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Credit cards certainly help drive our economy and drive some people into financial ruin.
As I stated more than once, my philosophy of personal finance is simply save first, spend the rest but never carry a credit card balance.
My American Express card was recently cancelled by Amx. It was a business card and they said since I no longer ran a business I couldn’t keep it. Even though I had the card since 1986, I had to apply for a new one which I did and was approved virtually instantly. I saved money on the annual fee too, and now accumulate Hilton hotel points. Now I have to travel to use them, but as soon as I figure it out, I know I can use them on Amazon purchases as well.
Then my bank United card raised its fee to $600 a year. Since I rarely fly any more I cancelled it and got a new free bank card with cash back. To my surprise since I received the card two months ago I have accumulated $233 in cash back which I can transfer directly into one of our bank accounts or apply to the card balance. Hey, it will offset the extra 3% merchants charge me to use the darn thing.
All this, despite no fault of my own, lowered my credit score. That seems rather unfair, but I have no intention of applying for any loans so no big deal.
I have to admit it’s easy to spend money with plastic and I suspect it takes some personal discipline to not over spend – even a budget won’t help with that😰
I monitor our two card balances very closely – not with a spreadsheet, just a frequent login to our bank – and pay the balances long before the due date. In fact, just a few days ago I paid enough on one card to cover several pending charges. Yup, they are holding my money and I’m losing 0.15% in interest for 20 days.
Suffice to say credit cards are the proverbial two-edged sword. If I carried the balances shown below I couldn’t sleep during my afternoon nap.
WalletHub estimates Americans paid around $254.2 billion in credit card interest and fees in 2024 alone, averaging about $154 billion annually over the past decade😱. That big number is equal to what the federal government spends in fourteen days – a fact of interest, but no consequence.
A few Gemini generated data.
Credit card vs debit question. Do you pay for common things like groceries or coffee with debit or credit?
Always credit unless I am in a bind for cash back.
I really dislike the whole CC industry from a consumer perspective. The perks in cashback and rewards are just a hidden cost that you and in fact all other customers are paying for with retailers due to their high merchant fees.
Because most businesses don’t like the friction of adding separate CC charges this means that everyone ends up paying even if they pay by debit or cash. Post Covid there are of course plenty of businesses that refuse cash, which makes sense from a handling cost perspective.
Then of course there is the consumer debt point. When living in the US once I had a landlord who unfortunately had ALS. So housemates were not just a sort of income but people around to handle emergencies and chores around the house. He unfortunately had been recently divorced from his wife as a result of her ruinous behaviour in running up CC debt. She had kept a separate mailbox at a post office in the next town to avoid him seeing how many she had taken out and of course the bills. Very sad at his stage of life. No real economic need for it, before she ran up the debt they had a reasonable standard of living and respectable pension provision.
I am finding more and more business charging a fee to use a credit card especially for home improvements like a paving company, rug installer, and mechanical maintenance I paid for this year.
We had our kitchen remodeled a few years ago, and I remember the contractor gave us a big discount for paying with cash instead of a credit card. I think it was at least 10%, maybe more. I’m usually all about the CC points, but I couldn’t justify passing up that savings.
We didn’t use the card for any of those expenses for that very reason. Any time there is a big expense that charges an additional fee we pull out the ancient papyrus method of payment that younger generations have no idea how to utilize. A check.
I’m sorry, but I really don’t understand paying the credit card company more than once a month. I don’t even look at the account more than twice a month, if that. Paying more than once is unnecessary work. I could simplify things further by putting the payment on automatic bank draft, but I like to check the statement first.
If I have an especially large balance for the month, I’ll often make a payment before the statement closing date, so a smaller balance is reported to the credit bureaus and hence my credit utilization is lower. That helps my credit score.
I’ve been running an experiment for a while now and what Jonathan says seems to be correct. Pay off your credit card on the day before statement close and you’ll see your credit score rise for the very reason Jonathan cites: a lower credit utilization number is reported to the credit bureaus.
So far my FICO score has gone up between 11-20 points depending upon who is reporting it. My experiment has been running for just over two months.