I’ve said before that I’ve become a Dave Ramsey fanboy, but there is one thing we still do that he detests…we use debt.
I know, I know. Credit cards spend millions a year in clever advertising for you to use their product, debt, because they know that it increases your impulse spending up to 18% and most users of their product carry a balance, increasing their revenue in interest payments. But can you use debt responsibly and not fall victim to their trap? I really think you can.
We have fallen victim to the trap many times in our lives because we weren’t being responsible with our income. But I think if you follow the fundamentals of saving up an emergency fund, getting out of outstanding debt, and most importantly, have WILL POWER, it is possible to have a credit card and not be a self inflicted victim.
Don’t get me wrong, I would love to not have a credit card. I’d love to not have a cell phone (provided by my employer). I’d love to not fall into many of the trappings of modern day life. But there are things that prevent me from doing that. I have to carry a cell phone because co-workers and customers at work depend on me to be there to support them and answer questions they might not have the answers to. And I don’t have to own a credit card (I own it, it doesn’t own me), but like I said in a previous post, I don’t want to fight to get OUR money back in a world full of fraudulent charges. I’ve had it happen to me twice. Once on my personal credit card and once on my work credit card. Who eats Popeye’s Chicken and sushi in the same day? Somebody that steals your credit card information, that’s who.
So if there was a way to use debt responsibly and not spend more than you intended, what would that look like?
- Only using your card for reoccurring online transactions that require a credit or debit card to have the service / membership, like a monthly cell phone bill or a streaming service. If it’s something that you were going to pay for anyway and it is a set cost that you had in your budget, what is it really going to hurt? Just make sure you are accounting for that in your bank account so that money doesn’t get spent. You can also be frugal in those decisions, like we only have the $5.99 a month Hulu plan with commercials and my wife has the $15 a month plan with Republic Wireless. We don’t have cable and only have the lowest tier internet package for streaming. I also built an antenna out of scrap material around the house to get local television channels. Christy’s cell phone plan has talk and text anywhere, but she needs WiFi to get on the internet. With WiFi practically everywhere you go now, it’s never an issue to not have the internet at your fingertips 24 hours a day.
- If you plan to go on vacation, you should already be budgeting for that. You should have an idea of what you plan to spend on travel, accommodations, food, and entertainment. You will be booking that online and you have a budgeted dollar amount that you can’t go over, so guess what? Don’t go over it. If you go to set it up and you are going to exceed that amount, you need to have the strength to take a step back and tell yourself no. You’re just going to have to postpone your plans for a couple months because you didn’t budget properly. One cost saving measure we do when we travel is we buy groceries for breakfast and lunch and we only eat out for dinner.
- Speaking of food, I typically buy food with our debit card, but on the rare occasion that I’m ordering over the phone for delivery, and I don’t have enough cash, I’ll use my credit card. I usually just pick up the food though to save on the tip and you can get it home quicker than someone out for multiple deliveries. The reason I use credit when ordering a delivery is, you never know who is on the other end and they could be writing your information down on a piece of paper. They may be an honest person, but I doubt the guy at the pizza place is shredding that piece of paper. Sometimes I’ll use my credit card at the restaurant if the clientele looks shady. One thing we don’t do is use our credit card for our groceries. That is a monthly bill, the same as your electric bill. You wouldn’t put that on a credit card, would you? WOULD YOU???
So in summation, if the expense can only be paid by using a credit or debit card online, we opt for using a credit card to avoid fraudulent charges against our own bank account. Avoid situations were there is the option to purchase extra items. If you are in that situation and you can’t control yourself, maybe you should be using your debit card in that instance and take the rare chance that your information will be compromised. If it’s any kind of bill that we can add to our payees of our online banking, we do that. We use our credit card on a limited basis and if it is not a monthly reoccurring expense and we need to use a card online, we think about it before we make the purchase. Christy probably has 300+ items in her Amazon cart because it’s something she may want, but if it’s not an immediate need (which covers about 99% of things sold on Amazon), she doesn’t hit the buy button. The most important thing when using a credit card is impulse control. Impulse control also helps you take the time to look at other sources and possibly find what you were looking for at a lower price.
I did have an idea to avoid credit cards altogether and protect ourselves online. I wanted to start a second checking account with a debit card for online purchases only and keep a minimum balance in it – around $250-$500. That way we have a buffer to avoid going into overdraft, while also limiting the amount that someone could access via a fraudulent charge. My plan was to set up automatic transfers for any reoccurring monthly expenses like a cell phone or streaming service and manually transfer the amount for any one time purchases. Kind of like our own personal credit card because everything would have to come straight out of our bank account, therefore, avoiding debt. Christy thought that would be too much trouble. With most things, she’s probably right.