Credit Card Debt

It’s been a while since I’ve reported some good news.  So, here it is.  I’ve eliminated all my credit card debt, once again! This is significant for a number of different reasons, which I will explore in this post.

As you may recall, in my Get Out Of Debt Plan, one of the things on my short financial to-do list was to eliminate my credit card debt.  This was an important step to getting my financial house in order before I purchase a house.  But, while there is good news regarding the fact that I’ve now taken care of this debt, as the saying goes, all that glitters isn’t gold.

Let’s dive in to see where there remain some warning signs.

The Credit Card Debt Game

I hate to say it, but Dave Ramsey was right!  If you play with snakes long enough, you’re going to get bitten.  And credit card companies can be the worst kind of financial snakes.

The first thing to discuss is my decision to get the credit cards in the first place.  Initially, I was quite content with the credit cards I already had.  I really wasn’t using those cards and essentially only had them on a regular base.  My credit score was near perfect (above 800) and life was good.

Then, one day, I realized that I could potentially be getting more use out of my credit cards.  I’ve never redeemed points or anything like that, and the cards I had didn’t even give me cash back. So, since I had good credit, I applied for and received two new cards:  a) Chase Saphhire Reserve and b) the American Express Platinum.  Those appeared to be two of the best cards on the market for rewards.  I figured that, because I travel constantly, I would be able to rack up points and use them for rewards.

Now, I’m almost sorry I got the cards.

It’s All About Mindset

I was excited to receive the cards.  But that excitement quickly faded.  The cards had a high-interest rate.  I think my Chase card has a 17% interest rate.  Ouch!  My other chase credit card that I have has a 6% interest rate.  Of course, as conventional wisdom goes, the interest rate doesn’t matter if I’m paying off the card every month, right?

Thankfully, I was able to pay more than the minimum payment every month, but I still carried a balance.  What I failed to account for was the fact that, in my opinion, I was spending more money because I was using a credit card.  There was little-to-no financial discipline in terms of how I was spending other people’s money.  But, at least I was racking up points, right?

Well, l I fell into that trap. I kept using the card to gain points, or rewards or other benefits from the card.  It got to the point where my balance on the card was so high to pay off, that I would be short the following month – a vicious cycle.  Thankfully, it’s a cycle that didn’t last long.  I remember what it was like being in massive credit card debt.  That’s a situation I never want to find myself in again.  I had “only” $3500 in credit card debt, but that was keeping up with me at night.

Even More Consequences

Sadly, there were even more consequences to getting into credit card debt. Specifically, my credit score went down!  For starters, because I carried a balance, my utilization ratio moved against me.  But the second problem was that because I opened two new credit cards, the average age of my credit history has drastically declined.  The combination of these two factors weighed down my score a lot.  Before, I had a safety cushion at the low 800s.  After I got my cards, my score was hovering right around 751.  Still not too bad, and technically an excellent score, but definitely not the 812 it was before.

Now that I’ve paid off my credit cards completely, I can’t wait to see what my score will be (I check it every week – overkill I know).  It’s currently hovering around 767.  I doubt it will get to 800 again this month, but I’ll be ok with a 780.  Since the purchase of my house isn’t for another 6 months, with any luck, I can get back into the 800s again.

Beating The Credit Card Debt Game

So, I decided to take both cards out of my wallet.  My American Express Card is tied to Uber.  So, when I take Uber (which is virtually every day) and pay with American Express, I get $15 credit every month.  So, Uber costs me $15 less because of my credit card.

As for Chase, I used the card to pay for food. I eat out every day and so the costs add up quickly.  Additionally, I use the Chase card to fund my lifestyle creep, which has been pretty expensive as of late.  But, since I was spending way much more than I would have liked, I also decided to take the card out of my wallet.  I’m not ready to close down the credit cards, but we will see how it goes.

Conclusion

Thankfully, the credit card debt is gone, again!  The only debt I am interested in acquiring is that of a mortgage.  So, the focus for me over the next 6 months will be to save, save, save.  I will do my best to limit my wasteful spending.  Honestly, it really takes a Gazelle-like mentality that Dave Ramsey talks about.  I don’t think I have that in me right now.  If I did, I wouldn’t spend so much money on so many frivolous things.  Part of me is of the mentality that I should enjoy life now because no one knows what the future holds.  The other part of me is cursing at myself for being so wasteful.  It’s all about finding that delicate balance, which, apparently, is a constant struggle for me.

What do you think of this post?  Do you struggle with credit card debt?  Or, have you kicked credit card debt to the curve?  Let me know your thoughts by commenting below.