My $.02 on credit cards and the credit game
On Friday, Crystal guest posted about a topic that in the four years of writing Simple Mom, I haven’t dared touch with a ten-foot pole: credit cards.
But she was willing, and I love and share most of her sentiments, so I’m honored that she tackled the somewhat eggshell-walking topic. And after reading the many comments, it sounds like it is indeed a tricky subject.
Those of you who shun credit cards do so vehemently, and sincerely want others to see your perspective. Those who do use credit cards—and pay them off in full each month—might feel the need to justify their perspective. And those who feel up to their ears in credit card debt probably feel uncomfortable saying anything. So they stay silent.
So I thought I’d tiptoe around my opinion on the matter, without going in to too many details.
Why we don’t use credit cards
Unlike Crystal and her family, we formerly used credit cards. And we, too, planned to pay them off in full every month. But then things got tight. So one month, we didn’t. And though we never had a high balance, it felt like it took years to get afloat. Late charges, a high interest rate, and what felt like random extra charges (it’s snowing—let’s ding them with a Snow Fee!) made credit cards a ball and chain, not a useful tool.
We finally paid them off before moving overseas, but it was a miserable experience. It’s no fun watching your hard-earned money pay for things in your past, instead of saving it for the future or expensing your present. Once they were paid off, we closed our accounts (yes, completely closed them), wiped our hands, and never looked back.
Since then, Kyle and I have vowed never to use credit cards again. We’ve been debt-free for over three years, and there’s no feeling like it.
But I pay mine off in full.
I know many people do, and that’s great you can. As Crystal said, I don’t think credit cards are evil. But they are a game, and if you don’t plan your moves extremely well, you could easily lose.
Yes, you can get miles, or cash back, or points, or whatever. But you must believe that credit card companies are in the business of making money. They’re not a charity. They’re not happy when they don’t make money off you. They will find a way to make money. They’ve been known to randomly change payment due dates at any given time, and not warn you in advance. Most are legally allowed.
I know some of you mentioned you’ve had one for 17 years and never had to pay a dime in interest. For me, however, there’s a peace of mind that comes from knowing I’m in control of our money; I haven’t given over the keys to a multi-billion dollar industry. When I pay for something, it simply comes directly out of our bank account, not via a credit company.
When you open yourself to them, they can “get” you financially at any second. There’s so much fine print in credit card agreements—money management shouldn’t be that complicated. It’s not worth it to me to play the game. It’s just not. I’ll collect airline points the good old-fashioned way.
Photo by Manolo for the Home
But what about buying a house?
We’re dealing with this right now, in fact. Kyle and I are in the early stages of looking at fixer-uppers (we still want to live overseas again, so we don’t want a big house), and we’ve already been told by a number of lenders that “we’re screwed” because we don’t have credit scores (one even told us this literally!).
It makes us laugh, really. We have plenty of cash saved, we make decent money (at least, more than enough to afford a fixer-upper), and we’re mocked because we don’t want to play the game. Fine.
But here’s what we’ve found. There are a few lenders out there that still do manual underwriting—they take a long, hard look at your bill-paying history and your overall financial health with a non-traditional credit report. There aren’t many, and you really have to ask around, but they do exist. We’re in the beginning stages of working with them.
We still don’t know the outcome. If the interest rate offered is too high, or if for whatever reason it doesn’t work out, we’ll be fine. We’d honest-to-goodness rather wait to pay 100% cash for a house than to play the game. Really. It’s not worth it to us to open up a few lines of credit only to increase our FICO score. (We paid cash for our vehicle, in case you were mentally asking.)
Crystal’s family did it—they paid for their house with 100% cash. Yes, neither of us are lawyers, like Crystal’s husband (writer and non-profit ministry director, anyone?), but with sacrifice, and patience, it can be done.
How do you pay for hotels, car rentals, and other online stuff?
With our debit cards. Except for a few items in our envelope system, we pay for everything with our debit cards. I’ve never had any problem with an airline ticket, car reservation, hotel stay, or online purchase, both here in the States or in any other country. And I travel a lot.
Photo by Vinoth Chandar
If you use credit cards and feel like you can handle them, and you have peace of mind, then I’m not here to judge. That’s great. I have many wonderful, responsible friends and family members who do. I’m just telling you how we do things in our household.
My purpose in writing this is to give a voice to those of you swimming upstream from the culture like us. There are people out there not willing to play the credit score game. It’s hard, because our world doesn’t function this way. But for me and my family, it’s worth it.
I welcome any comments if you’d like to share what works for you. I won’t, however, tolerate snarkyness or any form of a judgmental attitude. No ad hominem—comments like these will be deleted. But please…. I’d love to hear how you handle credit.
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