One of the major effects of the current economic downturn is that many people are putting their credit cards away and only using cash to make all their daily purchases. I know that the American population has a long way to go before it will totally accept such a radical premise as a cash-only existence. But the situation we now find ourselves in may make it the better way to live day-by-day, at least at the personal level. But with the recent changes in the credit card industry and the increase in interest rates, more and more consumers are now using cash (and that includes debit cards) to make their important daily purchases.
In 1950, Diner's Club issued the very first "plastic money" to a very small consumer base; about 200 customers who used the card at 27 restaurants in New York City. By the late 1950's the credit card industry really changed how we handled our spending habits and buying on time became extremely popular, if not the norm among the population in the United States. In 1959, it was the Bank of America that issued the very first, truly universal credit card but only in California but by the mid-1960's their card was available for use on a coast-to-coast basis.
So what's your plan for 2010? If you decide that a cash-only lifestyle is how you want to live the rest of your life, you must first create a budget. That is the key to making this whole plan work. You must know how much you need to spend in any particular area. A budget is the simplest form of a "cash-in and cash-out" system and by using only the money that you have on hand has a way of encouraging you to not spend what you do not have; which runs contrary to all of the hype that you see for credit and credit cards in our American society.
Those who have already started using cash-only have experienced a real decline in their spending. That's because they are only spending money in their personal or small-business banking accounts. By using a debit card, you still have the convenience of using a card while not being encouraged to spend more than you have. You now have a limit and you have a financial plan in the form of your monthly budget.
Some people argue that if you don't have credit, you can't build your credit rating but that's not entirely true. There are methods of building your credit without a credit card but most times this will include borrowing money. You might get your car financed, and then pay off the entire amount after a couple of months. You may also consider getting 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 be very careful when it comes to the fees they charge; many are very high.
Another interesting sidebar of living without credit is that people who are doing so have noticed they are sleeping better at night knowing that they don't have a mountain of debt weighing on them. If you are mentally healthy then chances are you will also become physically healthy too. Stress is everywhere in life and if you can rid yourself from the stressful situation of a debt load then that's all the better for your personal well-being.
Finally, as you are learning to live within this new, cash-only lifestyle, make sure you teach your kids about money. I don't know if you've noticed, but the various school systems around the nation, from elementary to college; just do not do a good job of teaching our young people about their finances. Because of this, they take a large amount of financial ignorance into their personal lives and the nation's consumer economic problems are perpetuated. So, using common household lessons, teach your kids about money and credit. Put that at the top of your New Year resolution list.