3 credit rules I still break (and why)
I’ve been writing about using credit cards responsibly for about five years, so one would probably assume that I’m a super debt-free credit user, earning lots of rewards points and maximizing credit products.
One day I hope to be in the position to utilize all of the great expert advice I’ve shared with you in my articles, but I’m not quite there.
In fact, I sometimes break the very rules that my sources have advised readers to follow. The fact is, I’m in the same boat as many of you, dear readers — someone who lived paycheck to paycheck for many years thanks to the high cost of living in my area. ¬†In addition to being what some might refer to as “house poor,” I’m also guilty of occasionally enjoying things slightly above my means (hey, I’m human, after all).
On the positive side, I do take pride in my pretty high credit score and always pay my bills on time (except for one time). I paid off my student loans years ago and am saving for retirement. It took me years to get to this point, but I can still do better. If only I’d stop breaking these credit rules…
Carrying a balance. I confess. I’m guilty. Although conventional wisdom says it makes sense to use savings (earning barely no interest) to pay off high-interest card debt, I’ve been a rebel in this regard. I’m not super deep in debt (thankfully), and my utilization ratios aren’t too bad, but I’m a few thousand dollars away from a clear credit conscious. The thing is, as a fairly new full-time freelancer, I like knowing that I have a few months of living expenses socked away as a cushion just in case I hit a dry spell. The credit card writer in me knows that I’m foolishly losing money to interest payments, but the paranoid worst-case-scenario mom in me wants to make sure my bills are covered — just in case.
What I’m doing right: I always make sure to pay more than the minimum on my balances, which has helped me cut my debt in half in the last year or so. And whenever I come into a lump sum of money, I make sure to allocate a portion of it toward debt. My article research has also taught me to be more strategic about my payoff plan, so I learned to tackle the account with the highest interest first, and that’s helped me make progress.
Overusing my debit card. I’m not sure why, but the “money burns a hole in my pocket” idea is true for me. Therefore, I tend to rarely carry cash. As a result, I’m a serial swiper, and the debit card is my tool of choice. The problem with this plastic preference is that it’s not really a secure way to pay. Every time I get gas for my car or go to a restaurant and forget to bring cash, I’m probably putting my financial information at risk for fraud. It’s something I only recently realized when I started writing about the topic. Since then, I try to have cash on hand for certain kinds of purchases, but I do slip.
What I’m doing right: I’ve stopped using my debit card for online purchases. It’s a miracle I’ve never had my information stolen when I think of all the websites that used to have my debit card number on file. The silver lining about being a debit shopper is that I keep very close tabs on my bank account balance — probably every day — so that if fraud were to happen, I’d catch it and report it immediately.
Not being a strict budget follower. I know that if I really put my mind to it, I can be debt free by the end of this year. But that would mean giving up things like my gym membership (which I actually use), cutting back on entertainment spending and not taking a summer vacation. Instead, I’ve chosen to follow the “life is too short” mindset in which I splurge on outings with my kids, the occasional concert with girlfriends or an expensive dinner with my husband. It might take me an extra few months to reach my debt-free goal, but the good times I’ve had have been worth every extra penny of interest payments.
What I’m doing right: While I do spend money on experiences that could otherwise be put toward my debt, I’ve evolved into someone who’s no longer a buyer of frivolous things. When it comes to shopping — whether it’s for clothing or groceries — I wait for sales, cut coupons and often make the decision to go without. As such, I can’t remember the last time I had a case of buyer’s remorse, and I can stretch a buck when I need to.
If I’ve learned anything over the past few years, it’s that it is important to have a smart game plan to get your financial house in order. And as long as you’re making progress, it’s not the end of the world if you choose to break a few rules along the way.