Credit Cards ~ They Don’t Work for Us
I have hesitated writing this post for many months because I know that people have strong opinions on the subject of using credit cards. I believe that most of us would agree that having a credit card and carrying a high balance that you are unable to pay off is a bad thing. Some people believe that credit cards are okay, as long as you pay them in full every month. Some people, like Dave Ramsey, think they are bad, very bad.
I have to agree with Dave on this one. For several years we had a credit card that we used for all our purchases, and paid the balance in full each month. We thought we were really outsmarting the credit card company because we were earning cash back each year and paying no interest or annual fees. What we didn’t realize was that using that little piece of plastic was allowing us to overspend in almost every category in our budget. We were not in credit card debt, but we didn’t have much in our savings account either.
Last year we stopped using our credit card. At first I was apprehensive because the year before we had earned $400 cash back from using our card. I felt like we were giving up free money. We decide to pay for all our purchases with cash. It only took one trip to the grocery store for me to realize the power of paying with the green stuff. I was almost in a panic walking down those aisles, knowing I only had a certain amount of cash in my wallet. I stuck to my list and didn’t even look at things I did not have written down. When I was using my credit card I wasn’t as concerned with the total amount. Certain months, when our bill was a little high we would tell ourselves that we needed to spend a little less next month, and we did, but we never got ahead.
Studies show that over 70% of people do not pay their credit card balance in full every month. Studies also show that people spend 12 to 18% more when paying with a credit card.
So, what were the results of my ditching the credit card? I didn’t earn $400 cash back this January. I did however pay off $11,000 in student loans last year and we increased our savings account balance by over 500% .
Credit Cards- they don’t work for us!