Tag Archives: Credit card

Financial Peace – 1 Year Later (part 2)

You can read Part 1 of this series here.

Credit Card

Credit Card (Photo credit: 401(K) 2013)

February rolls along, and I’ll admit.  I was a little embarrassed, because I think we were the only couple in our group who didn’t have that sacred $1000.00 emergency fund (EF).  Other couples had cut up their credit cards, but the only credit card we had was a twice-used (several years prior) Best Buy card with a long-standing zero balance on it.  I cut it up, anyway.  After all, why keep it if I never even used it?  Couples had cut out or cut back their cable.  We’re bare-bones on cable, anyway.  It’s like we’d trimmed all we could, but we still didn’t have much, if any, to put towards our EF.

Around mid-February, I sat down with stacks of papers and forms and my trusty laptop and filed our income taxes.  And OMGosh!!!  I was about to hyperventilate when I saw our refund amount.  My husband looked at me hopefully and asked, “Is it enough to go to Universal?”  I smiled and said, “We could go on a very NICE trip to Universal.  And we will – after we clear our debts and save up for it.”  (Yeah, I’m a little evil like that.)

We had found out by this point in the class that there are two types of people in this world.  There are Nerds, and there are Free Spirits.  Layered onto that, there are Spenders and there are Savers.  The strongest relationships will have one of each.  In our household, I’m the Nerd Saver (you can just as easily have a Nerd Spender).  Give me the money, give me the savings, give me the special accounts and I’ll let that money sit and grow and do great things for us.  When I have a goal in mind, I’ll sacrifice some fun to meet that goal.  My husband, on the other hand, is the Free Spirit Spender.  Don’t feel like cooking?  “Hello?  Domino’s.”

So, when Peter found out what our refund was going to be, he was seeing himself at Hogsworth down in Orlando.  I was seeing us having the long-awaited EF and paying down some debts.  We had some small medical debts, a slightly larger ($1300) medical debt, credit card debts totaling around $3500 and a personal debt of $7500.  So, just over $12,000.  Yet, we’d heard stories of debts ranging in the tens of thousands, and we personally know of someone who was working down $300,000 in debt, so that amount, big as it was, seemed entirely doable as long as we had a plan.

My birthday is in late February, and all I wanted for my birthday was to pay off my credit card debt, and I believed it was going to happen.  My credit card company had been calling and calling, but I couldn’t pay them a dime, because we were still struggling to pay for our “four walls.”  So, they would call asking why I hadn’t paid them, and I’d very calmly say, “I’m sorry, but you fell below the line.”  The credit agent would be giving me an incredulous, “I’m WHAT???” while Peter and our older daughter would be piled in the office doorway busting their butts laughing.  (In FPU, we learned that paying for the “four walls” must come before paying down debts, and when you run out of your allocated money, then you don’t spend anymore on whatever falls below that line.)

The morning of my birthday, I checked our accounts, and there it was.  A very large deposit had shown up that morning.  I immediately texted my husband, transferred $1000.00 into savings (woohoo!!!  Emergency fund at last!), then called my credit card company.  Oh, what fun!!!  I’d set up a payment arrangement for March, just to get them off my back.  The conversation went something like this:

Thank you for calling *****.  Can I please have the last 4 digits of the account holder’s social?”

I gave her that, verified my name and address, answered the security questions and then…

“Thank you.  How may I assist you today?”

“I’d set up a payment for 10 March for $165, and I need to cancel that.  I won’t be able to pay it.”

“OK.  Do you mind if I ask what’s preventing you from making that payment?”

“Because I’m going to pay off the entire balance today.”

[Pregnant pause.]  “Oh.  I see.  Well, I guess that’s good for you.”  I swear, she sounded like she was going to cry.  I guess if my company was looking at a loss of money, I’d probably feel a little down, too.

I paid it off, paid off some of those medical debts and a few other things.  I burned through over $4000.00 just like that.  Finally Peter said, “Stop!  I want to see some of this money before you spend it all!”

In under two weeks, our emergency fund was 70% gone.  Ticked.  Me.  Off.

Stay tuned…

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Credit Card Debt-Free (and how much I need my husband)

A credit card, the biggest beneficiary of the ...

It came!  It came!  It came!  On the morning of my birthday, it came!  “It” is our federal income tax return.  Lots of money to do with exactly what we… need.  Ooh, that hurts.  It’s no longer about what we want; it’s about what we need.  What do we want?  How about another week in Orlando, this time at Universal Studios?  Or maybe a week at a condo in Hilton Head would fit the bill nicely.  Shoot!  We could even do a week at an all-inclusive resort down in the Caribbean.  But those aren’t needs.

As of this morning, our family is completely, 100% credit card debt-free.  As of this morning, our family has a decent emergency fund in place.  As of this morning, we are quickly on our way to being completely debt-free.  Damn, that feels sooooo good!!!

Oooh, and then on top of that, the mail came – with birthday cards.  Birthday cards with money in them!  Then there was that email from DSW.  Shoes, anyone?  And with – OMGosh! – TWO coupons.  Shoes on sale!  Can I get an Amen for a shoe sale?  The Nerd in me says, “That money goes into the debt snowball.”  The little bit of me that’s Free Spirit says, “You need a new pair of white sandals (and you have your birthday coupon).”  My husband, on hearing about our IRS-gifted windfall asked, “Where would you like to go for your birthday?”  My girls and he were going to make dinner at home, which was fine and budget-friendly.  He’s the Free Spirit; he wants to have some fun.  He’ll also make sure I have a little fun myself.

It’s been a truly great day.  My older daughter – so sweet! – very altruistically said, “Mommy, it’s your birthday.  You shouldn’t have to do any work today, and you shouldn’t have to teach me.”  Haha!  The lessons have been thin – Bible with reading comprehension and math.  It’s good for her to see me ecstatic over being credit card debt-free.  She should witness the struggle with blowing it for fun and using that money responsibly.  It’s in the normal moments of life that she learns so much more than what our basic third grade curriculum would allow.

Free Money!

Just sounds good, doesn't it?

Cash back!  Making priceless memories!  Convenience of getting what you want when you want it!

Since beginning our journey toward financial peace,  I’ve become a lot more aware of credit card advertisements.  Ironically, when we’re supposed to be collecting credit card applications that we get through the mail – you know the ones I’m talking about; “You’ve been pre-approved!” – our mailbox is sadly bereft of them.  However, there are still plenty of advertisements for credit cards on TV with Discover being the current front-runner in frequency.

The credit card companies know exactly where to get you, don’t they?  Master Card is offering you priceless moments:

New Vera Wang wedding dress: $12,000.00

Florist: $6,000.00

Watching your irritating cousin looking like a crippled monkey trying to dance: Priceless

Ahh, the memories, and they can be yours if you’ll shell out a small fortune for your wedding day.

Then there’s Visa.  “It’s everywhere you want to be.”  Want seats on the 50-yard line at the Super Bowl?  Use your Visa card for a chance to win.  Of course, the more you use it, the better your chances.  Want to be cool at the grocery store?  Use your Visa card.  Want people not to look at you with annoyance while you’re writing a check?  Use your Visa card.  Convenience and coolness all in one.

Discover has been coming out with the catchiest and most prevalent commercials of late.  Who isn’t familiar with a bearded guy answering the phone, “Hello.  Thank you for calling US Prime Credit.  My name is Peggy.”  They can become annoying after you’ve seen the same commercial for the nineteenth time, but they’re funny because they’re so true.  Now Discover is trying to hook cardholders with “cash back.”  Ohhhhh boy!

Cash back???  You mean to tell me that I can get money – cash! – back on my purchases?  Oh my gosh, I’ll be getting FREE MONEY!!!  Let’s see…  I need a new 48″ flat screen TV.  That’s $1000.00.  And groceries for the month…  $300.00. Hmmmm…  I get cash back on fuel purchases, too, so I’ll put my gas on my Discover card.  After all, I’m getting cash back.  That comes to $350.00.  So, this month I’ve charged $1650.00.  That’s going to be a lot of cash!  That’s going to come up to… $26.50 cash back*.  Now I’ve charged over a thousand dollars I do not have and that I will be paying 20% interest on.  Next month, my credit card charges will be $1980.00 with that 20% interest rate.  What a great gimmick, though, isn’t it?!  Discover promises to pay 1-3% cash back, but they charge you 20% interest.  When looking at Alec Baldwin and a pretty convincing body double, who pays attention to that pesky fine print at the bottom of the screen?

Be smart about credit.  The smartest thing is, don’t use it.  Why charge stuff and risk having to pay interest on your purchases when you can save for them and pay cash?  At Financial Peace University, the goal is to learn to save up for the things you want to buy.  In fact, Dave Ramsey teaches that, when you pay cash for purchases, you can often times get by with paying less than the ticket price.  Let’s say you want to refurnish your living room.  You save up $3000.00 for your new living room furniture, which is priced at $3300.00.  If you walk in there with 30 pictures of Ben Franklin, chances are, you’ll get that furniture for $3000.00.  What many people don’t realize is, merchants have to pay for every single credit card transaction.  There’s normally a monthly fee for the privilege of accepting credit cards, plus there is a percentage-of-sale fee for every credit card transaction, on top of a flat per-transaction fee.  So, with all these fees merchants have to pay and the expenses associated with running credit cards, merchants can afford to accept a negotiated cash price – and you won’t have to pay high interest rates.  Win-win!

* At the time of this writing, Discover is offering 1% cash back on purchases, 2$ cash back on groceries and 3% cash back on fuel.