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Monday, February 3, 2020

Why I Finally Got a Credit Card, and How Have One Safely


I will admit, one of the things that are more challenging for me in life is to see more shades of grey and be less dogmatic about things, realizing that there is a middle path. Certain decisions of mine, mainly parenting, I tried to do the opposite from how I was raised, because I realized how bad it was for me, that I ended up swinging to the opposite extreme, which also wasn't good. It wasn't even unhealthy for my kids, but it was unhealthy for me, because I ran myself ragged, all because I wanted to do things right. Over time, and with therapy, I've worked on being less extreme in my positions, and to take the good from certain dogmas, while leaving the less beneficial parts behind.

So, I'm a big fan of Dave Ramsey. I think he is really great, and his baby steps and get out of debt plans are good, solid advice. And I have all the respect for him.
But he's human. Which means sometimes his advice just doesn't work. Or isn't the best for everyone. Or needs to be tailored to your situation.

One of the things Dave Ramsey talks about is that you shouldn't have a credit card. Credit cards are bad, bad, bad. Don't do it. Blah blah blah.


And he has a point. For people who don't do well financially, and have a hard time budgeting, or whatever other reason, credit cards can be very dangerous. It is so extremely easy to get into the credit card debt trap. For certain people, don't ever have a credit card. Its like alcohol in and of itself isn't terrible, but if someone has a drinking problem, even a sip is a bad idea. Because it can easily lead one back down the hole of addiction.

For me, I know I don't personally have a spending problem. (All my previous issues with finances were complicated, too complicated to share here now, but suffice it to say, the issue wasn't my having a spending problem.)

But I still shunned credit cards.

In my old bank account, I did have a type of credit card that is "special" to my country. Not the standard American style credit card, this type of card is connected to the bank account, and the full amount comes off on a set day of the month, no rollover, no debt. (And that card is actually better financially than debit cards, because with debit cards we get charged by the bank per purchase, but with this type of credit card, we only got one fee per month (the same fee as we would get per purchase with the debit card.)) But then when I separated and opened a new bank account, the bank wouldn't give me even that type of credit card unless it was prepaid, for various divorce related technical reasons.

I went nearly a year without having a credit card. Just a debit card. And it was a royal pain.

For some reason, I'm not exactly sure why, many places where I wanted to make payments, specifically utilities, phone, electricity, internet, etc... they wouldn't let me pay with my debit card. Or if they did, they refused to keep it on file to charge me monthly, and would only let me pay the fee each time, which meant that, because of my ADHD and forgetfulness and other reasons, I'd often forget to pay something until it was past date, and I'd need to pay a late fee or have my internet cut off. (Yea, not some of my better moments.)

One day, though, I was in the supermarket, and I was offered a supermarket credit card.

(Ok, hello, I already know I'm going to get people blasting me, telling me this was a horrible financial decision, just like getting my free TV with my phone service, which, by the way, I still don't regret...)

At first, my immediate instinct was to say no. Credit cards are bad, bad, bad. Especially since this credit card, unlike the bank credit cards, allows you to carry over a balance from one month to the next.

But then I thought about it, and remembered that I've been having trouble getting a credit card through the bank, that not having a credit card is making my life harder, and I asked them if they'd approve me for the credit card, and what the process was. The lady ran my info through their system and they immediately approved me for the card. Score! After a year without, a year full of headaches, I finally was going to have a card again.

And the card comes with perks. I get discounts when I shop at the supermarket under which this card is registered. Sometimes serious discounts.

But I know that they can be dangerous. So I made sure that I would not fall into the credit card trap.

What I do is I budget very strictly, using the YNAB app (get 34 days free through this link). I only, only, only budget money that already is in my account. I never, ever, ever count on money that I'll be getting paid soon. Nope. If the money is in my account, I can spend it. If not, then I don't have it to spend, even if I'll "be getting it soon". Each time I spend using the credit card, I input the expenses, and it lowers my total net worth on YNAB, even though the amount of money in my account stays the same, and then on the set day of the month, it all comes off in one go. But the amount is never a surprise, because in my mind, and in my budget, it was already spent.

The biggest problem is when people are spending money they don't have, and only have access to because of their credit card, and then because they don't have that money, they don't pay that balance off in full. I will not, will not, will not put money on my credit card that I don't have in my account. Period. And my balance will always get paid off in full. Every month.
If I have an emergency? Well, first off, most emergencies aren't actually emergencies, they are expenses that are to be expected, and should be planned ahead by budgeting for them in a sinking fund. But for emergencies? That's what an emergency fund is for.

I don't recommend someone get a credit card of any kind if they don't have an emergency fund. Because then people will turn to the credit card thinking of it as an emergency fund, but all it is is high interest debt. It's not free money!

While I currently have a local credit card, it only helps in some ways. There are perks, which I'll talk about in another post. But now my next mission is to get a US credit card. Because I currently have no credit score, and I think it is important for me to have a credit score in the US, even if I don't currently live there, because who knows what the future may hold.

But that's something for another time.

What are your thoughts on credit cards? Do you have one? Why, or why not? What are your personal rules to make sure that you do things safely with your credit card?

2 comments:

  1. I have a couple of credit cards and pay them off in full every month. Where I live it’s easy to pay utility bills online with a saved credit card, and I really appreciate not having to think about missing a payment. PLUS I take advantage of sign up offers for air miles and free hotel nights/points which makes traveling back to my home country cheaper.

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  2. Another great post. Thanks for sharing. I was doing decent with credit cards until my relationship status changed and then my finances took a turn for the worse. End result, I went a decade without a credit card. Then the day came when I realized I needed a new or newer car. So I started off slow, bought some furniture from one of those stores that doesn't care how low my credit score was. 3 months later I then opened an account at a Credit Union. They suggested I get a credit card to boost my score. So I did after another 3 months. Score boosted! Then I finally went and bought a car and 6 months later I re-financed the car because my score was getting higher. Currently I have 3 store cards I only use when I need something from those stores (usually Christmas deals) and 2 major credit cards. One I use for everything because they give me points which turn into $$. The other I used to purchase my HVAC unit because they had 18 months zero interest. Needless to say, I paid that off before 18 months. Now only my husband occasionally uses that card whenever he's without cash and needs something.

    I have total control when it comes to my cards. I always pay off the balance because I hate losing money due to bad budgeting or worse, late fees. Because of this, I now have really good credit.

    One thing to mention Penny, is that folks should freeze their credit if they are not planning any big purchases (car, home, HVAC, etc.) This way it can't be stolen. I'm planning to do that soon, but I might have to get another card with zero interest again due to a needed home repair. But I'm hoping to save up the money instead.

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