Have We Learned To Use Credit Responsibly?

Using Credit

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The thunder and lightning carrying on outside represented my struggle well. Two evenly matched forces were doing battle inside my head. The need to save money whenever possible, and my solid stance that using a credit card to pay for something should be avoided at all costs.

Let me be clear, I do not think that credit cards themselves are evil. When used correctly, they can be a valuable tool in a person’s financial tool belt that can actually save money.   However, I have a huge problem with some of the business practices and policies of credit card companies.

My main problem, however, is simply with my own lack of self-control.   I fall too easily into the minimum payment trap. I have every intention of paying the balance in full, but when the bill comes I pay the minimum and keep the rest of the cash for more spending. I also fall too easy into the downward spiral of entitlement spending. I deserve it, I have the means to get it, so I’m going to swipe the card and buy it.

On the other hand, I love to save money. Finding ways to pay less for the items you buy leaves more money in your pocket to use for other purchases, or to save for our future. Who doesn’t like to save money?   If someone picked an item from your cart right before the checkout lane and asked if you’d rather pay full price or $10 less, which would you choose?

Which is the exact the dilemma Vonnie and I were faced with Saturday afternoon.

Vonnie was in need of some new clothes, for which we had been setting aside money for quite a while. She was having great luck at one of her favorite stores which was reflected by the near $300 total illuminated on the cash register. We weren’t surprised at the total, nor were we concerned as we had had the money to pay for it.   Then the employee dropped the question that began the financial battle royal in my head.

She asked if we would like to save 20% by using their store credit card.

Utilizing my math skills, I calculated that it would save us about $60. I knew we didn’t have a store credit card for that particular store, which added an extra level of intensity to my personal Clash Of Titans playing out in my subconscious. Not only would we have to use a credit card, but we’d have to actually open a new account. My wife and I had a short conference, the result surprising us both.

We opened up a store account, and reduced our bill by just over $58.

We didn’t take our decision lightly, however. We came up with a well thought out plan to ensure that we don’t misuse the account:

Move the Funds: When we returned home, I transferred the exact amount of the bill from our checking account into an unused escrow savings account.  By having it sitting in it’s own separate account will remind us of it’s purpose, and reduce the temptation to spend it.

Pay it off: As soon as we’re able to access the account online, we will pay the balance in full. This should be only a few working days according to the employee.

Don’t Carry The Card: When the card comes in the mail, it will be placed in a drawer with the other cards for the few credit lines we have open.

The deal we have is that we will NEVER use a line of credit unless it will save us money, AND we have the cash to pay for it immediately. Since we won’t carry that (or any) credit card in our wallet or purse, using it will have to be a conscious decision to dig the card out of the drawer, hopefully reducing the chances of impulsively using it.

I’m still worried.

We don’t have a good track record with credit cards. We’ve seen the kind of negative impact misusing credit can have on our finances and we definitely do NOT want to go back there. On the other hand, the root of our financial issues was really a lack of communication. We’ve fixed that issue, and discuss our finances often and freely.

The desire to save money was strong that day. Let’s just hope we’re more responsible than we used to be.

About Travis

34 Responses to “Have We Learned To Use Credit Responsibly?”

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  1. I have the same issues with credit cards, lack of self-control, entitlement spending, etc. That’s why I would have passed on the store credit card. I understand your choice, $58 is a nice saving, After the one time 20% saving the card I’m sure carries a high interest rate so I might pay, cut up and close the account after.

    • Travis says:

      Oh, I’m sure it does have a pretty hefty interest rate….store credit cards usually START at 12% I think. But I also know that this particular retailer, kind of like Kohls, sends out coupons and has sales that you can only take advantage of if you use the card. We’ll see how our little trick works….if we can handle it, we might keep it and save money when the sales line up with my wife needing clothes. If it causes us to shop when we weren’t planning, or we don’t pay the balance in full we’ll dump it.

  2. Kathy says:

    We always pay off our credit cards each month so interest charges are not a problem for us. I just hate having that many cards and have actually passed up some nice savings because I want to avoid having another card. I might have to re-think that if the discount was large enough.

    • Travis says:

      I can understand that, Kathy….I don’t want to get into a situation of having a lot of lines of credit open either. Not every store gives you special deals for using their card outside of the discount when you first open an account. If we go awhile without seeing anything of that nature, the card is gone.

  3. I can relate Travis, to a certain level, because I went through the same thing after I had just paid off my credit card debt. That worry is understandable, but you have taken great steps to help prevent what could happen which is the key, not to mention the communication level with you and your wife. That said, nearly $60 saved is nothing to sneeze especially when you can pay it off right away. :)

    • Travis says:

      We’re banking on the communication skills and self-discipline that we’ve learned. If our behavior regresses, we’ll at least have learned a valuable lesson. $60 is a nice savings for sure….it was a bit hard to pass up. Thanks for your thoughts, John!

  4. It’s possible to take advantage of these sorts of offers and come out ahead. The retailer of course knows from experience that, for most people, it’ll recoup that 20% discount, over and over. The trick for the consumer is to know in which category you fit: will you benefit in the long run from the offer, or will the retailer? If you’re not sure, assume the retailer will benefit and stay away!

    • Travis says:

      Exactly, Kurt….in the past we’ve always fallen into the category that would pay interest for months/years on a purchase that we initially saved money on. OR we’d be the people that shopped at that store when we didn’t have the cash because we had a line of credit. We NEED to be in the “benefit in the long run” category, or we’re cancelling the account!

  5. JMK says:

    And the big question…what did you do with the $58+ dollars saved? You were prepared to spend it until the deal was offered, therefore you were prepared to part with it and have it leave your cash flow. If you didn’t already, maybe make an extra payment on your mortgage or line of credit, or add it to the emergency fund? Or go knock a couple of Christmas gifts off the list early. But something concrete and intentional. It’s not really “saved” unless you’ve purposely done something constructive with it. Whenever I pay less than expected for something, the savings are added the the weekly transfer to either the mortgage or retirement accounts. The sooner I move the excess to where I can’t spend it the better.

    • Travis says:

      Oh, boy, JMK…..you ask the tough questions. :) Right now the money is still sitting in our general budget fund as “left over” funds. I *should* go to our emergency fund – thanks for the push to make sure we do the right thing with it. I like your thought of moving the excess to where I can’t spend it….because you know if it sits there in an accessible account long enough that’s EXACTLY what would happen, right??

  6. Den says:

    I would cancel the card and cut it up after you pay it off.

    I’m always tempted by these offers, but 1. hate giving business to credit card companies 2. can’t stand the hassle of it all 3. don’t like even more of my financial life out in cyber space and 4. just really really dislike the whole idea of companies pushing credit for consumers to get a deal (just give me – a loyal customer – your best price regardless of how I pay for it).

    Credit Card rant over:)

    • JMK says:

      We signed up for a store card once (with their unbelievable 27% interest rate) just to get 15% off on top of the sale price, but we were buying major appliances so it was worth the aggravation of the enrolment process. After we made the purchase and before leaving the store we went to the customer service/accounts department and paid off the balance, then we asked them to cancel the card. I think the card was still sent to us since the process was in motion, but it had already been cancelled and we cut it up. I’m sure applying for a card and cancelling it the same day causes a blip on your credit rating but we only had one other credit card and weren’t about to renew our mortgage any time soon so it was irrelevant.

      • Travis says:

        Applying for a new line of credit always dings your credit rating a bit….but just a point or two (I believe), and probably another blip for closing the account. But I would guess it would recover those points pretty darn quickly. 15% on new appliances would be a HUGE savings!

    • Travis says:

      I agree with not being fond of giving credit card companies money…..but if I can save 20%? That’s hard to pass up. I would immediately cut it up, but the thing is, they have these kind of sales fairly often. So, there’s potential to save money in the future as well – as long as we stay disciplined! Thanks for reading and commenting, Den!

  7. Kim says:

    I was exactly the same way, but have seen how much you can get in free travel or cash back by using cards. I honestly don’t think you’d ever fall down the rabbit hole again and I can’t say whether or not you should use credit on a regular basis. For us, we will never, ever carry a balance or buy things we don’t plan unless it’s maybe milk or bread. I think using credit cards to save money is a great reason to use them if you can and will pay it off every month.

    • Travis says:

      I’m not sure if I’m ready to enter the “travel hacking” world just yet, Kim…I need to ensure we have the self discipline that I hope we have. :) Thanks for the vote of confidence, Kim!

  8. I’ve always been tempted to do that too, but most of the time I just feel the stress over managing all my cards is not worth a little bit of savings. I think it’s great if you’re really on top of things, but I know me and eliminating stress and errands and tasks has been just as much of a goal as saving money. In fact overall I’m cutting way back on the cc churning, travel hacking, etc. I don’t want to concern myself with annual fees, possible credit score dropping, etc. I admire people who seem to manage that really well!

    • Travis says:

      That’s a good point, Tonya….I don’t know how many store credit cards we would let ourselves get…..I think almost every store has one these days. Food for thought – I don’t want a drawer full of cards…..

  9. Considering how disciplined you are with your workout routines, I think you should have no problem with resisting the temptation of the card. I realize you have a history with credit cards and using them, but seriously just channel some of that discipline! I would have got the card as well. I’ve opened two store cards, used them on one transaction, then never used them again.

    • Travis says:

      I hope so, DC…..become one with the discipline. LOL. If we end up in that boat (never using the cards again) we’ll close the account. But my understanding is that they do a lot of specials (sort of like Kohls) where you get a deeper discount if you use your store card. We’ll see….

  10. You’ve clearly planned for this purchase already, so I doubt you’ll have an issue when the card/bill arrives.

  11. Credit cards can bring great benefits (discounts, special offers, etc.), but you’ve got to be able to trust yourself with them in order to really reap the benefits. Personally, I think you guys will be fine, especially if you’re keeping it in a drawer instead of in your wallet.

  12. It sounds like you did everything you could to prevent falling into old habits. I bet you will pay it off and not think anything of it. Good job being so self-aware. That is half the battle right there!

  13. Be prepared for an endless onslaught of coupons and discounts designed to entice you back into the store. You traded $58 for the right to send you all these offers. The store is betting that most will return to buy again, whether they need to or not. Good luck!

    • Travis says:

      I’m glad you brought that up, Kevin…..great point. We knew that going in – Kohls sends us coupons every week I think. They go in the trash unless we’re in the market for clothes – so we’ve got practice in ignoring those ads when we don’t need them. :)

  14. Chris says:

    I’ve been using the EoD Excel spreadhseet for two years and reading the blog just as long. The wife and I purchased our first home last year and have been paying off debt like crazy. We recently went to Ireland/England for two weeks (all paid in cash!) where we used some old points to pay for a rental car, which got us to thinking: we’ve been pretty disciplined the past two years regarding our finances, can we handle credit cards properly? We discussed the topic at great lengths for about a month – what card? how do we use it? is it really worth it? Finally, we decided to apply for a Southwest Rapid Rewards Chase credit card, we even went so far as to signup for the premier card for added point-earning potential at $99 a year. They have/had a signup bonus of 50,000 points if you had purchases exceeding $3,000 in the first 3 months of opening the account.

    With our trip to Ireland/England we easily reached the halfway point in two weeks. Upon our return we immediately paid off all charges we incurred while abroad. We have also made some large ticket purchases, but only because we had saved the money already. After checking this morning, our balance on the card is $0 and we have 53,000+ points, good for two round-trip flights on SWA. I went ahead and switched all utilities over to the SWA card, and signed up for full balance autodraft the end of each month. This also frees up cash at the beginning of the month, since both my wife and I are paid bi-monthly. Now I can go to the bank once at the start of the month and withdraw all the necessary cash for our cash envelope system, thank you Dave Ramsey!

    As you and others have stated, credit cards can be a valuable tool – when used responsibly.

    • Travis says:

      Thanks for being a long time reader, Chris, and glad to hear you’re using the spreadsheet! Sounds like you’re doing some successful travel hacking and reaping the rewards! I’m also happy to hear you’re using the envelope system….we use a hybrid of that system ourselves – we may use credit for something to save some money here and there, but cash will ALWAYS be king!

  15. Thumbs up to your humble self-awareness and the great strides you and Vonnie have taken in communicating with each other and in managing your money. I was hoping that you were going to decide against the credit card though. I believe that you will use it well, but credit cards are the number one vehicle towards debt in our debt-ridden era. And while I wouldn’t call them “evil”, it’s a fact that credit card companies make their profits from the minimum payment trap you’ve fought hard to escape. I feel badly writing this! No offence taken I hope.

    • Travis says:

      No offense taken, my friend…..it’s the exact thing that I struggled with. The will to save $58 won me over that day – maybe I’m fooling myself into thinking that we can do this, save money, and pay everything off without paying a penny of interest. I felt odd writing this post as for years I’ve said flat out that I’ll never use a credit card again….but what if we can use their powers for good? LOL. If Brad, the original EOD, reads this, he’ll probably shake his head at me. But I feel like I’ve at least got to try. If I feel us slipping, and the interest starts accumulating, the card gets cut. And fast.

      thanks for your honest comment!

      • Here’s something to consider: If everyone paid their credit cards off completely each month, credit card companies would lose their most significant profit centre – the monthly minimum payment group. Without this profit, cc companies wouldn’t be able to offer the rewards, points, and incentives that they offer now. As long as cc companies are offering these things, we know that a critical mass of debtors are trapped in the monthly minimum payment cycle. Does that make sense? There are two ways of looking at it.
        1 – People who get trapped in minimum payments have to take responsibility for it. I’ll enjoy the rewards.
        2 – The whole cc system is contingent upon chronic debt. I’m going to disengage.

        • Travis says:

          I see your point, Prudence, however I’m not sure if the interest earned from chronic debt is more than the per-transaction fees that the companies earn. Maybe it is, maybe it’s not……that would be an interesting thing to investigate, wouldn’t you think?

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