I’ve Paid For This Twice Already…

Archive for the ‘credit cards’ Category

Thursday morning while doing my daily financial tasks, I checked on my Capital One account online. There I saw the electronic payment of $5104.63 and my current balance of $0.00.

Yes, this was a balance transfer. I’ll get to that part. But the just… joyful feeling that came over me at seeing the $0.00 balance cannot be denied or really explained. It just is.

I sat there and stared at it for a minute or two, and then logged out and logged into my Citicard account. And there, in black and white, was the matching transaction, a current balance of $5104.63 through an electronic payment to Capital One. And the feeling this time was… not quite relief, but definitely a mellow feeling. A feeling of “Okay. Now, it can begin. The paying down of debt without dollars going to interest. The unrelenting attack on the principal. Here it comes. Watch out.”

I would have liked to make a payment right then. At least a symbolic one. A $1 “Here I come, debt!” payment. But with change comes adjustment, and I only get 4 electronic payments a month, and for now, until I get into the rhythm of things, I need to use those payments wisely. So no symbolic thumbing of the nose at the debt.

But the yard sale is today and by 2pm I will have some ammunition for a good nose thumbing. I hope it is a lot.

~J

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So, I’ve used credit cards irresponsibly in the past. There is no question of that.

And, it has been a very long time (if one can call multiple years a long time) since I have done that. It could be said I have seen the error of my ways and learned from it. That’s my story at least.

And I stand here looking at a future conundrum. Not a current conundrum, because there is no way I am going to start using a credit card right now while I am still in credit card debt, no matter how organized or efficient I might think I could be at it.

But at some point in the future, I will have no credit card debt. And I might, then, start using a credit card again.

Say it isn’t so!

This is what I keep thinking about. I started this blog in part to help myself learn about and make better financial decisions. And I think, in many ways, I am accomplishing that. I’ve become better at tracking my money. I’m much better at not spending it. I’ve increased the amount I snowflake by a whole lot. And I have learned a lot of things about…. credit cards. Some bad, but some potential good too.

It is all about my coupon/rebate/freebie loving nature. The word is… cashback. Say it with me…. cashback.

Doesn’t that sound so… nice? Enticing? Happy? I know it is supposed to. I know it is supposed to give me nice happy warm feelings of gooeyness right inside my stomach. Cash………back.

If I am going to spend money anyway (which I am, I mean, one needs to eat) and I can get basically a rebate on everything I buy in the form of 1-5% (depending on the car and the purchase) back in cash at a later date well…. wouldn’t that be a *good* thing? Wouldn’t that help me out?

But what about all those studies you hear about that when you use a credit card, you inherently spend more? I believe that it is generally true. I know for myself, before I started the zero-based budget and completely tracking all my spending, I was definitely spending more with my debit card than I would have if I was carrying cash. The flip side to that is I may not have spent as much at the point of sale carrying cash, but when I carry cash I tend to be sucked in to those little purchases, the latte factor if you will. I never bought more actual lattes than when I used to carry spare cash in my car ashtray and I drove past a Starbucks taking my son to and from preschool. So I may spend less at the grocery store if I have cash, but I spend any change on a pretzel on the way out and a vanilla half-caf latte the next morning when I am barely awake.

Since I have started the “hard-core” budgeting and the zero-based every dollar working for me philosophy though, I have reduced overall spending. I may still spend too much at the grocery store, but I definitely pay more towards my debt every month and have more available cash left over to do so. So I could handle a credit card, right? I mean, I’m doing this right now with a debit card with is also a bitty piece of happy plastic….

I guess it comes down to… do I feel credit cards are inherently evil? Do I think I could behave responsibly with them and make *credit* work for me in the same way I want to make *cash* work for me? Do I really believe I have changed in the core of my nature?  And is the cashback (I still love the word….) worth it?

I don’t know yet. I still have at least a year to find out though.  The best lessons take the longest I guess.

~J

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On Sunday I paid my Capital One card $352.08 (which included my minimum payment this month of $109). That put my balance at $5,104.63. I then logged in to my Citicard account and initiated a balance transfer with my 0% for 12 months no balance transfer fee offer of $5,104.63 from my Capital One card. It was pretty easy, actually, I could choose the appropriate offer right there on the screen and if I had wanted to, I could do the transfer right to my checking, or split it between up to 4 cards. I now understand how people start credit card arbitrage.

As of right now, the transfer hasn’t posted yet to my Capital One account but it has been removed from my available credit on my Citicard and I am sure it is just a matter of time. I feel on edge. I think I will feel a little weird and unsettled until this is completely done and I get into the routine of paying Citicard. The money will still post the same day when I pay them just like with Capital One. I can’t do my instant reactive mini payments anymore, I am limited to 4 online transactions a month. But I still can do multiple mini payments just not quite as many or as frequently. I’ll have to track what I want to pay on a weekly basis I think and designate a certain day of the week (like Fridays) my “payment” day. Now that I am in the budgeting groove and used to tracking things intently I don’t think it will be too hard of an adjustment. At least I am not limited to one payment a month.

One thing I will not miss is paying interest! I cannot wait until my interest for the past month posts to my Capital One account and I can just… pay it and be DONE with it. For good.

$5104.63 split into 12 monthly payments breaks down to $425.39 a month. A little more than I have been averaging. I paid $421.45 last month and I think I can consistently do better than that the more fine tuned the whole tracking money thing becomes. It will take a lot of work and a lot of luck but I am feeling positive about it happening. My goal is to make it happen in 11 months so that bumps it up to $464.06/month. Ambitious.

But we can do it. Or at least, we can try really really hard. Focus. Don’t lose sight of the goal. Every dollar works for us. And maybe I could have a few good months contracting? And a lot of craigslist sales. And come on yard sale this weekend!

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Once upon a time, having a $1000 credit card balance was shocking and upsetting to me. I remember the feeling like it was yesterday (too bad I couldn’t have learned the lesson for good then!). I had one credit card which I had picked out very carefully while in college to establish a credit history, and I never kept a balance on it and rarely used it for purchases. Then the summer between my graduation from college and start of graduate school, I went to another state with a friend and a vague plan of doing a summer internship and earning some money to take to graduate school with me, but that fell through. I stayed there for the summer anyway (I had signed a three month sublet lease that was dirt cheap and I didn’t feel I could get out of), and miserably failed at obtaining even a seasonal position at an ice cream shop. I kept expenses down as much as I could, but I knew I would need some cash when I got to school in the fall to pay for rent and my apartment deposit until I got my first fellowship check, so I kept some money in my savings and used my credit card to pay for food and other miscellaneous things while I kept looking for a job. I should have written off the apartment and gone back to mom and dad I guess, but I didn’t, and by the end of the summer, I had just under $1000 charged to my credit card. Every month I had gotten my statement and paid the minimum and felt sick to my stomach as the balance grew. I hated that feeling more than anything else I could remember. Not enough to not eat I guess, but it weighed on my mind all the time.

I went off to graduate school, and pinched pennies and held my breath for a few weeks until I got my first fellowship check. Fellowships where I went to school were paid by semester, so my check was for an entire semester’s worth of “pay”, about $7500. The very first thing I did was go to the bank and open an account with it. The second thing I did, sitting in the parking lot of the bank in fact, was write a check to my credit card for the full amount outstanding and then I drove to the post office and sent it. I felt so relieved. And that feeling kept me out of trouble for some time, I didn’t venture into credit card debt again for several more years. But eventually I did, and here we are. The lesson did stick for a while, but not forever, or maybe I needed a harsher lesson.

At my current place in life, having a credit card balance of under $6000 is a cause for celebration to me. It took until my total amount owed on credit cards was about $12,000 a few years ago before I got seriously worried about how to deal with it. But as I said to begin with, there was a time where $1000 of credit card debt made me feel sick inside. I don’t know what changed in my head, I don’t know where or how or when I started to feel nonchalant about credit card debt. I think maybe a few “emergency” charges of car repairs built up on each other and it snowballed from there. And as long as I was nowhere near my limit and I thought I had money coming in “soon” to deal with things, it felt manageable, I guess. Never mind that my limit kept going up since I always paid on time and you can’t count on tomorrow’s earnings to pay for today’s problems (another harsh lesson).

How does it happen that $1000 can seem enormous and scary one moment, and the next time it takes $12,000 to elicit the same response?

The good news, or the moral to the story I guess, is that I am back at the point where $1000 scares me. I can’t imagine being $12,000 in credit card debt again, and the idea of adding to my already horrendous total of $5400 in credit card debt makes me feel physically ill. Maybe this time, the lesson will stick.

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My new billing cycle for my Capital One card started, and the updated numbers and my new statement posted.  I’ve made some progress!

My balance posted as $5478.40.  My balance is actually $5467.71, which is reflected on my “numbers” page, because I snowflaked $10.69 after the previous billing cycle ended that is not on my new statement.  For comparison, my balance at the beginning of last billing cycle was $5852.72.  So I’ve reduced the principle by $385.01 from the last statement to this one.

I made payments this billing cycle of $421.45, compared to $362.86 last cycle.  I am hoping to continue that upward trend.  Why not the same as what the principle was reduced by?  Because we move on to the…

Interest charges.  I accrued $47.63 in interest charges, compared to $53.98 last cycle.  This was lower for the obvious reason of my balance being lower, but also because I got my interest rate lowered from 10.9% to 9.9%.  Not a huge change but every little bit helps!

And last, but not least, my minimum payment dropped from $117 last cycle to $109 this cycle.  I don’t know why I like tracking that progress so much but I do.

Hopefully I will be transferring my balance within the next 7-10 days to the 0% offer and then I will just have to pay whatever interest accrues  between now and then and be done with credit card interest, hopefully for good.  Until then I will keep chipping away at it, the more I pay, the less I transfer and the less interest I ultimately pay.

~J

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