Posts tagged murphy

Credit Cards – The un-common theory

How many credit cards do you have in your wallet?

We have been conditioned (brainwashed) into thinking credit cards are a good idea. “Oh I only use it for emergencies,” is a common expression. Isn’t an emergency the worst time to go into debt? If you’re using a credit card in an emergency, that means you don’t have the cash, which means you’ll go into debt for this emergency. This is a downward spiral for many people. 38% of people with credit cards carry a balance from month to month, incurring hundreds or thousands of dollars of interest. I’d be willing to bet that most of THOSE are the very people who cannot afford it! The spiral goes on and on, as the debt piles up and up.

Somewhere along the way, we started using OPM (other people’s money) for the basic necessities and anything we ever just had to have. Whatever happened to ‘living within our means’? Being in debt our whole lives has become normal. It is so pervasive in our society that laws had to be passed to keep college kids from being overrun with credit card offers. Kids are told to get a credit card to start building their credit. Credit cards seem to be a status symbol. Though we don’t know the story behind everyone’s credit card history, you can be sure that over a third of those using credit cards (as opposed to debit cards) are going into debt for whatever they are buying with that ‘swipe.’

I will admit that on our journey to become debt free; I was nervous when I paid off my last credit card. I will also admit that I was the one with credit cards. I would no longer have that card to fall back on. I made a big deal about shredding it because I was so attached to it. I had had that card the longest, and at first, it was for emergencies. Then it became the ‘go to’ card for the things we needed to spend, things that were not emergencies. Sometimes it was MY splurge money. Here we are 1 ½ years later … and we’re still standing! We have had emergencies that we had to ‘cash flow’ (pay cash for), and with our little emergency fund, we have handled MOST things that have come our way. Murphy loves to come on in when you think you’re making progress. A roof (impending emergency) and truck engine disaster handed us one last debt, but we were able to pay half of that off in a couple of months. That is the last time we will EVER borrow money. (Except maybe a mortgage)

When we use a credit card, we DO spend more because we don’t pay attention to the cost. It doesn’t hurt to hand over a credit card. It hurts (me) to hand over cold hard cash. I think it is more mindful to use actual money. I have to count it. I hand it over. I see how much less is in my wallet.

So what about those who pay it off every month? Congratulations, you still paid more for everything. Have you ever had to pay interest? That hurts. You could get sick before you’re able to pay the bill at the end of the month. (I have a feeling that those who pay them off every month, could actually afford NOT to use them, and they only use them for convenience and security. IMHO) They will never be convinced. That makes me sad.

A debit card is just as convenient and just as secure. Using a debit card as a credit card (not using PIN#) has all of the protection of a credit card. I do admit that it is more hassle when a debit card gets hacked. Your card will be closed, and the money won’t be available while they investigate. If this is your daily card, it is a hassle. Here is my take on it: most of the time your card is not going to get hacked at a local store, though it does happen. My hubby had his hacked, and he thinks it was at a ‘shady’ gas station. So we go to a ‘shady’ gas station to what (?), save a few cents on gas? My card has not been hacked through my everyday spending. What has been hacked was my credit card from online purchases.

Here is what I do for online purchases and vacations: I have a separate checking account with a different debit card. I keep $1,000 in it for a kind of ‘clearing account’ (and a mini emergency fund). By clearing account I mean, let’s say I spend $50 online, using the 2nd checking account. Then I transfer $50 from my daily account into the 2nd checking account. That ‘clears’ the amount, and I still have $1,000. You could also have a line item in your regular checking account for buying things online, add each purchase to it and make only one transfer a month. For vacations I deposit the amount that I want to spend, plus a little buffer, into the second checking account. That way, the vacation ‘hangover’ (debt) does not follow us home.

Sure there is a little more thinking and work involved, but steering clear of debts products (including credit cards especially) brings peace of mind. Because right now, we only have two payments that go to debt right now. We have a tremendous amount that goes to extra principal each month. If an emergency comes up, we use that money. When we have a fully funded emergency fund, that will be our ‘credit card’ if you will – other people would just use a credit card. The difference (?), we will never have to pay someone else back for the money we used.

My goal here is to get people thinking about credit cards and how much they spend, the risk of getting into debt, and maybe start to think about living without debt products.

Credit cards are a tool for THE BANKS. Some of us think of them as tools for us, but BANKS get the lion-share of the positive outcomes!