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Posts tagged with: Credit Cards

Is Using Credit Immoral???

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Happy Valentine’s Day (or Singles Awareness Day, if you prefer)! : )

Here’s a fun little philosophical question for you….is using credit immoral?

Let me back up and explain the question a bit.

I’ve had credit cards my entire adult life (even though I didn’t get into debt until much later, my first credit card was at age 18 so I could “learn to use it properly”. See my debt story here).

Even when I paid off my last credit card back in June 2014, I never cut them up and closed the accounts as Dave Ramsey would suggest. Instead, I put most of them in our household safe. I still carry 2 with me all the time. One of them (my Target card) I use anytime I shop at Target so I can receive 5% off, plus I use it for online gift purchases for friends’ weddings/baby showers/etc since I save 5% AND get free shipping (I wrote more about how I use this method to give gifts for cheaper here). My other card (a Wells Fargo card) has the best reward program, so I use it for all big-ticket purchases (e.g., preschool tuition it automatically charged to the card monthly). I carefully track these expenses (and still use my debit card for day-to-day spending) and pay the balances in full each month. I haven’t paid interest a single time because I’m really vigilant about paying on time and I’ve never had any issues. Plus, I receive perks from these cards (a discount at Target, and the Wells Fargo card lets me use points to pay bills, receive cash, or get stuff free – I used it at Christmas to get the girls a really cool toy totally free).

I never saw anything wrong with any of this. This is the way to use credit, right? Make it work for you so you have some benefit, then pay it in full every month. I thought this was responsible credit usage.

Then I was listening to an old podcast from the Dave Ramsey show and someone asked him this very question:

Is it “okay” to still use credit cards as long as they’re being paid in full every month?

And Dave Ramsey’s answer surprised me a bit. OF COURSE he says no (he’s the “absolutely no debt/no credit” guy). Part of his reasoning is that studies have shown people tend to spend more when they buy with plastic  (this part doesn’t bother me – same thing could be said for debit, not credit); another reason he gave is that people can fall into a trap of forgetting to pay on time and winding up paying interest (fair, but this hasn’t ever been an issue for me); and the final reason is what caught me off guard. He said that if you use your credit card to buy things and pay it in full every month, you are essentially ripping off the credit card companies. That is not how credit card companies intended for their cards to be used, and Ramsey basically likened it to taking money out of someone else’s pocket. Like it’s cheating the credit card companies. In other words….its immoral.

I had never thought of it that way before and it definitely struck me. I tend not to sympathize with giant credit card companies (especially as they are making money hand-over-fist off others and I’ve MORE than paid for all my “free perks” in the interest I’ve paid them over the past 8 years when I still had credit card debt). But still, it got me thinking.

What do you guys think? Is it immoral or in some way wrong or cheating the system to use credit cards if you pay them in full every month? What do you think is fair and honest for credit card usage?


Did I just get lied to?

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The other day I got a phone call about 9am from my Capital One credit card company. It was the fraud department asking if I’d tried to make a $200-some-odd dollar transaction that morning.

  • Me: What? No! I haven’t used the card in months!!
  • Representative: Well I’m glad we got in touch with you then! Yes, our records indicate no activity in over 6 months, so this transaction was flagged as fraudulent and was declined. No need to worry, but we will be issuing and sending you a new card.

The conversation goes on for a bit with them verifying information and me worrying about how my credit card information was “leaked.” FYI – I checked and I still have the card in my possession (I never use it, but keep it locked in a safe in our house).

Then after the call I started thinking……is this a new tactic credit card companies are using to try to get you to use your card? They come up with some excuse (e.g., fraudulent activity) to send you a new card so its fresh in your mind and right at your fingertips for the using (as opposed to being locked away in a safe)?

Am I being overly paranoid or skeptical? Or did I totally just get lied to about a fake fraudulent attempt at using my credit?

For the record, I checked online and there are no recent or pending charges. Of course, the woman said the attempted-fraud charge had been declined so I suppose it wouldn’t show up, but now I’m suspicious. If I never use my card (never even log into my account – I had to do the “forgot my password” option because its been so long!), and still have the card in my possession, then how on Earth would someone get the card information in order to attempt a charge?

I’ve been known to be a bit on the skeptical side….but I’m calling BS on this one.

Anyone else have this experience before???


Ashley’s March Debt Update

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Here’s my debt update now that March is over.

Place

APR

Feb End Balance

March End Bal

Capital One CC 17.9% $413 $0 (Yay!!!)
Wells Fargo CC 13.65% $7697 $7429
Carmax – Car Loan 7.75% $24040 $23736
Bank of America CC 7.24% $2219 $2198
License Fees 2.7% $5808 $5720
Mattress Firm 0% until Sept 1, 2014 $1381 $1281
Medical Bills 0% $9,000 (approx.). $8328
 Total:

$50,560.44

 

$48,692

 

A couple things to note:

First, I removed my student loans from the spreadsheet. I shared them in the first debt update to give you a big picture of all my debts. I’m not opposed to sharing them with you and am happy to do a big quarterly update if people are interested, but I always said my focus was on credit cards and I’m paying so little toward the student loans that I’d rather look at this reduced spreadsheet so you can really see where I’m making dents in my debts instead of just having a HUGE looming debt amount that barely budges every month (which would be the case if student loans were included).

Second, the medical bill debt is no longer approximate – this is the actual amount owed. Just so you know, the total amount was actually over $9,000 but we had already been making some payments, and when we had extra money last month we put a big chunk of it directly toward a lot of the smaller medical bills we had received (more details this afternoon when I discuss our revised budget). Some may argue this was unwise since they were interest-free, but we had 8 different medical entities to pay and now we have reduced this number down to 4 and have established payment plans for the remaining debt (except the Mayo Clinic – details this afternoon). It was important to me to knock out a lot of the smaller bills so we could have fewer monthly debts to deal with.

Third, in regard to the license fees, many people commented on my last post to look into the “service” fee, saying it might be more than I think. I checked it out and discovered that the service charge is a percentage of the payment received. I played with the numbers and for a payment of $50 it was $1.38 (2.7%); for $75 it was $1.74 (2.3%); for $100 it was $2.50 (2.5%), so it appears the percentage of the fee goes down with larger payments. Regardless, 2.7% is still much lower than any of my credit card debt so I will continue making smaller payments to that entity at this time.

I also plan on drastically increasing the amount we pay toward debt, overall, each month. I feel like this is a tease, but I’ve got to tell you just to make sure you check back this afternoon for our full revised budget where all these details will be revealed.


YOU GUYS!!!!!

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Guess what I just did!!!! I just mailed in the last payment for my Capital One (highest APR) credit card!!! Wahoo!!!!

last bill

Notice that the credit limit is $7500. At one point, this card was maxed out and now, after mailing in that final $413.27, it’s down to ZERO!!!! Eeeeek!!!!

I could not be more elated! Now the plan is to snowball the payments I was making toward Capital One over to my next highest APR credit card (in this case, my Wells Fargo CC). It still has over $7500 in debt on it, so its not going to be a quick pay-off, but it’s at a 13.65% APR so its got to go!!!

Mwhahahahahah!!!! (<<evil genius debt-paying laugh)


Mandi’s Debt Introduction

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Note: This is the introduction written by Mandi about her debt to be the next BAD blogger. Take the time to comment or ask questions about her debt journey. This is part of the process to find a new BAD blogger which you can find out more about here

My name is Mandi, and I am debt! It is a secret from everyone, because I appear to be very in control most of the time. I grew up with very financially responsible parents, and I did not have debt of my own until I got married. My husband had about $20,000 in debt when we married, and we paid this all off in a few years. We then saved $20,000 before having children so that I could stay home. I stayed home until my son was 3, and then I went back to work.

Unfortunately, while I wasn’t working, we didn’t cut back too much and burned through all the savings and racked up incredible debt. Our current debt includes credit cards with balances of $3,000, $11,000, and $6,000. We also have a home equity loan of $31,000 and a loan from my parents for $3500. We have recently been able to pay off balances on other cards, so this is not our starting point. Our take-home pay is $6100 per month.

We also bought an older home while I wasn’t working. Our mortgage is inexpensive, but since it is older, we had many unexpected repairs (new HVAC and new ductwork, anyone?), and there are, of course, cosmetic changes that I would really like to make. Making our home inviting is very important to me, and I struggle with paying off debt versus making lasting changes in our home. This and travelling are our two top issues with saving versus spending. I don’t mean extravagant trips, either. Even a weekend at a nearby beach is no drop in the bucket for a family of 4.

In addition to paying off all that debt, I also want to replace the savings we’ve spent and increase our savings in other areas like 401(k)s, etc. I struggle with how to prioritize each item. I would really benefit from the advice that readers here provide, and I need people to call me on my “justified” expenses like new paint, light fixture, furnishings, etc.

I think it would be beneficial to post how much money has been spent each week (and if it was me or my husband). When I even THINK of doing that, I cringe at the items I would put down and not look at twice because I would have to justify the expense to everyone. This includes items at the grocery store. In some areas I feel we are very frugal, but objectively, I know that we probably aren’t. I only feel that way because I am comparing myself to others in my social circle.

I showed my husband the blog, and he is interested, especially in me contributing, but I don’t know how that translates to his involvement. He is very supportive, and he mostly listens when I express concerns about debt, but he does not want to get granular. In fact, he does not even know how to check any of our balances, including our checking account! He does not spend a lot of money on “things,” though, so it might not be as challenging as I think it could be.

I would love the opportunity to share more, answer questions, and start contributing to the site, so thank you for reading!


Debt & the City Introduction

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Note: This post comes from Debt & the City who would like to be the next BAD Blogger. Read her introduction and ask any questions you may have. This is for the new blogger position which you can find out more information about here

That was the name of my old blog so I’m not new to blogging about my debt. At my highest (start of 2012) I had about 26K in credit card debt and 26k in undergrad and grad school loans. That’s a lot of debt! Thankfully, I’m down to approximately 7K in Credit Cards and 19k in loans so you can see I’m motivated.

Let’s talk about me for a second. I’m a typical twenty-something year old with lots of debt that I mostly incurred before I started working full-time. I had absolutely no concept of money management in school and thought that once I got a real job, I’d be able to pay it all off in one year. With that in mind and a job offer in hand, I decided to travel around Europe and “experience the world”. Needless to say, it was a shock to my system to find that i could not find a semi-decent one bedroom apartment in New York City for less than $1500. I got an even bigger shock when I got my first pay check – what do you mean I have to pay state AND city taxes? My plan of paying all my debt off seemed laughable and I literally lived paycheck to paycheck. I tried to focus on paying my debt but struggled with balancing that and enjoying life. My turning point came when I found the world of personal finance and eventually started my old blog.

Now I live in a different (but almost as expensive) city and I can finally see the light at the end of a long and dark tunnel. Having so much debt throughout my early adulthood has held me back from so many things I want to accomplish and I am ready to finally throw the weight off. There are some life decisions I am currently contemplating that might slow my progress down a little but that is still in the works.

I’ve read BAD since the era of Trisha and I don’t think we have really had a younger more urban perspective. I’m not gazelle – I will only read recycled newspapers for entertainment – focused but then again, I did go 6 months without a bed because I didn’t want to spend so I have my moments. I try to balance having a reasonably enjoyable life while getting rid of the debt so that might not be for everyone. I definitely know that I don’t always prioritize the way people expect (plane ticket over couch and dining table anyone?). However, it means that I find creative ways to enjoy myself or make extra money (craigslist is a treasure chest guys).

I’m closer (knock on wood) to the tail end of my journey and would love to share it with the BAD community because i have NEVER in my adult life known what it feels like to get paid and keep all the money (it’s actually scary when I think about it). I should add that I work in the finance/accounting industry so I’m a lover of excel and spreadsheets are my friend.

Hopefully, there are readers out there that can relate and would benefit from my story as I know I have a lot of information to share with you all and I am excited to get some feedback (and advice).


Shauna’s Debt Introduction

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Note: This is an introduction from Shauna about her current debt situation in hopes of being the next blogger at BAD. Feel free to ask her any questions and leave comments about her situation. More information is available about the new blogger position here

Hello, my name is Shauna and like many of you I am trying to balance paying off debt, saving for my children’s education, saving for retirement and just paying everyday bills. I’m 36 recently married with two kids and about $70k in debt all my own. While I look at that number and think “How did I get that far into debt? I’m a smart person who doesn’t live an extravagant life” the reality is I know full well many of the choices I’ve made that have gotten me to this point.

The short version of this story is that when I first lived on my own I got a credit card, took out more student loans than I needed to pay for college and lived beyond my means. I married young to someone who lived even further beyond his means, since he made more money than I did I didn’t question it. Add a move out of state, a surprise divorce and loss of my job due to a company bankruptcy and as you’d imagine my finances didn’t fare so well. While trying to get myself back on my feet in an almost non-existent job market and during a custody battle I went back to college, sinking further into debt. Of course all the while with the idea that one day I’d be able to fully tackle it all when I did land a job again. Here I am five years after I did get that job I was hoping to land, even further into debt than I was before.

When I got married for a second time a year and a half ago my husband’s finances were in much better shape than mine. He made all the right decisions with his money along the way having a house, truck, motorcycle, etc. all paid in full; a sizable retirement account and a decent savings account. Mostly due to my embarrassment and partially due to guilt for amassing so much debt I have not wanted to put any of the burden of this debt on my husband. While he’s aware in general of my sizable debt, it’s not something we talk about. Right now we each handle our own expenses for the most part. Since the house is paid off the arrangement is that I pay for all the groceries and household supplies and he pays for the utilities (Natural gas, Electric and Cable) and the taxes. I’m responsible for all of my debt payments, my daughter’s expenses and my other bills for things like car insurance, cell phone, etc. We have some shared daycare expenses with our new son. As time goes on I see us sharing more expenses, like when we do find a new home to buy together.

While this is not the beginning of my debt journey, I’ve finally reached the point where I have the time and energy to face my debt head on. I’ve been trying to pay my debt down for years now, but it seems to keep growing slowly each year. As I look at how much money each month I have to put towards debt, and dream of much better things I could be doing with all that money I’ve reached the point where I don’t want this debt to run my life anymore.

I hope that by putting all the numbers out for everyone to see not only will I feel more accountable for my actions, I will also get a better idea of how I’m sabotaging myself. I’m hoping to be able to laugh together about my mistakes and look for advice on the best ways to get my debt paid off. I’m opening to trying almost anything to get this tackled as soon as possible.

Where I stand now:

  • $4,666 in credit card debt
  • $14,101 in auto loan debt
  • $58,698 in various Student Loans (Currently on a graduated repayment plan so I can afford to pay them each month) At this rate I’d be paying for my student loans up until I meet retirement age. Yikes!

Currently I’m making monthly payments of $250 to my credit card; $525 towards my auto loan and $370 towards my student loans. I often “budget” to pay more toward my credit card, but often I don’t pay more or end up putting more on my card so it ends up being a wash each month.

First things first I’m going to have to take an honest look at what I spent last year ($1,400 at Amazon.com alone last year to my credit card) and create a realistic budget and debt repayment plan from there. I’m looking forward to any questions, comments and suggestions.


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