Posted on: June 3, 2009 by Matt
Early last month I was pretty excited to report that I had paid off my credit card balance to Capital One. So I thought I would give everyone a quick update on where I am at this month: the card is still paid off.
The plan that my girlfriend proposed involved paying off the credit card balance and working to curb spending to keep the balance low. The result for me was a pretty empty checking account and we figured that we would use the card for expenses but would keep a closer eye on spending. So far it has worked out. Since my initial pay off of the large balance I have seen two statements.
The second statement was about half of the first for amount due so it appears that we have been gradually easing up on credit card use and easing back onto the checking account and debit card. I did have a couple of decent months at work which lead to higher commissions so the balances were paid in full and so far I have not made any transactions on my new statement period (which began in the middle of last month).
All said and done – the little plan my girlfriend put forward has worked pretty well. The process looks like this:
- Pay off the entire balance – do not worry about the low checking account balance.
- Use the card and stick to your budget for essentials.
- Keep tabs on spending, use the card sparingly.
- Pay the card off in full again – this time with a lower balance leaving more in the bank.
- Repeat
In addition – the plan plays to my emotional well being as well as I generally do not like having to pay with my credit card. The emotional reaction is enough that I will often forgo additional comfort items for myself (do I really need to go out for a coffee?) and stick with the basics.
Posted on: May 6, 2009 by Matt
On the day that I left for vacation I made another step forward in my financial recovery – I paid off the remaining balance on my credit card. I have posted a couple of times about a new approach that my girlfriend and I have decided to take and I am happy to report that when I left for vacation my credit card had a balance of ZERO!
According to the debt repayment plan we discussed for the credit card we would pay it off as quickly as possible but continue to use it as sparingly as possible. So I did use the card again while on vacation for most purchases but the upside is that my new charges should not accrue any interest until after my next statement.
Right now my new balance after vacation is about $450 which is actually a little bit less than I had anticipated. When planning the short vacation I figured that we would probably spend close to $600 in addition to the room so I am about $150 ahead of where I expected to be. Given my current expenses and income I think I will be able to have the balance paid in full prior to my next statement. In addition – once the balance is paid off again I should also not have to carry a balance on the card any longer.
I should be receiving another statement in a couple weeks here and will plan to give everyone an update on where I stand then but I do believe that I have moved past carrying a balance on my credit card!
Tags: Budget, Budgeting, Credit Cards, Debt, Debt Reduction, Expenses, Goals, Personal Finance, Planning, Relationships Filed Under: Credit Cards, Debt, Debt Reduction, Goals, Planning, Relationships
Posted on: April 29, 2009 by Matt
Shortly after exhausting my inheritance from my mother’s estate I discovered credit cards. However – I had no clue how they worked or how they could effect my financial future. The only comparable reference to how I felt that I can think of came from an episode of the TV show Undeclared (the only episode I remember seeing even). In the scene one of the students is running back to his friends, huffing and puffing while yelling something like “Guys!! They’re giving money! Money they’re giving it away!“ If you have any interest in checking it out just watch the first 50 seconds or so over here at YouTube.
I think that pretty much sums up my impression of how credit worked. I knew that the credit card folks expected to get their money back plus interest but I did not really take credit cards seriously. So I somehow managed to secure two credit cards and maxed them both out within the span of my junior year. I somehow managed to make a minimum payments for a while but eventually stopped making any payments at all.
Eventually I was sent off to collections for the two credit cards that I could obviously no longer use. I stopped answering my phone and stopped checking my mail. I was terrified that I was going to jail or they were going to track me down and send the police for me. I really had no idea what would or could happen so I just avoided all of the uncomfortable situations. I got to the point where I checked my mail about once a month – usually after the mail room called and left me a message that the box was overflowing.
After about a year or so the calls stopped and the mail became less frequent so I thought I was in the clear. After a couple of years in the work force I began dealing with all of my bad and defaulted debts. Most of the debt was student loan related but there were still the lingering balances for the two old credit cards. I made arrangements with both companies and paid them off in full but the damage had already been done. Luckily – the bad credit card debts have since fallen off of my credit report so the negative information is no longer listed.
I lived in complete fear of credit cards and taking on any new debt for a couple of years after my experience with credit cards in college. The whole series of events could have probably been avoided if I had taken the time to educate myself and understand what I was getting into. My father tried to explain but simply told me that I should not have a credit card and got frustrated when I asked the obvious “Why not?”. He was unable to explain how credit works or how bad debts can carry on through the rest of your life. His flustered answer was along the lines of “because it will effect your credit”. I know he had the best intentions but the explanation seemed obvious to me at the time – I mean that was the point of credit cards right?
I believe the lessons learned here include that credit cards are not to be used lightly, not repaying debt can have serious long term ramifications on your future plans, do not spend money you do not have and communicate with your creditors. I still work on practicing some of these items (hence my current credit card having a balance – which is going down quickly) but have worked really hard to ensure that I do not get back into yet another cycle of harassing collection calls.
Posted on: April 23, 2009 by Matt
Earlier this week I posted on a discussion my girlfriend and I had regarding paying off my credit card debt. Since I posted on Monday a lot has changed and I thought I would provide an update. As of right now the $1900 in credit card debt is now down to $601. This came after applying most of what I had for expenses in my checking account along with some money from my savings. After thinking about interest rates a little bit I opted to move money from my online savings (which currently earns 1.65% APY) and apply it toward my credit card balance (interest rate of 13.40% APR). I figure that not paying the extra in interest every month is well worth not having all the cash in savings. In addition I believe I will have the card paid off between one more transfer from savings and the remainder of my checking account balance before the end of the month. I find this extremely exciting!
Of course we still have normal living expenses and a vacation that I had budgeted for based on my checking account that still need to be paid for this month. We discussed these items last night and came up with a game plan to work on reducing expenses this month and next month by:
- Cutting back on food expenses: Paying better attention at the grocery store and cutting back on dining out. We have been steadily getting better here but there is always room for improvement.
- Cutting back on gas expenses: We like to go places and get out of the house. In our area we drive to a number of different towns to do things. Aside from vacation we can try to stay closer to home and I can start walking or riding my bike to work.
- Let my girlfriend cover more of the vacation: She has space in her budget to pick up some of the vacation. I had planned on covering it and intended to pay out of my checking. However she seems to be committed to fast tracking debt repayment as well and asked that I let her cover more of it. I have a difficult time letting her pay but I suppose a little growth in this area will not hurt.
My credit card will probably get used before the end of the month and new charges will be incurred but I also anticipate being able to pay them off next month as well with our new plan. So having the credit card paid off puts me ahead of the goal of getting the balance paid off by October by about six months! I may not be paying it off in full and never using it again as my original plan had entailed but I am working toward that and by not carrying a balance month to month I will not be paying the interest fees! I should also be able to replenish my savings account fairly quickly (within 2 months) to the level it was at before paying off the credit card so that will be available again as well.
I am already looking forward to my next goal of having my car loan paid off (August if I stick with my current payment schedule) and then I will be down to my student loans. Unfortunately the student loan that needs the most attention is about $20,000 and stuck in collections. I will simply have to keep moving forward with one step at a time.
Tags: Budget, Budgeting, Credit Cards, Debt, Debt Reduction, Expenses, Goals, Planning, Relationships, Savings Filed Under: Budget, Credit Cards, Debt, Debt Reduction, Expenses, Goals, Planning, Relationships, Savings
Posted on: April 21, 2009 by Matt
So only yesterday I posted on how I am trying to relieve myself of credit card debt and this morning I am already being enticed into a new credit card offered by the nice folks over at Upromise.
When I first discovered Upromise I was kind of excited at the idea of having a passive means to slowly build up money to repay my Sallie Mae student loans. I figured I would just sign up and register my credit cards and use the site for shopping and other features that would allow me to add to my account, bypassing the Upromise credit card.
However when I logged in to check up on my account this morning for the first time in a few months I noticed a rather enticing offer for the new Upromise credit cards. They are offering a $25 bonus to your account in addition to the normal savings with your first qualifying purchase on a new Gas & Grocery or Dining & Grocery card.
I saw the bonus offer and thought “Why I use gas and groceries all the time…. Maybe I should get one of those and use it just for gas..“ It does give an extra whole 2% on gas purchases (which means in stead of $0.20 every tank I’ll get $0.22?) and there is no annual fee – I could just use it once for the $25.
Of course I know that while I would like the sign up bonus that I really have no need for another credit card, regardless of the frills. The offer is appealing though for the one time bonus if nothing else. I just wish that Upromise would stop trying to entice me with all their new credit card specials and offerings! They must make a lot of their money from their credit business and they market the products incessantly – it really does become difficult to avoid and not find something of interest.
I just managed to close my browser window and stop eyeballing the deal so I guess I am still one step ahead but I still feel as though I am leaving money on the table. What do you think?
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