Anyone who knows me also knows that I hate debt. I particularly hate credit card debt because most cards carry usurious rates of interest if the balance is not paid in full. So this post is for people who pay their monthly credit card balances in full EVERY SINGLE MONTH!!!
If you carry a balance on your credit cards, then this post is not for you. This post will not help you to stop accumulating credit card interest, which should be your priority if you’re carrying a balance. Credit card interest is a cancer that will stop you from achieving your financial dreams so please start working on how to get out from under the burden of credit card debt. Please come back next week when there will be a new post for you to read. 🙂
Credit cards are a tool. They are not meant to charge me interest. Rather, they are meant to minimize my need to carry giant wads of cash as I go through life buying the things I want. The money stays in the bank until the time comes for me to pay for my credit card purchases. At no point should I ever be in the position that the amount of money owed on my credit cards exceeds the amount of money that I have in the bank to pay off my credit card. That is a recipe for disaster!
To those who never carry a balance, please keep reading. I view my credit cards as a tool. (For full disclosure, I collect cash back on one card and travel miles on the other.) I pay recurring monthly bills with my credit card. I put all of my gas purchases on my credit card. I use my credit card to pay for meals with friends and my annual theatre subscription. Truth be told, I really do enjoy the purchasing power that comes with my credit cards.
That said, I never carry a balance. I’m one of those weird freaks of nature who checks on her credit card’s monthly running total every other day. Once a charge has hit my credit card statement and I’m rewarded for my purchase, in the form of travel miles or cash back, then I go to my online bank and send a payment in the amount of my purchase to my credit card. More often than not, I put several thousand dollars through my credit card each month yet the statement’s balance is only for a few hundred dollars when all is said and done.
Why do I pay my credit card charges before they’re due?
I do it because I’m human and I know my own foibles. I do not yet have the discipline to keep large amounts of money in my chequing account. I’ve had the distinct pleasure of only having $0.01 in my account the day before payday. I don’t encourage this but I share my experience so that you know I’m not the sort who can keep a buffer of several thousand dollars in her main bank account! It works best if I make the purchase, i.e. $50 to fill my tank, wait to see the charge posted to my credit card account, and then pay off the $50 immediately. I owe the money to the credit card company, so why not pay off the charge while I have the money in my account? The bill is paid and I never have to think about it again. I don’t have to worry about something unexpected happening in the future which will prevent me from paying off the charge on the due date. I’ve got gas – I’ve got my reward – I’ve paid my bill – life is good!
I can hear you asking – “But what if you need that $50 for something else before the credit card bill is due?”
Should this happen, then I go to one of my other accounts to find the money. Or I cut back on my groceries for that week. Or I decline an invitation to something fun that I otherwise would have accepted. The bottom line is that I borrowed $50 from the credit card company and they will charge me 17% per annum (or more!) on that $50 if I don’t pay them back. Trust me, I would rather miss out on a dinner and a movie that pay than kind of exorbitant interest to pay for my gas.
My bottom line is that my credit cards are a tool that I use to make my life easier. There is no need for me to pay interest on my purchases. My main responsibility is to stay on top of my charge by checking my credit card statement online every few days and by making frequent payments to cover all my credit card purchases. I’ve been controlling my credit cards this way for over 20 years. My system works for me. Try it out – you might find that it works for you too!