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7

How to Have No Credit Cards, Protect Your Identity… and Be Safe

After my post A Breakdown of the Credit Card Debate, I got some great comments and even a full response post to the arguments. I disclosed at the beginning of the last post that, “the debate can get pretty heated, and the reason is obviously because when we’re talking about personal finance, the choice is personal,” and I stand by it. This is my personal finance that I’m talking about on this blog
My personal choice is to live a life free of debt of any kind, and to not carry any credit cards. There have been a lot of great counterpoints made against my reasons for not owning cards, and so I thought I’d expand on just how I plan to live (safely) without cards. Rather than refute all the arguments one at a time, below is a guide for how to have no cards without being foolish and getting into a bad situation. I understand the arguments made against my plan to have no credit cards, and that’s all fine and dandy, but I completely disagree with all of them and will continue to do things my own way
Before the list, I have to say that first, in order to be able to live without cards, you must have no debt on your credit cards. This is important because you have to close your credit card accounts and have a $0 balance to do so. With that, on we go!

1. Get all your information together. Gather all of your cards into a pile and all of your last statements from each card. Make sure that the balance is $0 on every card and check if you have any over-payments. (I overpaid a couple of my cards because I payed the final balance before I got the statement, without knowing what the last period’s interest would be. I intentionally over-estimated the interest in order to cover the entire balance, and ended up with more money ON the card than I owed, so essentially they owed me the money back.) If the cards have over-payments, make sure to ask that they send you the remaining balance as a check. They will.

2. Call each card and close the account. REMEMBER to ask for a confirmation number for the phone call and a letter in the mail confirming that you’ve closed the account! Some companies won’t be able to give you a confirmation number, but they ALL will be able to send you a letter. Write the confirmation number on your final statement, if they give you one. Most likely you will have received one final statement saying you have a $0 balance - staple the letter (when it eventually comes) and the check stub from the balance that they sent back to you (if there was one) to the final statement and file them somewhere important - forever. If 10 years down the road Target Visa thinks you owe them $5,000, you better have proof that you closed the account 10 years prior.

3. Cut up your cards! You can cut them up, hole-punch them to death, shred them, or do any number of creative things to destroy your cards. Just remember to make sure that the number is NOT discernible at ALL when you’re done. I am paranoid enough that I shredded my cards and threw the pieces away in three different trash cans (home, mom’s house, and a gas station) so that there was no way to reconstruct them. You should also ensure that your signature and the security code are destroyed, although they’re less important.

4. Freeze your credit. If you don’t want to buy LifeLock or similar products, I strongly suggest that you freeze your credit. You can learn all about the specific steps on how to freeze your credit and laws for your state regarding freezing your credit over at this website by FinancialPrivacyNow.org. Freezing your credit means that no one will be able to get a card in your name, including you! If anyone tries to apply, they will be declined.

5. Opt out of credit card offers. To be safe, I recommend that you opt out of receiving credit card offers. This is an extra level of security, because it means that you have virtually no papers out there for applying for a credit card in your name in the first place. It is much less common for a thief to steal your identity (by way of driver’s license, passport, etc.) and open a card in your name than it is for a thief to steal your mail and send in a pre-filled-in card application in your name. Get the offers out of your life and you lower a thief’s chances for taking your card offers - plus, you’ll have a TON less crap to sort through when you get your mail! And opting out takes 30 seconds. You can opt out at optoutprescreen.com.

6. Switch to online billing exclusively. Going further down the paranoid route, I recommend that you convert all bills possible to online billing. Some people say that it’s annoying because then you have to go to all the different websites to pay your bill, but this is simply not true. If you bank with a bank that offers online bill-paying (and most of them do), you can pay all of your bills by logging in to your bank account. I pay all of my bills on one screen with Bank of America except for the light bill, which I pay by check. By eliminating the bills that come to your house on paper, you give thieves one less thing to steal covered in your personal information.

7. Get a debit card, if you don’t have one already. Make sure it is the only card you have that accesses that account (some banks give out more than one card), and if you need more than one, know where all the duplicates are (spouse’s wallet, etc.). If your pin is something really easy (like your birth year), change it! The banks will help you with this, although sometimes they will send you a new card. Either way, make it something random that no one could guess if they had your SSN, bank statement, or passport. Nothing personal.

8. Check your credit report every 4 months. This is extreme - you can choose to check it only every year if you’d like, but the most you can do for free is every four months. There are three credit reporting agencies, and each one is required by law to give you one free report per year (12 months / 3 agencies = 4 months per report). Don’t be fooled by places like freecreditreport.com, which are not free! Go to AnnualCreditReport.com for your free report, and if you’ll be checking every four months, make sure to get just one company’s report, not all three at once.

Maintenance

Once you’ve done all the above things, you are far more secured than you need to be and you’ll be fine! But there are a number of things you will need to do as ongoing monitoring of your credit.

Shred all documents that you throw away which contain personal information of any kind - phone numbers, account numbers, pin numbers, maiden names, a list of old addresses… anything which can give a thief information about you.
Change your PIN every now and again. I change mine every 4-6 months, just in case I said it aloud in my sleep or something. No, just kidding, I’m afraid someone may see me at the ATM at some point, and so I change it.
Be careful where you put your info, and protect those places too. A great number of people have your personal information - PayPal, your bank, your phone company, the IRS, your previous employers, etc.. Having your identity stolen is not impossible, and so it is important to know where you’ve given it out and to keep track.
- Change online passwords every now and again.
- Never leave an account “logged in” on a public computer.
- Log out of everything online if you leave home, and lock your computer (especially if you have “remember my info” checked at any of the sites you visit regularly).
Memorize all your important numbers: driver’s licence, social security number, debt card number and expiration date, bank account number, insurance policy, phone number (you’d be surprised how many people don’t know their own anymore!), and anything else you may need to know if it’s lost. This way if your wallet/purse is stolen, you can Google the bank/insurance/police and contact them regarding the theft of your debit card/policy card/ID and get things closed and blocked… and get new cards or accounts.

If this isn’t enough, then I don’t know what is. If the only way to your money is through your bank account or debit card, you’re secure in my book. A bank will ask to see your ID to withdraw money, and an ATM will ask for your PIN. If someone steals your debit card and uses it at a store and runs it as credit, hopefully you’ve already called the bank at that point and the card will be useless (and perhaps the thief will be apprehended).

I understand that credit cards will give some people security, but not me. I’d rather pull out all the stops to protect myself and then have nothing for thieves to access but a bunch of dead ends. And if someone DOES manage to get a card in your name even with all these steps in place… well… Mike at Master Your Card put it best when teaching us how to do a DIY LifeLock:

… let’s be honest: if the credit bureaus fail to alert you in the case of fraud or credit is granted on your behalf in spite of your having frozen your credit report – and any of this results in identity theft - you’re going to have one hell of a civil case against a whole host of businesses. I’d argue that’s comfort enough, so save your $120 per year.

Filed Under Random Tips, Tricks, and Advice, money and finance

Comments

2 Responses to “How to Have No Credit Cards, Protect Your Identity… and Be Safe”

Rachel @ Master Your Card on April 8th, 2008 2:18 am

This plan sounds great and I have considered doing it myself. However, I do find that these days a credit card is essential for making online purchases and when travelling abroad. How do you plan to get over these obstacles?
Carla on April 8th, 2008 6:12 am

I’m a big believer in eliminating credit cards from your life. My hubby and I have one card left we’re paying off and we’re pretty sure once it’s at a zero balance we’ll close it out and never get another one.

His concern, and mine too, is how to go about getting a mortgage. I know credit cards stay on your credit report for a certain amount of time after you’ve closed them but what if we apply for a mortgage after they are all over the specific time? I’ve read that a good choice is to go with a mortgage company that does manual underwriting but what if their rates aren’t competitive with other mortgage companies? Are there steps we can take now and in the future in terms of applying for a mortgage sans credit cards in our most recent history?

Thanks!

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