Thursday, January 9, 2014

No Love For Credit Cards Here

My thought for the day:  I hate credit cards.

We lived for years without credit cards.  We had no choice in the matter because we filed bankruptcy in the 90s and no one would have anything to do with us financially for years after.

In order to qualify for a decent refinance rate, our bank told us to open up credit cards accounts in order to build credit.  We had no tradelines, no open credit accounts, nothing.  For all intents and purposes, we had no credit at all.  Well, we were finally able to refinance almost a year ago and we refinanced into an excellent 15 year loan at a low fixed 3%ish rate.  Very low and affordable payments.  That part is the good part.

The bad part is that, yes, we opened up credit card accounts here, there and everywhere and now have quite the roster of credit cards.  I was never good at paying bills on time back in the day and gradually got better at it over the years.  Now, I am a stickler for paying everything on time and hate to see the words "Payment Past Due" on anything .... it creates huge anxiety.  Some of the cards have balances on them in order to produce that arbitrary credit score in the 700s, which leads me further to believe that the banks and the credit bureaus are in collusion.  Why should I need to carry a 30% usage balance on these damn cards when I don't want to?   All in the name of the Credit Score, that's why.  Because when I pay these balances off, my credit score drops.  Every time.

Well, we have been using the cards and, with all the clusterf*cking going on around here just lately, we haven't been keeping an eye on the balances.  We are up to $3500 on these damn cards as of today and I am very disappointed in myself.  It shows that I still don't have the self control to manage credit.  I tapped Vanguard for a $5000 withdrawal to pay off these cards and to pay the final balance due to the contractors who are still here finishing up the bathrooms.

I know what I need to do and I just need to get on and do it.  I need to kick adult children out of the nest, get this house finished and save my ass off.  As if it all weren't enough, a family member called last night to see if we could lend money.  It never ends.


Scooze said...

Its good that you're nipping the cc balances in the bud now rather than waiting. But I'm confused... I don't think you need a balance on the cards to raise your credit score, I think you just need to have them. The lower your balance-to-credit ratio is, the higher your score.

Tanner said...

If you think of the credit cards as debit cards, it makes things a lot easier. That's how I use my cards; if I need to purchase something and I know that I don't have enough in the bank, I will not get it, but if I must, I will deduct it first and foremost from my next paycheck. Because of that, I try to keep my deficits as small as possible, or not at all. As long as you're always aware of what's on your bank account as of that minute, you should be good to go. As of today, I know I have about $185 on my bank, so any of my purchases should stay within those boundaries.

Scooze said...

I agree with what Tanner said. Once I paid off my debt two years ago, I gave myself a cash cushion in my checking account and now have my full credit card balance deducted automatically from my checking account. I understand that this won't work if you aren't 100% sure you have the money to pay off the balance every month, but it's something to consider once you get to that point. Good luck!

Anonymous said...

Now that you have your mortgage locked in at a good rate, get rid of some of those credit cards. You don't need them, and they'll only get you into trouble. Keep a one or two of the major ones, pay off and close the rest. If your hubby is retiring shortly you need to be as debt free as possible.

Anonymous said...

Carrying a credit card balance does not help your credit score at all.

Joanne said...

Credit cards aren't the culprit. They are merely a payment method, albeit a potentially dangerous one. If each charge at the time you make it is deducted from your available spending (budget), you'll never have a problem with credit cards again. Rake in those rewards. Paying the cards off each month becomes merely a technicality if you make purchasing decisions based on your budget.

I recommend YNAB, which I've been using since 2007. Use it and you'll know at any given moment what you have available for spending on any given category. The budget tells you what you can spend, not the available credit on a card or the available balance in a checking account.

Quest, for someone like you (addictive personality, attentive to detail, obsessive about finances & holding down spending, working toward retirement), using YNAB can be addictive (in a good way) and fun. It is for me.

Louise said...

I hate them too, I just got rid of one that we got as a trial to get the free points towards groceries. we end up spending more than we plan to when we have credit cards so I've gone back to having none.

The Quest said...

@Scooze ~ that is what I thought too until I learned that carrying a 30% usage conveys to the credit bureaus' computer algorithms that one is a 'responsible' user of credit :/ thus, credit score is raised. However, I don't care about all that now and only want cards with zero balances!! Even at my advancing age, I am STILL learning about my finances and the best way to handle them.

@Tanner ~ I know that I have to get into the same habit .... thinking of credit cards as debit cards and deducting the money from my bank account as soon as I am able to. I'm working on it!

@Anon1 ~ AGREED :)

@Anon2 ~ Well ..... I am about to find out LOL I swear, I read somewhere that carrying a 30% usage produces an optimal credit score .....

@Joanne ~ I am most definitely OCD and compulsive when it comes to numbers and figures on a spreadsheet ...... I never thought I would be but that is in fact how I have evolved over time. I love my spreadsheets. They have been the only thing to straighten me and my finances OUT. One big problem I have, however, is with control: I have to be the one doing the controlling. I tried a couple of online budgets (Pear, Mint) for a brief time and I had the unsettling feeling that 'they' were 'telling' me what to do and what not to do and it (LOL) pissed me off. Everything has to be on my terms, unfortunately, and I will be the first to concede that I screw myself over because of this undesirable character trait. Thanks for your advice, however, and I am truly happy that you have found something that works for you. That's the key :)

@Louise ~ That is my problem too. I tend to overspend. I too am better off without credit cards altogether because I always get into trouble with them eventually ........ yet, I live just fine without them!

Revanche said...

Ironic that my last post was on getting 5 new cards, then! :)

I am curious where you got the 30% balance carrying information from, I wonder i that's something unique to particular bureaus or something? Genuinely curious.

I've not researched the algorithms so all I have are my own experiences. I've never carried a balance beyond the ones that I did oh so many yrs ago paying off my parents' debt (on a 0% interest promo) and it's been years since. I haven't had a car note in ten years and the mortgage isn't in my name. I do use CCs regularly but pay it off every month, or even early. At last check, my credit score is mid to high-700s.

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