One of the most popular methods for getting out of debt is to cut up your credit cards. While this may seem like a drastic measure, it’s one that many people find success with as they work towards living an “all cash” lifestyle.
The benefits of cutting up your credit card are obvious. The ability to buy on impulse is gone, and you’re forced to think before making a purchase. No more worrying about how much money is in the account or if there’s enough cash at the end of the month – it’s all about budgeting now!
There are pros and cons to cutting up your card, so before you decide what method will work best for you, explore all possible options and weigh them against each other.
However, deciding whether or not to cut up your credit card can take time and effort. Here are some pros and cons to help you make an informed decision to cut up your credit card to get out of debt.
Pros Of Cutting Up Your Credit Card
Cutting up your credit card is a great idea for many reasons. You’ll save money, you won’t be able to make impulsive purchases, and you won’t have the hassle of worrying about how much cash will last at the end of each month!
Here are more tips to convince you that cutting up your credit card is a good idea.
Pay Off Debt Faster
Here is the first reason why many people cut up their credit cards. It is a means of paying off credit card debt faster than it would usually be paid.
Instead, using this method allows consumers with more disposable income other than just one source. Now, there is no cash flow available for you, and eventually, there is nothing left that can fund any emergency expenses. That’s why many people pay down their credit card balances as soon as possible after making monthly payments.
You may be charged late fees by not paying off your credit card statements in full each month, which cost you more than how much you earn as interest rates compound over time. Some cards even have an annual fee just for using them.
Many people resort to cutting up their credit cards as the first thing to do to pay off debts faster. Add the debt snowball method to the chopping, and you are well on your way to paying those debts off for good.
Debt is nobody’s friend. Some debt is inevitable for things like mortgages and student loans. But the more you use credit cards, the faster the balance builds, and the harder it is to dig out from under the pile.
Learn more about why being debt free is important here.
Save Money In Interest And Annual Fees
You may be wondering why your credit card statement is so high when you’re sure you only bought a coffee at Starbucks.
Using our credit cards can make us feel like everything in life is within reach. We don’t have to save for things because they are readily available on plastic.
This convenience comes with consequences, though, and those come out in high interest rates, late fees, and annual fees, which end up costing more than just what we originally spent! It’s important not to take this lightly, or your shopping habits could cost you big time over time.
Making minimum payments doesn’t help, as the interest charges consume most of that.
Not only do you not solve your problem, but it also worsens over time with accumulated interest and late payment fees, which may cost you more than you spent in the first place. The smallest debt can become a monster in the long run, and if your card develops higher interest rates, it can get out of control.
Not having credit cards is the best way to save money. Debt consolidation and debt payoff save money.
Streamline Your Spending
People often feel better about streamlining the mess of cards they’ve acquired over the years. It’s safe to say that no one loves carrying around credit cards, which can make them burdensome and inconvenient. But did you know they are also a cause for concern regarding personal finance?
According to Cardrates.com, the average American carries four credit cards, and in 2019, “75% of consumers with credit cards carry an average balance of more than $6,200 on their accounts”. This could lead to spending too much on interest rates or forgetting about funds altogether.
Now is the perfect opportunity for some spring cleaning! Simplifying things into a single monthly payment can help with monthly spending and budgeting.
Fewer Bills To Manage
One of the best parts about not carrying a credit card is having fewer bills.
Imagine what life would be like if we weren’t swamped with managing our finances every day–it’s true, there are fewer monthly financial responsibilities without cards.
It’s always refreshing not to have the constant hum of debt looming over your head, constantly reminding you how much money is owed to creditors each month.
With no credit cards or other forms of payment that need ongoing management, there are fewer responsibilities when paying off debts, and your bank account will benefit!
Cons Of Cutting Up Your Credit Card
Harder to get credit
It can be hard to get a personal loan from banks without a line of credit, and it will take time for new habits to form and for you to build up savings. You’ll need a plan and will need to think before making purchases.
This just takes a little more planning. Instead, you will need to save for things like furniture and cars. Buying a home will take a lot of work, but it can be done. Look for a mortgage broker who works on manual underwriting. This is the old-fashioned way of getting a mortgage.
Cutting Up Your Credit Card Is Inconvenient
Some people may choose not to cut up their credit cards because they perceive it as being more of an inconvenience.
Credit cards can be beneficial for those who often travel internationally or shop online. Making reservations and renting a car could also prove to be more of a challenge.
Many would rather have Visa, Mastercard, and American Express in their back pockets for a night on the town.
Having a debit card can replace a credit card in almost all of the scenarios you can think of here. Except, you need to have the funds available instead of “borrowing” from the credit card company and paying them back.
It’s better just to cut up credit cards to get out of debt and be done with it.
What If There’s An Emergency?
With access to it for emergency purposes, you might end up with a way out and eventually deeper into financial troubles. This is the biggest reason I hear from my coaching clients to hold on to credit cards.
However, having a substantial 3-6 month emergency fund would debunk this myth.
Spending Is An Addiction
Many people who tend to overspend want to keep pursuing something that allows them to buy things they desire or need.
Instead, the feeling of spending money out of control can be very addicting and even seductive. Many people who continuously use credit cards to buy things they cannot afford are those who fail to cut up their credit cards because having that access is very important to their livelihood.
How to cut up your credit card.
When deciding how to dispose of a credit card, consider these ideas:
First, close your account at the bank. Make sure the account is not active so if someone doesn’t get ahold of this information; they cannot hack your account or steal your identity.
DO NOT DISCARD IN THE TRASH!
Dispose of them by throwing them away via garbage disposal or shredder if available, but ensure that there is no way someone else can use them with personal information available.
I’ve heard of people disguising their credit cards in cans or old food containers in the garbage. It’s not the worst idea because who would dig through moldy sour cream to get ahold of a credit card?
Your best bet after shredding it is to cut it up with scissors into small pieces, making sure that the numbers are all on individual parts.
Then, go around your home and throw each piece into a different trash container. That way, the entire credit card number is all in different places, making it virtually impossible to glue it back together.
And remember, when your credit card issuer sends you a new card after the old one expires, just do the same again!
Does cutting up your credit card hurt your credit score?
You don’t need your credit card to live, so why keep it? If you can manage without a credit card for three months, you should try cutting it up.
It may hurt your credit report, but the risk might be worth it.
The benefits of cutting up a credit card are endless, from preventing spending to stopping others from charging unauthorized purchases on your account. It’s no wonder why so many people have taken drastic measures in recent years with their cards and cut up credit cards to get out of debt. The credit utilization ratio can also factor into your financial situation if you need finance. The smallest balance possible on these cards can help your credit file.
Why Would You Cut Up Your Credit Card?
The benefits of cutting up a credit card are endless. From being able to prevent spending and also stopping others from charging unauthorized purchases on your account, it’s no wonder why so many people have taken drastic measures in recent years with their cards!
Cutting out this crutch has helped countless individuals get back into shape financially by eliminating any form of temptation that would otherwise be present when using plastic money.
Gone is the worry about missed payments and interest accumulating. Gone is the worry about your debts building up to being overwhelmed.
Just imagine how much less stress we’d have if our constant worry about paying off debt weren’t tied so closely to the idea of using credit cards.
It is a great feeling to know you are in control of your finances and spending decisions again; let’s face it, how many times have we all said, “This was supposed to be my treat” after we’ve already purchased something on our credit card?
With an option like cutting up your card, there will never be any reason to justify your actions by telling yourself, “I’ll pay for this later.”
While some people may choose to cut up multiple cards at once, others prefer to do so one by one over time. But replacing credit cards with cash, checking accounts, debit cards, and other products and services will reduce your financial anxiety.
It depends on what method works best for you, but if you decide to handle it, you can be sure that it will free up your mind from constant worries about money and spending impulsive purchases. It’s a great feeling to know that only some people can use your credit card by asking you for permission first!
Once you go through this process, forcing you to take complete control of your life and finances, you may find that you’re good at it!
But whether or not this makes anything more manageable for you, in the end, it will surely give you a sense of accomplishment knowing that you are handling every aspect of your financial well-being without relying on banks and credit card companies to loan you money all the time. And the feeling that you cut up credit cards to get out of debt will be its own reward.
Final Thoughts On Should I Cut Up My Credit Card To Get Out Of Debt?
Unfortunately, canceling our credit card account or cutting up a credit card is not enough on its own; if we are serious about getting rid of our debts and getting out of debt, we need to take control of our finances.
This is where we begin feeling good about what we have been able to accomplish – but the most important thing for us to remember is how easy it was once we had a plan in place that would help us get rid of debts and stay that way for the rest of our lives.
Do you know how much credit card companies charge you just for “renting” your plastic? You’re being charged every single month whether you use it or not. So, we should cut up or cancel our credit cards if we are trying to get out of debt.
Although there are many pros and cons associated with the idea of cutting up credit cards to get out of debt, as well as other financial products, as a solution, keep in mind that the advantages outweigh any disadvantages by far.