Why my family doesn’t use credit cards
Photo courtesy via Creative Commons from https://webaroo.com.au/
In my August blogs, I want to talk about healthy credit practices, especially why and how my family became credit card free.
Back in the late 1990’s--before my husband and I got married--he introduced me to a book called Financial Peace. It was by some guy out of Tennessee named Dave Ramsey. Dave is now known all over the world for his financial wisdom and management tools. In this book, Dave details his seven “baby steps’ to help you have peace when handling your money.
This book inspired my husband because it contained ideas he’d never thought of before. I was a natural saver, so I was surprised that he didn’t know most of the information already.
We got married soon after that and took the 13-week course Financial Peace University. This course revolutionized our marriage and our lives. It put both of us on the same page concerning money and finances, and we adopted the same goals. It helped give us a road map to follow to know how to begin building our financial house starting with the best foundation we could have --being debt free.
After saving up $1,000 for your starter “emergency fund” in Baby Step 1, Dave has you “Pay off all debt except the mortgage” in Baby Step 2. You list your debts from smallest to largest and then proceed to pay off the smallest one first. Then you move on to the next and continue until you are debt free except your house.
When we took FPU, we had two credit cards--mine and his. We cut his up, paid it off, and closed the account, but we kept mine for “emergencies”, albeit with a zero balance. In fact, despite following Dave’s principles pretty religiously, we didn’t cut up and close my credit card account until 2011 when we facilitated our first FPU class. We have been credit card free ever since! Neither of us has had a card since 2011.
Why get rid of credit cards?
According to Dave Ramsey, you spend more when you use a credit card than when you spend cash. We experienced this in 2007 when we vacationed in Jamaica. The trip was paid for with cash, but we took our credit card along “just in case.” When our cash began to run low, we turned to the credit card. We spent an extra $700 over what we had budgeted only because we had it with us.
Most of the time, the card had a $0 balance. When the card did have a balance, we also ran into problems paying it off. Since we did not carry a balance most of the time, the payment due date would come and go. We’d forget to pay it and incur interest and finance charges over and above the amount we had charged. Suddenly, that one small meal at McDonald’s would cost a lot more than the $7 we initially put on the card.
When you use a credit card, you spend more because you don’t “feel” it as much. The cash in your wallet and balance in your bank account stay the same. So it’s easy to just keep swiping and swiping and not realize how much you’re actually spending.
I realize that a lot of people have a credit card and “pay it off every month”. While this is not a bad thing, you do have to realize that it’s super easy to spend more without meaning to. In fact, I liken credit cards to alcohol. Some people can handle them responsibly, but some people can’t.
Let me help
I would love to help you look at your finances to help create a plan to become debt-free. This can be a challenge, I know, especially when you are self-employed. I hope you check out my blog at the end of this month where I share tips for how to go credit card free without losing your mind!