So Sick of Debt

Since I paid off my credit card debt, I haven’t paid any interest. But funnily enough I have used my credit card almost as much as before! I remain focused on paying it off within days of any purchase, but I find that purchasing with the credit card is quick and easy. I know, I know … that’s the idea!

Basically, I don’t use the credit card without having planned to do so, and I am always confident that I can control my behaviour with it. But sometimes my money attitudes seem a bit strange.

For example, say I need to buy an item that will cost $300, and I’ve saved the money in a high-interest account (without debit card access). I can either pay for it with the credit card, then go online and pay it back, or I can transfer the funds from the online account to out working account.

However, if I do the latter, then manage to negotiate on the price, or get a better deal than expected, I have to send some money back to the high-interest account, meaning I have to do everything twice. I might have transferred $300, spent only $230, then had to go and send the $70 back to the high-interest account.

Instead what tends to happen is that the $70 seems like free money to me, and we spend it on something else! Sound familiar? I know, it’s classic credit card behaviour, but using money I’ve saved! How’s that for weird. So I prefer to use the credit card and pay it back. It works for me, but I understand why for others it might not.

I received a letter from my credit card company that made me smile:

“We’ve noticed you haven’t been using your credit card much lately. We were wondering if maybe it was because you need a boost to your credit limit. How does $10,000 sound?”

And so it went on in the conversational tone that this particular company loves to use. The limit increase is pre-approved so all I’d need to do would be send back the bottom portion of the page.

Funnily enough I HAVE been using my card a lot but always making immediate repayments the same day. They just haven’t been making any money out of me, and therein lies their problem!

The letter made me smile because it even offered me the choice of a `lower limit’ - eg if, say, I didn’t want $10,000 but maybe I wanted $9,000, I would just write $9000 in the space provided.

I thought maybe I should reinterpret that for them and really ask them for a lower limit, say $2000! I’m sure this wasn’t what they had in mind!

After announcing on here last week that I was getting another credit card, I subsequently received a letter saying I didn’t `fit the lending criteria’.

I think this is actually a good example of my bank not lending to people who really shouldn’t be getting credit cards. And, on paper at least, I probably shouldn’t be getting one. This bank also knocked me back for a personal loan when I was in my early 20s. I had wanted to buy a car that really was a little expensive for my needs, and I’ve never regretted their decision not to give me the money. Well not after the first day anyway!

In this case, the bank initiated the contact. They rang ME up and told me why I should have the card and all it’s advantages. They caught me off-guard for a start, and I should have said no to anything marketed by phone. Anyway, in the application process I only included my casual income (I didn’t mention my husband’s at all), and disclosed that I have a dependent. I also mentioned that I have a $7000 limit on my other card (though no money is owing).

I know, I really don’t need any more credit at my disposal! As regular readers will know, I only thought the card would be ok to try out these rewards programs everybody is always talking about. I wasn’t going to charge anything I couldn’t pay off the same day.

The only thing that grates on my nerves about this is the way the bank framed the letter, going on about how they were `unable to approve my request at this time’ and how they `appreciate my interest’.

Hey guys, you rang me! You told me what a great customer I was and why YOU thought I should have a shiny new card. I didn’t exactly go grovelling for it. But that is the way banks are, and always will be! In the end, I think it’s for the best. I have heard that you have to spend an awful lot of money to make rewards programs worth it.

Now before you smack me upside the head I will first admit that the bank got me when I was pre-occupied and tired. They rang me while I was doing an assignment and for some reason I let the customer service staff member rattle on even though I don’t like or agree with phone-based marketing, even from my own bank!

But after listening for a while (always a mistake!), the card sounded quite good. Not the interest rate, mind you … thats about 20%! But this card is linked to a rewards program voted Australia’s best in Money magazine. And it has quite a few features that I think could fit in quite well with our family.

This is how it works:

• up to 45 days interest free (if a purchase is made at the start of the monthly cycle), then 19.9 per cent pa
• two cards linked in one account - one is Amex, and you get double points for every dollar spent using that card
• points do not expire and can be used with any Australian Frequent Flyer or other rewards program
• you can link your savings account to the card and use it to withdraw your own funds instead of using the credit
• There was a balance transfer offer but I don’t remember it because it didn’t count in my decision-making (I don’t have a balance to transfer).

There’s a $100 yearly fee, but you can use your points to pay for the fee, so I will be able to use some of the 5000 bonus points I receive for joining to avoid that charge .

I see this as a chance to explore how I can make credit cards work for me now that I have spent 5 months maintaining a nil balance. My usual CC is a basic one - no rewards programs, just a low interest rate.  Anything I buy with it gets repaid online the same day. I don’t buy ANYTHING I don’t already have the money to pay for.

Perhaps this card would be good to use when I’m buying large purchases I can pay off immediately in exactly this way. It will be a little experiment to see if rewards programs are as worthwhile as everybody tells me they are.  I can only see them being worthwhile if their use doesn’t cost me anything. We shall see, and if this experiment fails I have no qualms about binning the card and cancelling the credit line.