I have had credit cards since I was in college in 1987 – so, for over 20 years. I have had fourteen different credit cards over the years, and I still have the first one from college. A NCSU Visa card. My limit in 1987 was $500. It is now $9,000. I usually have 4 or 5 cards at one time – until now.
Earlier this month, I decided to officially quit using my credit cards – forever. I do not have a steady income, I do not have a savings account, IRA or 401k. I do not have a retirement fund. (I will explain those decisions later). So, using a credit card was a great crutch for me. If I had a low balance in the bank, I’d put my purchase on the card. If one card maxed-out, I’d move the balance to another card with a lower balance. And, despite that I was a one-person income family, I never made one late payment. I always made my minimum payment due, before the due date.
All this did was justify my use of the cards. I was good! I deserve these cards! They were not getting me into trouble, my head was always above water. Everyone thought I had everything under control (financially).
A couple of weeks ago, I called a non-profit credit counseling agency. At first, they were confused. ”You have five credit cards and none of them are past due. Your credit score is fine. You have no over 30/60/90 posted on your credit reports. How can we help you?”
I made it clear. I do not want credit cards anymore. I want my interest rates lowered, and I do not want to be penalized for closing my accounts. (Many card companies significantly raise your minimum payment due when you close or stop using your cards). I want to make one payment each month, for all of the cards, and I want it auto-deducted from my checking account. I was now in a situation where I do not make enough money to pay my minimum payments and I want to make a preemptive attempt at straightening this out before things get out of hand.
After a lot of back-and-forth, and a lot of careful explaining, the counselor on the phone began to understand my situation. You see, I have $31,000 of credit card debt. My minimum monthly payments combined were now over $1500. And all cards were maxed. Calling each card company went well, representatives were nice and even used my name frequently, but none would lower my percentage rate or minimum due – unless I lied and said I was unemployed. (I am self-employed and my income is not stable.) So, I decided to call a credit counselor.
I still have my credit cards. Five cards in 500 pieces. I still have open accounts, but I consider them closed. The credit counseling agency pays each card every month – each card company agreed to a proposal of a set amount. $600 is automatically withdrawn from my checking account each month to pay these cards. My credit report is temporarily effected, denotation of my credit counseling beside each account. But that is okay with me, because I do not intend to use credit for a long time, if ever. And, the notes on my report are not permanent and will be removed once I complete the credit counseling. It does not effect my score.
On my own, without additional spending, it would have taken me 17 years to pay off the $31,000 in credit card debt, at $1500 a month. For every minimum payment, only a smidgen went towards the balance. Now, it will take less than 5 years, at $600 a month. To me, that is one smart financial decision that makes up for the game I was playing with myself over the past 20 years.
Above: Actual invoice showing a payment of $172.00 and finance charge of $154.88. Total loan balance reduction was $17.12.
Some Extra Notes:
1) I have accumulated heavy balances many times over the years. At some points in my career, I had the wherewithal to pay the balance down significantly or even in full. This was part of my game. My ability to do this kept the credit card close to me. A crutch, a savior for when times were hard.
2) My $31k balance that I mention in this post was credit used over a two and a half year period. (scary, I know.) I traveled, frequently, over the period; I paid for a wedding and reception on the cards; I started a new business using credit as capital; my father was ill and passed and I used the cards to pay for those travel expenses and conveniences as well.
3) I know many people use credit cards and it is advantageous in some form or fashion. An on-going receipt of expenses, a reward program, insurance for purchases made, and fraudulent ones not made, etc. For me, none of this out-weighs the liberation of not using credit cards.contact: onegirlweb@gmail.com
