In our previous blog entry, we discussed some of the potential landmines that will put holes in a financial plan quickly. We left one HUGE budget leak out the last time, because as we said it’s worthy of a post by itself. The main reason for that is because it acts as an amplifier and then a multiplier to the prior leaks. Additionally, the prevalence and the acceptance that our culture has lended to them only carries the potential for their damage further. As you probably guessed from the title, this super-leak is the Credit Card. We’re not here to preach about the evils of the industry, but rather to share our experiences with them and to explain why we made the choice to remove them from our life.
We realized that the problem with them in our life wasn’t so much that they were a leak we didn’t see, but rather they were a faucet that we kept slowly opening further and further. It started with a slight nudge of the handle and a few drips… We had our first credit card and the limit was less than $1,000. We would put gasoline on it and maybe a meal or two here and there and perhaps an Amazon order occasionally and then we would pay it off in full. This cycle continued until we received in the mail an offer for another credit card! I always felt like Ralphie Parker from “A Christmas Story” when he was finally invited into the Little Orphan Annie’s secret society when I got these card offers. In my mind, I thought that we had been good at managing our little bit of credit so now we’re being given the opportunity to manage more credit. The problem was, the message that Little Orphan Annie sent to us was “Be Sure to Charge Everything On Here”. That is exactly what we did… we charged and charged and charged. As a matter of fact, we filled up both cards in no time at all. Less than a year into our marriage and we were sitting on 2 maxed credit cards and several lines of credit at various stores in the area.
We had dug a hole and hit bedrock, and realized that it was time to start learning how to manage our financial life. I’m not saying that what we did from here was the wisest move, but it’s how it happened. Our “solution” to 2 maxed credit cards came in the mail a month or so later. It was yet another offer, but this time it came with a shiny perk. It was an offer for 0% interest for a number of months if we moved our current balances to their card. That’s what we did, we moved both cards to this new one and in the process quadrupled our credit limit on revolving credit. There were many financial problems bubbling beneath the surface of this volcano, but a few stuck out (as they say hindsight is 20/20). First, we just stuck the original cards back in our wallet “in case we need them for an emergency”. Secondly, we just quadrupled the potential hole that we could dig. Third, we believed that we cleaned our financial house, but all we did was sweep the kitchen dirt into the living room. Finally, we told ourselves that we were going to live on cash only, but we kept the lines of credit open and we didn’t cut up any cards.
Fast forward a year or so, and we’re still paying on the original balance transfer and there are now balances on the 2 original cards. We take an anniversary trip to Cabela’s and decide to open up a card “just for gas and things we’re going to buy anyways” because I decided to listen to an employee tell me how win with their card. We don’t hold anything against this employee, because he was just doing what Cabela’s paid him to do. We were the fish in this story and we took the bait. We thought that we were going to be so smooth when we put all of our bills on auto-pay using the Cabela’s card and then rack up a bunch of “free” money to take with us when we took a road trip to one of their retail stores. (Please don’t get me wrong here, this is about our stupidity, and we hold no animosity toward’s Cabela’s… it’s our favorite store). With the previous cards still alive and putting on weight, we opened the Cabela’s card to divert our planned expenses to earn that life-changing 1% reward. We chased after that 1% reward because every time a new statement would arrive in the mail, we’d see those reward dollars add up. The problem is though, to earn $1 at the store, we had to spend (and pay off) $100 on the account. We began using the card for everything just like before and the balance started to grow. A year later, that Cabela’s card is now closed… as is 6 or 7 of the other cards and lines of credit that we were extended. We had to learn some hard lessons, and we want to share them below:
– We did not experience anything close to an emergency requiring instant payment (i.e. Credit).
– When you leave lines of credit laying around carelessly, you’ll use them carelessly.
– The 0% APR balance transfer didn’t clean up our mess, it just made room for a bigger mess.
– We spent much more than 1% chasing a 1% “reward”.
– We always bought more than we needed and things we didn’t plan to just because we could.
At this point we have only a fraction of our previous debt on 1 last credit card. ALL of our credit cards are now plastic confetti in a landfill somewhere. The day that this last line of credit is paid off the final account will be closed. As we have talked to various people we realized that we were not the only ones who are/were living from credit card payment to credit card payment. We weren’t the only ones who worked just to pay off credit cards. That’s why we’re “coming clean” here for anyone who reads this because we believe we’re not the only ones to walk this road. We want to help anyone who is still on this road and we want to learn from those who’ve made it off and onto greater things in life. We spoke to our grandparents about using credit cards and cash, and when we told them that we’re getting rid of the cards and only paying cash she smiled and told us that it’s what they did. I seriously wish we would have asked for their advice much sooner. We can’t say that credit cards are evil, but we can show you the scars they left on us. We had to realize that the credit cards in our lives were like the backpacks with a leash that you see children wear. Yeah, the credit card let us carry some shiny new toys in it, but the leash we couldn’t see always he’d us back. Our next entry is going to go into detail about what finally helped us turn the tide of the battle and get rid of the debt that was burying us.
Jason & Steph