Hope from New Jersey writes:
I definitely can relate to living on a low income. I just paid off $3000 debt in less than a year playing the credit card game, making some financial sacrifices and getting a windfall. I love using a credit card (I only have one now with a $400 credit limit), but being in debt like that scares me. I don’t want to go back to that again. I’m thinking about getting rid of the card, but then what will I do to build a good credit history? I’m also afraid that I might need it one day. (I’m living on a low income with one special needs child and one child that’s not.) Should I keep my credit card or get rid of it?
Tawra: Hope, we would suggest that you keep your credit card. Here’s why: Credit cards aren’t the problem –it’s self control that’s the problem. You sound like you have your spending under control, so I would suggest that you keep the card.
I would use it for convenience when you know you have the money to pay it. Keeping a credit card is good for things like making online orders or for getting gas when you don’t have time to go to the bank and withdraw the cash. As long as you have the money to cover the charge and you don’t spend it on something else before you pay your credit card bill, you should be fine.
Then pay it off each month so that you can build your credit. They are very handy to have around for those types of things. If you need a way to keep track of what you put on it just write it down in your check register and put a C in the left column so you know that is what was put on the credit card. This is also a handy way to double check and make sure they charged you correctly.
A credit card can also help with emergencies, but you have to be careful what constitutes an emergency. If you use the card for an emergency, you have to expect to plan to sacrifice somewhere else to cover the emergency, but it sounds like you’ve already experienced this.
This part is not really directed at you, Hope, but for other readers who are reading:
Regarding emergencies, going out to eat or taking a vacation because you’re under stress is not an emergency. An emergency is something like a life and death hospital emergency, fixing the only car you have so you can go to work and earn money, etc. Keep in mind that even “emergencies” have to be paid for eventually!
If you feel that you don’t have control of your spending, I would suggest only keeping a credit card for true emergencies.
As for you, Hope, it sounds like you have done very well and are on your way to being permanently debt free. Congratulations on your hard work!
From our Dig Out Of Debt e-book
photo by: kanir
Credit cards are also very handy for online purchases that do not have a PayPal option. Given the number of times we’ve had unauthorized charges after using our credit card online, I never use my debit card. Also, credit cards are good to have for making hotel reservations. Those are the primary uses of our one card that gets paid in full every month.
My husband and I have 3 credit cards. One is Visa and one is for the home depot and the other is a card for home things and Zellers.
Visa is a necessity since hotels and motels do not accept cash when you book rooms.
Home depot is because you get a discount when you use the card and we purchase our home heating fuel with this one. Saves us 400 a winter.
The other we got when we purchased things we needed for the house. We were going to pay cash but there was a 30% discount if we got the card. There are perks to using the card so we use it and pay it off as soon as we get home from our trip. No interest and we have the receipt online for our records.
The one that I really didn’t want to get was the one for the grocery store and gas station. Same card for both.
When I buy groceries I get points towards free groceries. When we get gas we get double the amount we would get if we paid cash so that is also a savings. 8 cents for every litre we purchase. It goes towards groceries at the same store.
I buy groceries use the coupons from the gas station pay with the card go home put the groceries away go online and pay my bill. It has saved us $100. in one month not counting the points towards groceries since I still find it strange to buy groceries with a credit card so I don’t buy things I think of as luxuries. Chips, cookies, snacks. We have cut down a lot on those things so our diet is improving.
for 20,000 points you get $20. in free groceries so hopefully by christmas I can get all the extras and some of the basics without breaking the bank.
As long as you don’t run up huge bills credit cards are a great thing.
I don’t drive so no id with a picture so cashing cheques is not easy. Most places don’t like accepting my only picture ID which is an FAC which shows people that I own guns. For some reason they don’t like it that a middle aged to old age woman using a cane or crutches has access to guns so they don’t accept that piece. I hate taking my husband into lingerie stores to show his id so credit cards are what I use.
I also do not like carrying a lot of cash on me when we are out of town shopping so credit cards are easier and less likely to be stolen.
In town I use cash or debit card.
Doing things this way makes life much easier for our finances.
My husband is a self admitting credit junkie. We have told the bank and the credit card companies to not up our limit. Visa is $5000. and the rest are much less.
One month I looked at the visa statement and the limit was $20,000. That is what we paid for our house so I called the bank and had them get rid of that and had a long talk with my husband. I told him he could have a bill on visa of $4000, and then until it was paid off no more spending. It never takes more than 3 pays to cover it but it is the idea of owing that amount. It has taken me years of paying bills to finally put my foot down. I feel guilty telling him to not spend since he works hard and I do not have a job. So it seemed wrong for me to tell him he couldn’t spend money he worked for.
He never made me feel that way but it was my childhood that molded me into the insecure woman I became. Freud blamed mothers I blame my father.
With or without credit cards learn to live within your means with a few lapses and you will be fine.
Grandma,
I agree with you. We had three credit cards. Now we have one bank debit Visa. I like you don’t drive and it does get trying at times with the ID. Visa has a bad habit of increasing your amount without notification.
I’ve learned and taught my husband, or am teaching him to live within our means. We don’t have much but it’s a good feeling when you don’t owe before you get it. Credit cards seem consumer friendly but they are not. Miss one payment and that 7% shoots up to 30% (find print of course). I say limit the amount of credit cards and credit that you allow yourself. We can do like our parents did and save up for what we want. Who knows, by the time we’ve saved up, we may not want it anymore and then have the extra cash..
Fran get the principle card holder to call Visa and tell them you don’t want the limit raised. We did this 3 years ago and so far so good. No increase.
We actually had to keep calling them – they’d try raising it again every two years or so. Eventually they canceled our account all the way without prior notification! We were really angry and filed a complaint against them.
We got a visa card through our bank after that. We only use it when we travel or make online reservations/purchases, so we don’t use it very often. But I too am uncomfortable making online anything with my debit card, so that’s where we use it. Mainly it’s travel though.
Lea
Well, I can see what everyone is saying, but I just took a class called Financial Peace and I have to say, get rid of the credit card! I know you’re on a low income (as are many people) but what I’ve learned is you can usually negociate a lower price if you pay with cash. The class also teaches to save up 3-6 months of your income for emergancies. Hotels and such will take a debit card and you are not responsible if your card is misued or stolen. There are laws that protect you from ID theft. Our family is working on this right now.
JenW, I know exactly the class you’re talking about. IT WORKS! We live on a below poverty level income with 7 people in the household and we’ve paid off thousands of dollars in debt in 2 years and survived 4 months of layoffs last year because we learned to get rid of our debt, not worry about a credit score, and live within our means. Know what? We just paid off our mortgage last week (step 6, I believe).
As for credit cards? No thanks. I don’t need them. If I can’t pay cash or use my Visa debit card, I don’t need it.
Thanks for sharing what you did! Took the words right out of my mouth! and saved my hands from typing too! lol I use my Visa debit card also… if the money is not in my checking account… then I am not using the debit card… but when I did use the credit card… it didn’t matter.. I always used the credit card NOT KNOWING WHETHER OR NOT I HAD THE MONEY TO PAY COME PAYMENT DUE DATE! and I paid dearly in interest and finance charges! You don’t need a credit score when you pay with cash. A credit score is about your ability to pay payments and whether or not you have paid on time… who wants payments, I surely don’t. If you save up and pay cash… you get a better deal cuz you can negotiate a better price for the item when you have cash and then no payments… The only payments I want… are the ones where I am paying my savings account! Thank you everyone for sharing! Appreciate it!
Good point about the credit score Linda. A few months back I saw a thing that said if you do this and this you can raise your credit score and my first reaction was I should think about doing it then I thought duhhhh- I have no debt and don’t buy things on credit so why am I even giving a credit score a second thought. 2 things I learned from that – how good advertising is convincing you you need something you don’t even have a use for and second how stress free my life is being out of debt and not having to worry about all of these things.
There are pros and cons using credit cards which in my opinion is just legalized “loansharking” sanctioned by our culture. Anyway, if you are comfortable with no cards than that is fine. The only possible problem with not having available credit is in a real emergency like being stuck somewhere with a broken down car. Of course, taking care of your car carefully minimizes that problem a great deal. BUT if either you or your spouse is prone to compulsive spending getting rid of the card altogether may be the best bet. Spending excessively is like alcoholism to many people. I know people who paid off debt etc just to end up back with the problem a few years later when they started earning more money or took another job. It is an insidious problem as one only has to look at the bulk of the American people and the financial problems many of them have after years of binge spending on credit. Be careful!
Concerning cutting up credit cards: Do not cut up your credit cards nor close a credit card account. When you do this it will show up as the account being closed but will not tell that you closed it voluntarily yourself. ( Shows up on credit bureau as closed account) This will ruin your chances of obtaining a loan when this happens. Just use your credit card when you absolutely have to. Leave the account open and use self discipline.
Linda Cabler
Here I a trick I use when I have the credit card but don’t really want to use it unnecessarily.
I tuck it into my bra.
Every time I am tempted I think of the hassle of getting it out in public. By the time you have found someplace to reach in and get it inconspicuously the desire to use it has ended.
just remember not to tell small children where you put it. My 4 year old said quite loudly when I muttered that it wasn’t in my purse “mom its in your bra where you keep it.” I think everyone in the store now knew I keep it in my bra.
I love this idea! I keep my debit card on me for needs but I have one credit card I keep just in case because I budget my bank account down to zero. There have been times I wanted to stop in a store to price check something and so very tempted to pull that credit card out and use it for stuff not really needed. I could however see my 3 year old son doing what your 4 year old did, but if it saves money and regret later for the purchases it may be worth it!
That is so funny … LOL !! thank you for sharing that…. I keep my credit card in the freezer in a glass of water ….which, obviously is frozen now and the glass has cracked… and I don’t want to touch it.. I am sure it will cut me just like it has cut into my financial bliss! It can just stay there!
We keep one credit card for online or hotel purchases, but we pay the balance in full each month. After making the purchase we immediately subtract the amount from our regular bank balance as if we had used our debit card or written a check. By doing this, when the credit card statement arrives in the mail then we simply double check the purchases listed and write the check for the bill and mail it off. We don’t allow ourselves to indulge if the money is not already in the bank and we can pay the
I do keep my credit cards in a drawer,I know some ppl put them in different places but I’m sure I will not use them, whenever I feel like spending I ask myself, Do I really need this?,Can I buy it use,or make it myself? or, Is this going to help me in my future? things like that and I will keep asking again and again, and it works for me.
Once you take Financial Peace, or read Dave Ramsey’s book, The Total Money Makeover, you’ll realize you don’t need a good credit rating because you are never going to borrow money again! If only Congree would do this!!!
I have my credit cards in my wallet, (which we’ve just paid off!!)but my husband keeps his here to prevent any spontaneous spending. That’s more his personality. I will sit in a store forever debating on whether or not what I’m buying is a necessity, do we need it, can I get it cheaper??? Even with cash. I’m very frugal. No one likes to shop with me :(
I have friends who freeze their cards. They put them in water and into the freezer. By the time you get them half unthawed you usually decide that what you’re wanting to spend the money on isn’t worth it, or the moment has passed and you decide to wait and pay cash for it. Whatever works for you and helps to keep you debt free!
I have to disagree! If you have a debit card, more than llikely it has the mastercard or visa logo on it. There for you really don’t need a credit card, and you never have to worry about spending more money than you have. A good book to read on debt and credit cards is Dave Ramsey My Total Money Makeover.
Very good advice on whether to have a credit card or not. For me, I really liked lyn’s way of doing it. I had never thought of deducting the amount from my checking account when I made the purchase. Of course if its an emergency I wouldnt probably have the money. Good advice..thanks to all the comments.
I like to use a credit card when making online purchases, and sometimes to buy groceries or gas because I earn points toward free groceries. One thing that has helped me has been to have a separate account for my money that pays the bills. I use a Christmas club account for this purpose only; it is very easy for me to get online and transfer money from my checking account to my ‘bills’ account. Anytime I make a purchase with my card, I save the receipt and keep it by the computer so that the very next time I go online I can move money from my checking to the bills account, where it will stay until the credit card statement arrives. I do this for all of my bills. I add all the bills for each month, estimating for variable bills like utilities, and divide that total by 2 since we generally get paid twice a month. As soon as the check comes, I put that amount into my bills account and take it out as I need to pay a bill. This method has helped me a lot, and it’s like getting a bonus in months where we get 3 paychecks (usually twice a year).
This article was written before the credit card companies started giving bonus points for using them. I do use mine too to earn credit. You have your money under control it sounds like it but most of the people we deal with don’t and unless you don’t I don’t advice using your credit cards because you end up paying way more in late fees, interest and other things then the little amount you earn from using your credit it card.
But if you have your money under control like Brandi then this is fine to do.
My husband and I both have credit cards which we pay off in full each month. We use them for two reasons. 1) it saves us carrying lots of cash around. 2) the cards we’ve chosen give us cash back on purchases (in vouchers for a store we regularly go to) and another gives us airmiles which we save and save and save and then use to pay for a ‘free’ holiday. My husband has got this to a fine art and pays for absolutely everything on credit card, including milk or newspaper purchases, but by adding it all together it means we have the ability to purchase items for the house or Christmas gifts using this ‘free’ money.
I would stress that it only is ‘free’ if you pay it off fully each month and don’t end up paying high interest fees.