Living Without Credit Cards: She Made It Work, and You Can Too

living without credit cards
(Photo Courtesy Liz Smiley)
Every time you make a plane reservation or rent a car or pay for concert tickets, you're asked to provide a credit card number. Liz Smiley, a social worker in Florida, provides a debit card number instead.

Smiley has lived without a credit card for more than four years, and she doesn't miss it a bit.

"I got my first credit card when I turned 18, and I just got used to using credit to pay for things," says Smiley, a single parent who was also the caretaker for her mother when she decided it was time to eliminate her debt.

Smiley had accumulated about $38,000 in credit card debt and was tired of spending all her income on credit card payments. She arranged a debt management plan through CredAbility, a credit counseling service in West Palm Beach, Fla., and repaid her debt in four years.

As part of her debt management plan, all of her credit card accounts were immediately closed. "I have to admit it was hell in the beginning, like going from eating lobster and caviar to a starvation diet," says Smiley. "It was really hard to say that I couldn't afford something and that I had to save for it."

Not Accepted Everywhere

Smiley got around the need for a credit card for flights and online shopping by using her debit card. But it wasn't always easy.

Some retailers won't accept a debit card unless it has a Visa or MasterCard logo. And many hotels and rental car companies only accept credit cards, or will place a hold for hundreds of dollars on a debit card until the customer vacates the room or returns the car.

That means you need to make sure you have enough money in your bank account to cover the bill. "I always had to make sure I had at least $150 or more extra in my checking account when I rented a car," says Smiley.

In spite of her $970 per month payments on her debt management plan, Smiley managed to save an emergency fund of $3,000 that she uses as a back-up to her checking account.

How to Make It Work

If you decide to live without a credit card, you'll need to develop plans to pay for everything beyond your normal expenditures, such as vacations, gifts, car repairs and unexpected health care needs.

First, establish your emergency fund with three to six months of living expenses. Most financial experts suggest that you have a set amount transferred from each paycheck to build up your savings painlessly.

For health care costs, Smiley set up a health savings account at work where she saves pre-tax money for out-of-pocket health care spending. "I needed a root canal and I had to tell my dentist that I didn't have a credit card and I didn't have enough in my HSA to pay him," says Smiley. "He let me make a down payment and then make payments slowly until I accumulated enough in my HSA to pay him in full."

Next, try some other tried-and-true methods like putting your change in a jar or putting cash in envelopes labeled for each savings goal. You can open a holiday or vacation savings account at a bank or just open an online savings account and give it a nickname so you know the purpose of the account.

You'll also need to figure out how to pay for things without a credit card, such as:
  • Layaway. Many stores allow you to hold an item and make payments until the item is paid in full.
  • Debit card. Make sure you read your debit card terms and conditions so you know if you are protected from unauthorized charges. In addition, you'll need to keep careful track of your bank balance or have a savings account tied to your checking account for overdraft protection.
  • Cash. Be careful not to carry too much. And remember to track your cash spending.
  • Checks. As long as you have identification, most retailers still let you write a check.
  • PayPal. Most online retailers, including many airlines, accept PayPal. You can tie your account directly to your checking account.
  • Pre-paid cards. You can load funds onto a pre-paid card and use it like a debit card. Check to be sure you don't have to pay high fees to use the card.
What About Your Credit Score?

If you don't have a credit card because you have bad credit or because you have an aversion to borrowing money, you should check your free credit reports at and pay to get your credit score.

Your credit score is based on a history of credit repayment, so a lack of a credit history could hurt your chances of a mortgage loan approval or car financing.

If you plan to live on cash forever, this is not a problem, but if you think you'll be applying for a loan in the future, you may need to obtain a credit card and use it occasionally to establish a positive credit history.

Heidemarie Schwermer - Living Without Money
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Living Without Credit Cards: She Made It Work, and You Can Too

WWII refugees, Schwermer's family fled from Prussia to Germany in the 1940s. Her father had owned a successful coffee roastery and kept a nanny and full-time gardener on his payroll. "We were well-off but ended up as riff-raff," she says. "Then we became rich again and (we) had to defend it. I've always had to justify myself, whether we were rich or poor."

Source: Business Insider

So she became obsessed with finding ways to live without money. A former teacher and psychotherapist, Schwermer formed Germany's first exchange circle, "Give And Take Central" in 1994. The group helped locals exchange simple services like babysitting or house cleaning for tangible goods. "I noticed that I needed money less and less," she told Business Insider. "And so I thought, I can try to live one year without money."

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Schwermer attempted to live without money at least four times, she says, but it wasn't until a friend asked her to house-sit for three months that she finally took the plunge. "I said, 'The time is right. Now I'll do it.' I gave everything away." That included her apartment, which she sold first, and everything that wouldn't fit into a small suitcase.

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What was only meant to last 12 months became her life for the next 16 years. "I only wanted to try to do an experiment and in that year, I noticed a new life," she said. "I didn't want to go back to the old life."

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Family and friends weren't on board when she pitched the idea. She only sees her two children and three grandchildren a few times per year, but says they've warmed up to her come-and-go lifestyle. "Now they're proud of what I'm doing. It's enough for us," she says.

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After divorcing her first and only husband 40 years ago, Schwermer hasn't remarried. She's clearly not in any rush. "If it happens, I'm interested, yes," she says. "Sometimes it does. Sometimes it doesn't."

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Forget retirement: She gives away her pension and brushes off questions about her age. "Most people my age like to sit in their gardens," she says. "I like to travel around."

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In the beginning, she did odd jobs around the house like gardening to earn her keep. People usually didn't ask for anything in return.

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She's a light packer. When seasons change, she gives away old clothing and waits for new ones to come along. When they do -- usually donated by hosts or friends -- she calls them 'miracles', rather than charity.

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"I see a lot of miracles in my daily life. For example, in the beginning I found food. I thought about things and then I found them in the street or people came to bring them to me," she explains.

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Her schedule is pretty strict. After a week, she's off to somewhere new. "I'm always thinking how I could make things better for life in the world," she says. "I am something like a peace pilgrim. I go from house to house sharing my philosophy."

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She's no stranger to press, but this interview on RAI TV, a Rome, Italy-based talk show, put her over the edge a few years ago . She hasn't done another one since. "I can endure [critics], but when they tell me to my face, it's hard," she says.

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Friends often get frustrated with her come-and-go lifestyle. She's turned down many invitations to extend visits, including ones to stay permanently. "But I say no [to staying longer] because I can't," Schwermer says. "I feel that I must go. It's always my job to be in the world with people."

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Here, she coaches a group of student environmentalists from Muenster, Germany's BUND Youth in the ways of bartering. At a local market, they managed to turn that pencil into a fistful of fruit.

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These are stickers she keeps on hand to pass out at speaking engagements. They say "Gibb & Nimm" (Give and Take). "If you let one side get away then [life] is unbalanced," she says.

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In the documentary about her life, Living Without Money, she's seen foraging for leftover produce at fresh air markets, where she might ask vendors for unwanted leftovers or find them discarded in heaps on the ground. But don't call her homeless. "You cannot compare me to other homeless people," she says. "They are not well-liked and invited into people's homes."

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"I think it's necessary to see that we are all from one fountain and that the whole world is one organism. We are little cells and we have to work together."

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