For years I thought about cutting up my credit cards.
In the past, I always had six months of unopened credit card bills piled up on my kitchen table — I couldn’t even look at them. Chugging 6 cups of green juice seemed easier to stomach then opening those envelopes.
I’m glad those debt-ridden days are a thing of the past.
Fast forward to today. I’ve paid off all my balances in full. Yup, in full. And I did it without cutting up my credit cards. Did I freeze them in a block of ice? Nope, I use them every chance I get — I’d even whip out my Visa for a piece of Bazooka gum if I could.
I believe that you can pay off all your debt and still keep swiping your credit cards too.
Here are three good reasons why you should hold off putting your plastic on the chopping block:
Reason #1 – Credit cards aren’t really the problem
I used to curse out credit card companies all the time. And it felt good — especially if it was followed with a fist-pump from a buddy.
But deep down I knew that my credit cards weren’t the problem — I was. I was never good with money.
Even if I only had an ATM card, I’d probably spend too much cash and end up months behind with the phone company, utility bills, and tax man. Then I’d have to curse them out too ;).
Bottom line: Credit card or no credit card, I’d still be a financial mess.
Back then, I just bought stuff and hoped it would work out one day. I had no idea how much I could safely spend.
That “hope” strategy never worked for me. I needed a system for my spending.
In other words, show me my financial sandbox and I’ll stay in it. I needed to figure out what I could spend – guilt free – and know I’d be okay.
I called that guilt-free amount Your Magic Number. When I figured out my Magic Number, the financial fog lifted. I knew exactly what I could safely spend. It didn’t matter what I bought or how I paid for my purchases — Amex, ATM card, or cash. As long as I stayed within my Magic Number, my finances would be fine.
Like me, a lot of your debt is probably there simply because you don’t know what your Magic Number is.
Credit cards aren’t the problem. Not being clear on how much you can responsibly spend is.
If you want to figure out your Magic Number, CLICK HERE to download your free copy of the ebook, “Your Magic Number.”
Reason #2 – “Cash only” is a hassle these days
At first glance, it might seem that it’s just as easy to get by with cash and an ATM card.
But what would your life look like without a credit card?
Want to rent a car? You might be able to do it. Even if they accept ATM cards in lieu of credit cards, be ready to provide a full credit check, give a deposit, and forfeit the option of renting SUV’s and other luxury cars.
Want to travel? Just like renting a car, some hotels accept Visa Debt with a large deposit, while others flat out won’t give you a room without a credit card. And if you happen to get a bad jellyfish sting while wading in the Mediterranean, the last thing you want to worry about is how you’re going to pay the medical bills. Even if you have traveller’s insurance — which you should always buy — a lot of hospitals will require payment from you first followed by reimbursement from your insurer.
And if your ATM card gets stolen and all your account gets drained — like my wife’s did in NYC — it’s a big pain to get your money back. In our case, we had to schlep to file a police report, go to the to bank, fill out another report, and then wait for over a month for the money to get back in her accounts. Grrr. With a credit card, usually fraudulent transactions can be reversed with just one phone call. Presto.
Reason #3 – Bye, bye points, and other perks
If you want to jet around, get free groceries, or straight up cash from your purchases — you’ll be saying adios to these rewards when you cut up your plastic.
Besides the obvious points and cash back, a lot of higher end cards offer other perks as well.
Take my Visa for example. I get cash back, trip cancellation insurance, purchase protection, and free roadside assistance. At first, I was nervous to swap my CAA membership — the Canadian version of AAA — for the credit card’s free roadside insurance. But when my car wouldn’t start on the coldest day in February, I rolled the dice and called the roadside help number on the back of my credit card. I was shocked. The tow-truck came and gave me a boost within minutes. I cancelled the paid membership. Now I have over $140 of splurge money to take my wife and kids out for dinner.
What I’m not advocating
Credit cards have lots of perks and conveniences. But if you aren’t using your credit cards the right way, they become counterproductive and even damaging. Here’s what you shouldn’t do:
- Rackin’ them up – Too much shopping can quickly add up to high balances. I know about this first hand. And if you don’t pay the balance in full, the interest could cost you a tonne — you’ll be paying off that ribeye for years after you ate it.
- Chasing the rewards – Reward cards are notorious for higher interest rates — like 19.99% notorious. You could probably get a lower rate from your local loan shark — and no, I’m not advocating that either. Just saying. So even if you carry only a modest balance on your card, the interest is probably outstripping your rewards big time. You lose and the credit card wins.
- Applying for a tonne of plastic – Applying for the Macy’s American Express for that one-time discount can be enticing. And a lot of stores offer similar promotions. But applying for too many cards in a short period of time isn’t a good thing — even if you pay off your balances in full. A portion of your credit score is based on how much credit you apply for. If you sign up for too many cards, they’ll ding you and lower your score. Ouch.
The final cut
A quick snip of the scissors always looks more attractive than changing financial habits. I get it. But here’s a little secret: When you live within your means and get smart with your money, you’ll feel in control. You’ll be happier — and so will your family.
So figure out Your Magic Number, then go ahead and charge everything to your credit cards. And why not? You’ll pay off your balance in full every month and still rack up the points. Ciao, Italy!
Have you ever…
Cut up your credit card and ended up regretting it?
Had a bad “cash-only” experience?
TELL ME IN THE COMMENTS BELOW 😉