Does it make Financial Sense Canceling Credit Cards?

When the Times Square bomber was caught boarding a plane to the Middle East, the first thing that the newspapers wanted to know was, whether he paid for his ticket with cash. Who on earth would want to pay with cash, the newspapers wanted to know, and be left with less buyer’s protection and with no way to claim reimbursement at the office? Apparently, if you don't use a credit card for something, you're as good as a terrorist. Financial institutions all over the country seem to agree with this too - and the US Treasury is responding by putting out fewer new dollar bills every year. But there are some pretty good reasons you can think of to buck the trend toward plastic. While canceling credit cards can seem like a strange lifestyle choice to make - completely out of step with the way of life being promoted everywhere today, it can make a lot of personal financial sense.

You're probably asking yourself why canceling credit cards would be a good idea; you don't get those card bonuses and rewards, you don't get to take advantage of cheap Internet retailer prices and so on. Actually, these arguments don't make much sense. Let's take a look why.

Let’s go with that Internet shopping thing first. Just because you are not willing to do anything other than cash doesn't mean you can't buy online. You can go and get a prepaid card - with no credit. You have to pay cash to buy the card; and also, it isn't linked to your bank account like a debit card is. You don't have a large sum of money lying there waiting for you to use it. You have what you put into your prepaid card to start out, and that's all. You can still take advantage of those online shopping deals and you can have something to keep yourself covered when you're traveling.

There happen to be lots of advantages to canceling credit cards too. To begin with, remember how you keep hearing these days about identity theft? Huge corporations from American Express to Sony PlayStation keep getting their servers mercilessly hacked and getting their contents thrown to the four winds. If you don't keep credit cards, you don't ever have to worry about having it stolen.

But there can be many more tangible advantages that you can get to enjoy every month too. For instance, overspending doesn't appear nearly so impossible to stop when you don't have credit cards. There are no impulse purchases to make when you don't have money at the ready. When there are few impulse purchases getting in the way of your monthly budget, budgeting every month becomes a lot easier and a lot more doable. A study done by MIT has found that America's shopaholic character only really came into being in the 50s when the first credit cards took off. People really do spend less when they don't have plastic on them.

And if you're worried about losing those card rewards and bonuses, you shouldn't. To begin with, those frequent flyer programs at the airlines are really more trouble than they're worth. The airlines are making it more difficult than ever to use them in a way that would be convenient to you; and anyway, they're cutting back on them all the time. If you didn't have credit cards and didn't have to contend with all the overspending that came with it, you could afford to buy your own plane tickets to anywhere.