Time to Get Realistic About Your Credit Cards

Now that the holiday season is over, we’re into a New Year, and you’ve bought more than you should have from your Black Friday purchases it’s time to get realistic about your credit cards. Yes, those “magical” little cards that let you live beyond your means. I tried to point out a few months ago that Just Because They Send You a New Credit or Debit Card Doesn’t Mean You Have to Use It! but maybe you weren’t listening?

Credit cards seem to have a magical aura about them as if… some how… you don’t have to worry about what you buy using them because, after all, you won’t see the bill until next month; that’s like an eternity. 😉 Debit cards, however, aren’t quite as bad because the money comes out of your bank account rather fast and your bank will happily let you know if you’re overdrawn.

If you’re like most Americans then you likely have quite a bit of credit card debt–to the tune of about $15K and counting–and I’m willing to bet that the past month or so hasn’t helped this staggering number. Maybe it’s time to take out a personal loan? Yikes!

The sad truth is that the vast majority of our addition to credit card debt has very little to do with things we NEED but far more to do with things we WANT. No doubt if the car breaks down and you have to get it fixed then that’s probably considered a need and if you didn’t have a “rainy day fund” then it’s acceptable to use a credit card. There are legitimate uses for them, after all.

On the other hand, credit cards make it easy to purchase all sorts of potentially unnecessary things such as snack foods and other convenience items at the grocery store, Starbucks lattes, snacks and toys to appease whiny children, fast food for any reason, nearly anything while “window shopping,” and even big ticket items like jewelry because, well… you’re in the “dog house” to clothing and shoes and even various electronics like a new television or video games. Hence, the problem with overindulgence over the holidays.

Anyway, all that’s in the past. What’s done is done, right?

Great! Let’s try to do something different for next year…

Probably the best advice I’m aware of is that of Dave Ramsey who is vehemently opposed to credit cards. For the most part you can get away with NOT having them. If a vendor won’t accept cash or check then I’m positive they’ll accept a debit card. Every vendor that I can imagine accepts one of the aforementioned options. In other words, there’s nobody that will ONLY accept credit cards.

As Ramsey would likely say, you should work to rid yourself of your credit cards no matter what. Certainly that’s easier said than done but once you decide that it’s going to happen–perhaps like losing ten pounds–then you CAN do it. You can read up on how he recommends getting out of debt but the moral of the story is that once you get rid of it keep it that way. Once you get out of debt don’t fall into the same bad habits.

Personally, we keep only two credit cards active at any one time. We use one as the main credit card–mostly for purchases of things we need like groceries and gasoline–and the other purely as a backup. Now, I can hear you saying “but you just said you shouldn’t use them!” which is generally true UNLESS you actually have the willpower to pay them off each month… which is precisely the willpower that my wife has. 😉

She absolutely despises credit card debt and I’m positive she would have me sell off a kidney before we had to pay interest charges!

Obviously, that’s not a good option for any of us mostly importantly for me. The best option is to not use credit cards at all, particularly if you know you’re not the type of person who will pay them off each month. C’mon, you know who you are… you can’t hide from yourself.

But what if you’re too deep in debt and don’t honestly feel like you can pay them off? Thankfully, I’ve never been in that position so I can’t offer first-hand advice but it is possible to do things like use 0% balance transfers to defer the debt while you pay it off–there are almost always credit card companies willing to do this–or, if you’re in serious trouble, to contact creditors directly to see if you can work out a better payment plan (they would rather have you pay something than to have you default) or to try debt settlement agencies which can lower your bills/rates but that can cause your credit score to take a dive so beware.

Ultimately, the best plan is to own it. Stop using your darn credit cards right now. Cut up all of them if you have to. Work the debt snowball plan that Dave Ramsey suggests. Last, vow to never do this to yourself again once you get out of that hole!!