Cut up the plastic and spend what you have, if you can. Picture: iStock.
Cut up the plastic and spend what you have, if you can. Picture: iStock.

How I survive with no credit card, and how you can too

GROWING up I used to gawk at the size of my friends's parents' televisions or the boats in their yards, their swimming pools and outdoor entertainment zones and wonder how they could afford it on one income. Sure, we lived in the country and it was back in the days where houses cost a nudge over $100,000 and nobody had figured out how to smash an avocado, let alone justify charging $22 to put it on toast.

I came to realise these people lived on credit. In some cases, credit that was well beyond their means. This was evidenced when a job retrenchment came along and next thing you knew, they were "downsizing".

My family didn't spend what we didn't have and that fundamental philosophy has stuck with me all the way through to where I sit now, at the age of 36, having never had a credit card.

Credit cards can work very well for you when you pay your bills on time, but considering the average credit card holder is carrying around $4300 in debt and that as a nation, we are paying interest on $32.3 billion in debt, the diligent among us are far outnumbered.

There is no real reason for me to have a credit card. I am not a frequent flyer, I do not need reward points for anything and I do not crave expensive goods.

And the interest rates they charge on those things are a deadset crime.

Since the RBA began lowering the official cash rate in 2011, it has dropped from 4.5 per cent to 1.5 per cent. Standard variable mortgage rates have dipped from 8 per cent plus down to as low as 4 per cent in home cases. Savings accounts have seen interest rates dip from up to 6 per cent all the way down to less than 2 per cent. Yet credit card rate averages have stayed firmly entrenched above 17 per cent. What a load of rubbish.

I have kicked along just fine all this time without a credit card and one of the reasons I know I have done the right thing is that the banks have inundated me year after year with provisional approvals and great introductory offers, due to my credit rating and responsible budgeting. They have even mailed me cards that just need to be activated. They can tell I am keeping too much of my own money and it is eating them up inside!

But what happens if I need to pay for something expensive, but don't have the funds ready to go?

Pay with the money you have or risk paying off debt for a long time.
Pay with the money you have or risk paying off debt for a long time.

Well, credit cards aren't the only form of credit; even though they are the most expensive form.

Personal loans are available averaging around half the interest rates of credit cards, while

peer to peer lending is growing and also competitive. Or, if you want to buy and pay something off at the best rates around, roll it into your mortgage's offset or redraw facility.

Just make sure you pay extra off your mortgage to get the extra debt taken care of as quickly as you can.

The findings/report/investigation is part of #Lifehacks, a project by the News Corp Australia mastheads giving readers everything they need to know about the financial matters that impact us all - right down to scripts for securing better deals, dream jobs and more. Rolling out day by day across this week, the topics are mortgages, energy, insurance, cars, credit cards, super and salary - and you can find it all here