit — Tue, 27 Jan 2009 13:22:42 +0000

One of the effects of the current recession is that many people are turning to cash as a way to pay for purchases. More and more people are putting away the credit cards — either paying down debt or just trying to avoid getting in deeper. And there are numerous folks out there who contend that cash only is the way to go.

Is a cash only lifestyle truly possible in today’s world? Is cash only a viable option in a world where you are expected to build up credit in order to buy a house — or even get insurance? What about at the car dealership? At many dealerships, it’s actually harder to plunk down $10,000 in cash for your car than it is to finance it. Additionally, what about the security of risk of carrying that kind of money around with you?

Some people compromise by getting a debit card. With a credit card logo on the card, it is possible to use a debit card where credit is accepted, but it comes out of your checking account — mean that it is a way to use cash. This can be a good way to use money you have available now to make purchases that would ordinarily be made with a credit card. Of course, there are pitfalls to the debit card. You have to keep careful track of your expenditures so that you do not overdraw your bank account. And it doesn’t have all of the protections against liability that a credit card has. Besides, you can’t build a credit history with a debit card.

Building credit without a credit card

There are ways to build credit without a credit card — but some of these methods include borrowing money. You could get your car financed, and then pay off the whole amount much faster with the money you have saved up. You can also get a secure credit card (which is really just a debit card that is reported to the credit bureaus) to help you build a credit rating without using true credit. But watch out for the fees.

Additionally, there are some companies that can help you get a credit rating when you are functioning with a cash only lifestyle:

FICO offers the Expansion Score, which looks at how you pay your bills — such as rent and utilities.
Payment Reporting Builds Credit is another site that allows you to use your payment history to build a credit profile. Fees are involved in set-up.

Unfortunately, the credit card remains the fastest and most reliable way to build a credit history. And — even more unfortunately — we live in a world where a credit history is necessary if you want to buy a car, finance a home purchase or even get cable TV. Some employers even look at credit reports before they hire. Living a cash only lifestyle is admirable, but it isn’t always practical. But if you do live cash only, consider participating in some alternative ways of building a credit profile.