Credit card debt

Journey Man

3 years ago

Last updated on 30 March 2021

In my war on debt, my credit cards are Public Enemy #1. I’m convinced I should never have had a credit card. As far as I can tell credit card debt is a cancer, robbing us of the future we long for. I’m convinced that I am not alone and that as a nation we are drowning in credit card debt.

So, this is post 7 in the Late Starter series where I am tackling some hard truths and sorting out my finances! See where the journey started as I realised that I am a late starter.

Truth time

I don’t need a credit card.

Credit card (mis)use has proved to be a major contributor to the financial problems I’m sorting out on this journey. I have already decided to use cash, or a debit card for all purchases that I make this month. Tracking my expenditure using a simple app which I downloaded (there are many available), is now part of my purchasing process.

I intend to make using cash and tracking expenses a habit going forward.

Credit cards can be useful to those who have self-control. But if you’re like me, rather just stay away from them.

I lied! To myself…

How clever we are, us humans.

We ingeniously fool ourselves, particularly when it comes to our finances. As an example, let me share some personal information with you. I have two credit cards. Every month I transfer money from my savings account into each of the credit card accounts (I pretend that I am paying the balance down). I have an idea of what the minimum repayment is on both credit cards and I pay that and a bit extra on each. That sounds pretty good, doesn’t it? Actually it’s all part of the personal trickery that goes on in my financial life. I do make the payments each month. And then I use the cards (using those repayments) to make purchases.

So money in, money out – did I mention that I’m paying the bank over 20% for that luxury? I must be the thickest plank in the pile.

Or maybe not. The more people I speak to the more I understand that this is how many people live from month-to-month; in a credit-card haze of expensive debt, shame and denial!

Killing that credit card debt is very important. But, understanding how I accumulated the debt is also important. I don’t want to make the same mistakes over and over again and I want to make sure that when this debt is paid – it stays paid!

Why do we do this?

Research (and yes, there is extensive research into the psychology of money) shows that I am not very different from most humans when it comes to credit cards. I am not the only one battling these problems – this is not an individual peculiarity that I have, this is a human problem – and there are millions of people trying to survive this battle.

It has been shown that, when we use credit instead of cash, we use more. We are happy to use money we don’t have, and to pay more, when we use credit. The institutions offering us credit are well aware of this and have carefully engineered our relationship with our credit cards.

Here are some interesting things that have been shown through research:-

We are willing to spend (or pay) more when we use a credit card than when using cash;
The pain of paying (yes, every time you buy something there is pain involved) is somewhat dulled by less transparent payment modes such as a gift certificates or credit cards thus increasing the likelihood of spending when using these payment modes;
The outflow of money is very vivid when we use cash making it painful to part with. In contrast, any payment mode that makes the outflow of money less vivid (your credit card), and thus less painful, reduces the psychological barrier to spend;
We recall our cash payments better than our credit card expenses;
Cash payments are more likely to be used for justifiable necessities and less likely to be used for frivolous luxuries which may accentuate the pain of paying.

These are just a few examples of the real dangers we face when using credit cards.

Making a choice…

I think that there is a choice to be made here and a reality to face. Not only should I be asking if I need credit cards, I also need to be honest about my ability to fight against the proven psychology at play here. My track-record shows that I am not able to resist and I have simply fallen into the credit traps that naturally exist.

I can’t see any reason to have a credit card. It is obviously a trigger to spend more than I would, it gives me money at an [exorbitant] cost and it has become the biggest contributor to debt in my life. If a person in my life treated me with the disdain that my credit card treats me I would have left them a long time ago. I have decided that I will no longer eat with the enemy and I am not going to tolerate credit cards in my life or in my family’s life. This far and no further!

What now?

I suppose you may be wondering how I’ll be paying for things. There does seem to be a fallacy that we can’t live/survive/thrive without credit cards. Perhaps you have been duped into believing that your ‘miles’ or ‘points’ are worth the cost of your card (and remember that the banks make exorbitant income from your credit card in interest and fees). But that hasn’t been my experience. In order to earn points I have to spend, in order to spend I need the credit. In order to use the credit I have to accept 20% interest. This just doesn’t add up anymore.

My plan to tackle credit card debt

A big part of the Late-Starter Journey is CONSISTENT ACTION.

It is pointless knowing the problem and then doing nothing about it. I would like to share the actions that I will take and I would like to encourage you to consider the actions you need to take in your situation.

Firstly I will commit to and pay the credit card debt down as aggressively as possible. I am going to use the debt snowball method (I will cover this in a future article) to do this;
I will NOT use my credit cards. if I can’t afford it I simply can’t have it (it sounds so easy!);
There is no place for new or additional credit (the bank loves to tempt me to extend my credit limit);
I now understand that I need to think carefully when I make purchases, big or small, they are all paid with the same money (the money I need to save);
Self-control is important. No-one is going to force me to change my ways. It is up to me to be responsible, to control myself. It is possible and it is required (I will be dealing with self-control in later articles);
I am going to continue tracking my spending, I want to keep myself ‘aware’;
Learning is key and I will continue to learn – the only reason that I am aware of the danger of credit is because I have made a conscious effort to read and understand (not just skim).

This is my personal journey. You need to make your own decisions about your debt.