Should You Quit Credit Cards Cold Turkey?

Have you considered putting your credit cards on a diet? Thinking about moving to a cash-only budget? If so, you aren’t alone.

Going cold turkey

A recent article in the Globe and Mail explored the phenomenon of people who have stopped using credit cards entirely, going “credit card cold turkey.”

“A growing number of Canadians are locking up their credit cards and subsisting on cold, hard cash,” writer Carly Weeks claims.

Why are Canadians giving credit cards the cold shoulder?  Quite simply, many of us bit off more debt than we could chew. “Debt managers across Canada say they’re seeing about double the number of clients they were at this time last year, and massive credit-card debt is often at the root of financial problems,” Weeks continues.

Canada’s unhealthy credit trend

Statistics clearly show that we have an unhealthy relationship with our credit cards.  Over the past several years, we’ve been using our cards far more often, and charging larger amounts to those cards. From 2002 to 2007, the number of credit card transactions (using Visa or MasterCard) jumped by 60%, while the value of credit card transactions during that period rose by nearly 80%.

In 2007 (the last year for which data is available), a total of 76% of all retail sales were paid by credit card, up 21% from 2002. That means 3 out of 4 retail transactions now go on a card, instead of being paid in cash, by debit, or by cheque.

As a nation, we also have more cards. Today, Canadians collectively hold over 64 million MasterCard and Visa credit cards – that’s up 30% from 2002, when we only carried about 50 million cards in our wallets.

These numbers tell us that Canadians use credit cards very differently than they did five years ago. For many, the “buy now, pay later” convenience of plastic has led to too much debt and a subsequent desire to cut cards out entirely.

Where do you fall on the spectrum of credit card use? Is it time for you to cut back, or maybe consider going cold turkey?