While my husband, David, and I discuss all our financial decisions these days and have learned to respect each other’s viewpoints on spending, it hasn’t always been that way. I still vividly remember being furious with him years ago when he said no to getting a credit card. My argument was that we needed a washer and dryer so I didn’t have to gather up our dirty clothes, load the kids in the car and drive to the laundromat every few days.
But he said no. Not let’s talk about it. Not maybe. Not tomorrow. Just plain no. “We’ll get a washer and dryer when we can afford to pay cash for them,” he said, “and not before.” I’m sure my response wasn’t gracious and it probably wasn’t printable, but it was a wise financial decision. (I’ll save the discussion of the relationship issues here for another column. Like I said, we make decisions differently these days.)
David didn’t say no to be mean. He said no because he didn’t want us to pay interest. We had enough trouble making our income stretch to pay the bills as it was without throwing it away on interest.
If you are using your credit card for anything except a genuine emergency, you are throwing your money away and making the bank a handsome profit in the process. A ruptured appendix is an emergency; the hottest new fashions and a tempting sale aren’t.
Say, for example, you are tempted to take a trip with friends, but can’t buy your tickets from your current savings and decide to put them on your credit card. If your charge $1,000 of trip expenses at 18% interest, to pay them off with minimum monthly payments of $40, you will still be paying for that trip more than five years from now, and will have paid $1,475 for it—not $1,000—a full 47% more.
Credit card companies are required to clearly state how much interest you will wind up paying if you only make the minimum payment on your bill each month. That information is always on your bill. Don’t ignore it; read it. And you can calculate the actual amounts yourself at www.bankrate.com/calculators, a site not tied to a credit card company.
Credit cards are plastic temptations. It is so easy to use them without thinking, yet they are one of the most expensive ways to get money. My hard-won credit card tip is this: never charge more than you already have the money to pay off when the bill comes.
By Judy Osgood