Blogger Catherine Alford took drastic measures to curb her credit card debt—and now maintains a zero balance throughout the year.
I just shredded all of my credit cards—one at a time—and let me just say, it was very therapeutic.
After paying off my credit card debt years ago, I regularly wrote about how freeing it was: It took a long, hard 18 months and a lot of side-hustling to crush my credit card debt back then, but I was elated to be rid of it.
Then last year, I found myself in a position I didn’t think was possible: back in credit card debt. This time, a series of trips to the hospital and surgeries ate through our $3,000 emergency fund and more payments went onto our card. Add another cross-country move and mindless spending, and suddenly, for the first time in five years, I couldn’t pay off my balance in full anymore at the end of each month.
Fed up and frustrated, I eyed the shredder in my office one evening. Suddenly, I’d had enough: I took a handful of cards out of my wallet and pushed them into the shredder, cutting them up in little pieces. Then, I moved all my bills and automatic payments to my debit card, and I made a plan to pay it off once and for all.
Interestingly enough, paying with a debit card feels very different to me. Now that my husband and I are both working professionals with two kids and a lot of expenses, I have to be really careful about using that debit card.
Every month, chunks of money come out of my checking account automatically for life insurance, car insurance, gas, and my husband’s student loans. It’s up to me to make sure that my checking account can accommodate all of that—there’s no more carrying a balance owed into the next month. That means no mindless spending at Target, and I have to resist the urge to put unnecessary food in my basket while grocery shopping. Do I wish I could be carefree with my spending? Absolutely. But that’s what helped contribute to this mess to begin with.
So far, my plan is working, and I’ve adjusted well to using only my debit card. In fact, despite having a job writing about money for almost seven years, I find I’m more intimately involved with my finances and my spending than ever before.
It turns out, I’m not alone.
A recent Bankrate survey showed “63 percent of Millennials (ages 18 to 29) don’t have a credit card.” This is significant because “only 35 percent of adults 30 and over don’t have credit cards.”
It turns out Millennials feel differently about credit cards for a variety of different reasons: For one, trying to hunt for jobs during the Great Recession was stressful, and many Millennials saw their parents endure financial strife and lose their homes during that time. Plus, the stress of ever-mounting student loan debt has made many Millennials unwilling to apply for credit cards because they’re worried about adding to their debt loads.
While there are definitely some positives to not having a credit card, there is unfortunately a downside, too.
Without credit cards, Millennials are missing out on building their credit, which will allow them to qualify for larger purchases in the future, like buying their first house. Having a credit card that you pay on time every month shows future lenders that you’re a responsible borrower who will pay their loans back on time. Credit cards that aren’t maxed out also help your debt-to-credit ratio, an important part of your credit score that shows you have the restraint not to use all the credit available to you.
Although credit cards aren’t the only way to build credit, your “credit mix” does make up 10 percent of your credit score. Essentially, you won’t have a good credit mix if you only have student loans on your credit history. However, a good credit mix might include a credit card, a student loan, and a car loan.
So, there has to be a healthy balance. For example, I shredded all my credit cards, but I didn’t close my accounts. I left one recurring bill that’s paid automatically on one card so my credit report is constantly updated each month with on-time payments. I already own a house, but should I want to buy a different one in the future, I want to make sure that both my husband and I maintain our good credit scores. Plus, as I continue to pay off my credit card debt, our scores will only rise.
Ultimately, it’s really up to the individual whether to use credit cards or avoid them. I have many friends and colleagues, for example, who love using credit cards to get travel points. For me, personally, I find I just overspend without the restriction of looking at my checking account regularly.
Catherine Alford is the go-to personal finance blogger for educated,
aspirational moms who want to recapture their life passions and take on
a more active financial role in their families. Named the Best Contributor/Freelancer
for Personal Finance in 2014, she is also the founder
of CatherineAlford.com, an award-winning personal finance blog.
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