Like most consumers, you think having credit cards is handy. Worse yet, you may feel that living without them is literally impossible! Really? A reminder of the dangers associated with these credit instruments and some advice on how to do it without them.

Almost 76 million credit cards are in circulation in Canada. However, according to a recent survey, about half (49%) of Canadians in debt from 20 to 34 years and the majority of those in the 35 to 54 age group say they have an outstanding balance on one or more credit cards. Result: the interest accumulates and the invoice to be paid is more and more salty.

Disconnected from his budget

Because the dangers of slippage are numerous when you have such practical credit instruments to use. First, it is easy to disconnect from the reality of your finances and your budget, since you do not need to have money in your bank account to buy a property. The latest smartphone to hit the market? Hop, we get it right away. Our fridge no longer works? Why not take the opportunity to replace all the appliances at the same time. One of your cards is full? No problem, we transfer the balance to another and we start again!

The minimum payment trap

It's no secret that credit cards are a formidable source of debt. Not only because they provide us with financial resources that we don't really have, but also because we can quickly find ourselves trapped in a spiral from which it will be very difficult to get out.

Because even if some issuing institutions offer cards with reduced interest rates (10 to 13% approximately), they usually hover around 20%. For department store cards, it is not uncommon for them to reach 30%. When you pay the full balance every month, no problem. But if this is not your case, the bill will increase gradually.

Added to this is the minimum payment trap. According to the new provisions of the Consumer Protection Act, the minimum monthly payment to be made is 2% of the balance. This rate will gradually increase to 5% in 2025, under the new regulations. However, a quick calculation clearly shows the dangers of the minimum payment: if you only repay 2% per month on a balance of $ 1,000 for a credit card with 19.9% interest, it will take you almost 26 years to pay it and it will cost you $ 3,000 in interest charges!

Alternatives

Because we live in a society where everything is done to encourage us to consume, we are tempted to obtain and multiply credit instruments. In addition, it can be very difficult to book a hotel room, rent a car, or buy anything online without a credit card.

Is it really impossible to do without it? Not at all, because there are alternatives. So, to better control your expenses while benefiting from the flexibility of a credit card, you could opt for a prepaid card. It must be "refueled" in money, so there is no risk of exceeding the limits since you deposit the amount of your choice. You can then use it as you wish, both online and in-store.

Another interesting option: credit-debit cards. Visa and MasterCard both offer these new types of products linked to the bank account. The transactions will, therefore, pass directly into your account, which allows you to keep control of your finances.

To make purchases and reservations on the Internet without any card, use PayPal, Apple Pay, Amazon Pay or Google Wallet: these payment tools are also linked to your bank account and also offer solid protection against fraud.

The Benefits of Living without Credit

Living without a credit card is entirely possible thanks to the payment instruments available today. This keeps your peace of mind knowing that you are not living beyond your means. Besides, when possible, it is always better to use your debit card.

Eliminating credit cards is also a great way to restore healthy spending habits: don't have the money to make a purchase? We are simply waiting to have set aside the necessary amount. To do this, the best method is to establish a budget in which a certain amount is set aside each month for this purpose. We can thus plan in advance, over a few months or a year, large purchases such as a household appliance, new tires, furniture, but also a trip and even recurring expenses such as those of the holiday period, vacations and back to school.

Finally, remember that ideally, we should all have a financial cushion that represents two or three months of income in order to compensate for the unexpected in life, illness, loss of a job, etc. If you have this cushion, do you really need credit cards? Because the only real advantage of these is the ease of payment and therefore debt!