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Jul

19

Inbox Clips #8: Playing the Credit Card Game

You all may remember the WWSD series where I had Q&A sessions with the readers - WWSD stood for “What Would Shanti Do?” I’ve decided recently that I really hate that title, and so I’ve changed the name to Inbox Clips… i.e. snippets of reader questions and comments that come to me and that I feel demand a proper public response. And yes, I did go all 1984 on you and change the names of the old posts.
One of today’s questions comes from a Flickr user, actually, whose photo I used in the post Playing the Credit Card Game. Regarding that same post, ShutterCat7 asked:

“And so, I used the card and got the points, and when the bill comes next week, I’ll pay it in full. “
Okay.
But.
Did you?
I’ve gone through similar reasoning and then not done what I said I was going to do about paying when the time came.

This is a great question, and one I demanded of other credit card users the whole time that I was in debt. I thought it would be good to answer this one publicly because many of you were probably asking the same question in your heads. Here is the response I sent, verbatim:

Well, I wrote the post this evening, so I can’t talk about paying the bill in full yet, because I haven’t. BUT - I worked on paying off my debt for 3 years and have become very religious in my budgeting and saving. I make $2500-$3500/month and live on $1400, including “fun money” that’s earmarked for silly spending and clothing and stuff. The rest goes into savings each month.

The $60 that I spent at Nordstrom was taken out of last month’s fun money (or as I usually call it, “blow money”) and put into savings as well, so that I didn’t spend it otherwise.

I pay all of my bills online the day that I get them, and have for years now… so the ritual is set. When the Nordstrom bill comes I will transfer $60 from savings into my checking, and then pay the bill direct from checking. It’s really become a system in my life that I rely on and believe in, and I have no doubt that I will pay the bill in full when it comes.

The problem before, years ago, was in my ridiculous spending habits. I would charge $400 to the Nordstrom card every WEEK, along with manicures and nights out barhopping. It was very immature and irresponsible, and I’ve completely left that lifestyle behind. Knowing my patterns now, and the fact that the money is already set aside to pay the bill, I know I will pay it.

Since writing my response, the bill has come. I got it from the mail as I was leaving for Sean’s for the weekend and I left it on my desk at home. When I get home Monday I will pay the bill, just like planned
The second question is really more of a comment, and it came in a great response to the same post. The Executioner (from Death to the Mortgage - I’ve never learned his name and I think he prefers it that way :P) wrote:

Wow. I’m surprised you’ve changed your stance a bit. You seemed to be adamant about shunning credit card use in your previous entries.

Credit card companies are pure evil. They advertise a lifestyle of wealth and success, but they really want you to become a debtor for life. However…

If you beat them at their own game (by incurring no finance charges while still reaping the reward benefits), you can have the satisfaction of knowing that you are sticking it to The Man. Bleeding the beast. [Insert your favorite metaphor here].

Haha - thank you so much for this comment. I WAS adamant and still am, really. I honestly don’t think I will use my credit cards much (I have two now, down from eleven), if at all.

My bigger point to the post which I didn’t explain clearly is that I will not be closing those two credit cards because I would like to be able to use them from time to time when need be. I will be shopping at Nordstrom regularly whether I have a credit card there or not. Everything I buy there will be something I can afford and have budgeted for with cash in my checking account. But I will buy with the Nordstrom card because then I get the points. As long as I don’t pay finance charges and pay on time, there’s really no harm done - and I get more out of the deal than I would if I just bought with straight cash. It really does feel good to know I can use the Nordstrom card for my gain, and not theirs.

As for the Bank of America card, I don’t see myself using that ever except in cases where I want to pay for something with money in my savings account. Dave Ramsey would encourage transferring the money ahead of time into checking and using my debit card, but my life isn’t always so calculated. (But somehow it is, too.) Using the motorcycle gear as the example again, I HAD the money, and I had already planned on spending it - but on a Sunday, the money was trapped in my savings account and I had to make a purchase that day. In that case, the credit card just got me out of a pinch
Thanks for reading! And keep sending in those questions and comments - I love responding, especially to those questions that really make me think. What can I say - I love a challenge

Filed Under Inbox Clips - Reader Q&A, money and finance

Comments

2 Responses to “Inbox Clips #8: Playing the Credit Card Game”

Mariann on June 3rd, 2009 6:18 pm

Hey Shanti…I work at a childrens clothing store that offers a credit card. A point system much like your Nordstorms card. Once you incure $200 dollars worth on the card, you get 10% of all your purchases there after for the rest of the calander year. We offer to take payments for the credit card right at the store. So what I suggest to people is to use the credit card, then turn around and pay the balance you just charged with cash and or debit card.
I was just curious if Nordstorms offers that as well?
I myself am not in a healthy spot to be able to have that much self control…so will not be getting any credit cards, but maybe in the future…to be able to take advantage of the credit card Pluses!
admin on June 27th, 2009 9:22 pm

Not sure - probably. I always just go to Nordstrom Bank online and log in when I get home and pay the balance of my receipt