Today’s question is: How do you manage your credit cards? Mine strategy is pretty simple, and has been ever since I stopped living paycheck-to-paycheck: Most months, I pay them off in full. If I can’t pay them off, I pay them as quickly as possible. The longest I’ve carried a balance in recent years is about six months, maybe seven.
Like most moderates, I walk the middle of the road on plastic. Let me see the hands of anyone who wants to return to the days when, if your washing machine broke and you didn’t have liquid savings to replace it, you used a laundromat until you could scrape together a few hundred bucks? Didn’t think so. On the other hand, the last time I used a 90-days-same-as-cash financing option — to buy a new mattress after the old one sprung a leak and started poking me in the ass with a spring — the first mailing I got from the finance company was to spread that $300 over two years for an absurdly low monthly payment, etc. So I see how people become hard-liners.
I see plastic as an ally in navigating modern life, but as a treacherous one that must be watched at all times. Money — or rather, credit — is a powerful drug, and I’ve seen too many people end up in rehab. My sister has a friend who at one point owed a five-figure sum to MasterCard and Visa equal to half her annual salary. (She told me she knew the mortgage industry was crooked when someone offered this woman a 100 percent loan to buy a house, with enough extra cash thrown in to pay off all her cards, which at the time was something like 40 grand.) I’ve gotten in over my head a time or two, but was always able to recover quickly — maybe $2,000? On one card? Sounds about right.
Over the years, I’ve heard plastic horror stories from both sides of the fence, not just the in-over-your-head spenders, but also the gamers, the people who claimed to be harnessing the power of their cards, using the frequent-flyer miles and cash-advance perks to their advantage, and it’s fair to say I trusted them only incrementally more than the deadbeats. “I write two checks a month,” a friend told me once. “The mortgage, and MasterCard.” Everything — groceries, restaurants, utility bills, clothing — went on the card, which accrued frequent-flyer miles at the rate of $1=1 mile. He paid it off in full every month. After a year it had earned him a free ticket to Paris. He’s not the liar sort, so I guess I believed him, but part of me…didn’t.
Gaming plastic just sounds like something too good to be true. There’s got to be a catch. There’s always a catch.
Turns out, there’s a catch:
Credit cards have long been a very good deal for people who pay their bills on time and in full. Even as card companies imposed punitive fees and penalties on those late with their payments, the best customers racked up cash-back rewards, frequent-flier miles and other perks in recent years.
Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit.
Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.
I did a story on credit a few years back, for a financial magazine. You know what the industry calls people who pay off in full every month? Deadbeats. Ha ha.
I have one card now, a Discover. I use it for newspaper subscriptions, which are set up as monthly bills, my iTunes account, and anything I order online, mainly because I can remember the number and expiration date and don’t have to dig up my debit card. I pay it off every month and have currently accrued cash-back rewards equal to a moderately priced piece of software. If they think I’m going back to the annual-fee days, they are, um, mistaken. I’ll go back to writing checks.
Why is money such a taboo in our culture? If I ruled the world, I’d institute a class in high school — say, sophomore year — called Practical Finance, and it would be all about using money in the adult world. Half the year would be spent studying credit. I think it’s at least as important as sex education, and maybe more.
Quick bloggage, because I went to a city council meeting last night that featured tears and cries of embezzlement, and I want to get the story written p.d.q.
Matt Yglesias takes apart another stupid George Will column. Ably. I’m not even a total believer in light rail, but this is about facts.
A Gallup poll adds up the damage to the GOP:
Since the first year of George W. Bush’s presidency in 2001, the Republican Party has maintained its support only among frequent churchgoers, with conservatives and senior citizens showing minimal decline.
In other words, the party of Palin and Plumber. Good luck with the rehab.
One of those Sara-Jane-Olson-but-not stories — prison escapee builds new life on the outside, only to see it come crashing down decades later — concluded here today. Susan LeFevre was released today and, surprise, said something dumb:
“Prison is a very tragic – it’s a very hard place,” she said. “People really do suffer. Beneath the laughter and the veneer, there’s suffering.”
You don’t say.
I say: Time to write that council story. And do it justice.
Jenflex said on May 19, 2009 at 9:39 am
You’re smart to use a credit card instead of a debit card online. The thought of a billing error affecting my checking account is enough to make me want to use someone else’s money. But there you go…I’m a deadbeat.
John said on May 19, 2009 at 9:49 am
What Jen said. Plus, you have fraud protection with a CC vs. debit card. And finally, do you really want your bank account information out in cyber space?
Edit: We have two casinos locally. The tears are long gone from the tales of embezzlement.
moe99 said on May 19, 2009 at 10:04 am
6 degrees of separation: the nephew of my college roommate is marrying the daughter of Sarah Jane Olson this year. Nice kids. Hope the media doesn’t bother them.
Joe Kobiela said on May 19, 2009 at 10:07 am
Are you sure it was a spring poking you and not Alan?
Snarkworth said on May 19, 2009 at 10:31 am
Back in the day, interest on plastic was deductible. When that loophole closed, we became deadbeats, paying it all off monthly and using a home equity line of credit when needed. Works OK, as long as you keep a close, cold eye on that HELOC balance.
derwood said on May 19, 2009 at 10:32 am
I’m one of the frequent flier freaks who uses the Northwest Visa for EVERYTHING and it automatically drafts from my checking to pay the balance in full. I have had the card for 8 years and never paid a finance charge. I also have not had to pay for a ticket on NWA in about as many years. I am in the process of switching all of that fun back to Discover as Delta doesn’t play with Visa and I refuse to pay AMEX 95 bucks a year.
When I was in my early 20’s and the credit union gave me a Visa, I did my share of racking up a 3-4k balance but was always able to eventually pay it off.
As with anything else in life it takes some responsibility to use them wisely. I have a relative who got a MC in college and he is more than 20k in debt. I don’t see how he will ever get it paid off as he can only afford the minimum payments.
Peter said on May 19, 2009 at 10:32 am
Yes, credit cards offer fraud protection but you still can get screwed. Case in point: I was charged twice by Sears for the same item; called Visa as soon as I saw it on the bill. Months later, the charge reappears; I call Visa, who said that they asked Sears to drop it, Sears said no, end of story. It took a few hours and a personal visit to Sears before I got the credit. Some customer service.
ROgirl said on May 19, 2009 at 10:53 am
Are you sure you weren’t at a Detroit city council meeting last night?
alex said on May 19, 2009 at 10:53 am
I learned my lesson with credit cards a long time ago. Fortunately I was able to refinance my rapidly inflating real estate in order to cover my excesses, and still made out like a bandit when I got out of Chicago before the real estate bubble burst. These days I use a debit card to do everything, though as Jenflex notes above, occasionally the bank does screw up. I was recently debited twice for a single large transaction and it royally messed things up for a few days.
Danny said on May 19, 2009 at 10:58 am
2 degrees of separation, Susan Lefevre, was the neighbor of one of my coworkers.
If they think I’m going back to the annual-fee days, they are, um, mistaken.
No kidding. And I seem to remember that there was a time when gas purchases cost more on credit. That is, if you used a standard credit card. I think it was different if you used a gas station’s own card.
Colleen said on May 19, 2009 at 10:59 am
My debit card offers the same protection as a regular credit card, as far as fraud goes.
Husband and I have a lot of cc debt. I’ll admit it. We have bad morals, we’re ashamed, all that other stuff that’s supposed to go with having a lot of CC debt. he just discovered last night one of his cards had lowered his limit to juuuuust about the outstanding balance. I’m hoping that some laws do get passed so that cc companies aren’t able to do whatever the hell they want, whenever they want, which is pretty much were it stands right now.
LA Mary said on May 19, 2009 at 11:05 am
I bought a last minute birthday gift at the hospital gift shop with my debit card, and the volunteer at the register charged my debit card 990.00 instead of 9.90. She voided the sale and did it correctly, but my bank held that 990. out for 7 working days as a pending charge. Three small checks bounced, at a charge of 34. bucks each, and my soon to be former bank refuses to cancel those charges. That was one expensive scented candle I gave the receptionist for her birthday.
jeff borden said on May 19, 2009 at 11:12 am
Maybe I’m too much of a believer in semantics, but if we started calling them “debt cards” instead of “credit” cards,” perhaps more people would understand sooner the danger of playing around with those bad boys.
When I graduated from college, I obtained a MasterCard with a $500 limit, which I promptly red-lined by buying an expensive stereo system. I still owed more than $400 when burglars removed my stereo and numerous other items from my apartment while I was at work. Naturally, I had no renter’s insurance. The sting of paying off that debt and living for months with only a cheap clock radio as entertainment was a valuable experience.
I’m still a believer in layaway plans. They offer a great lesson in deferred gratification and, when you finally get the item you want, it’s already paid for.
Sue said on May 19, 2009 at 11:27 am
It’s an indication of how thoroughly the banking industry owns congress that the 15% limit on credit card interest rates didn’t pass last week. I have a couple of credit card “disaster balances” that I’m working on right now. You mentioned washing machines – what are you supposed to do when you have an expensive car breakdown, followed by another? It happens when you’ve got kids and used/old cars. At least I’m not in the same boat as one of my relative’s in-laws who had to charge the entire cost of a funeral on a credit card. Who knew you could do that?
alex said on May 19, 2009 at 11:45 am
At least I’m not in the same boat as one of my relative’s in-laws who had to charge the entire cost of a funeral on a credit card. Who knew you could do that?
My friend who put her heart attack on a credit card, that’s who. She was making payments religiously, by the way, but when she was late they jacked her interest rate to 39 percent and refused to negotiate. So she went to a bankruptcy attorney and the rest is history. She now lives with chronic heart disease and still has no health insurance.
Julie Robinson said on May 19, 2009 at 12:08 pm
Like many others we had too much debt when young, and like many others we dug ourselves out by finally realizing we had to reduce our expenses. We had to say no to a lot of things that we wanted and it seemed so unfair, so hard.
But a funny thing happened. After we had things under control we found our desires had lessened, and saving money became a fun game. Finding some nice clothes at Goodwill, learning to create handmade gifts and good meals, learning we didn’t need cable to entertain ourselves–all of these were empowering. I can’t imagine going back to the old ways.
And of course perspective helps, too. We are so rich in comparison to most every other country in the world. How can we be anything but thankful for what we have?
All of that is to say that we pay our credit cards off every month, and if they want us to pay a fee, we’ll cut them up.
Scout said on May 19, 2009 at 12:15 pm
We used to have one card with which we bought everything from groceries to car repairs and we paid it off every month. We took several trips to Europe, one to Hawaii and several domestic flights on the mileage we accrued. We had another one that we had used for some home repairs that we had a balance on but the interest rate was only 3.9%. Anyway, we paid both of our cards off for the last time about a year ago and keep them locked up at home in case of emergencies. I am hinky about debit cards – I do not trust having my actual bank account number floating around. Somebody gets hold of that you’re screwed, or at least extremely inconvenienced. We are back to the old fashioned cash system, and it is amazing how much less money we spend than when we always paid with plastic, even though we knew we had to pay it off at the end of the month. There is something psychological about not actually seeing money change hands that justifies throwing a bunch of extras in the shopping cart.
Mindy said on May 19, 2009 at 12:18 pm
I must be one of MasterCard’s worst deadbeats. Never carried a balance and have never been late with a payment. They’ve thanked me by suddenly changing the date my bill is due and delaying when it’s mailed so that I’ve had to scramble to send my payment on time. I take great pleasure in defeating all attempts to trap me with a late fee.
Personal Finance for Dummies is a worthy Dummies title to have. It’s best taken in small doses due to the subject’s excitement. I’m friendly with a financial wizard and enjoy hearing him talk about advanced money juggling – wish I had his attention for detail. He can pinch a penny until Lincoln screams but also knows how to live well.
Catherine said on May 19, 2009 at 1:17 pm
Are you sure you weren’t at my PTSA meeting last night?
I’ve long held that George Will is 85% idiot. The LA-SF light rail would find a lot of fans, depending of course on fares. I recently drove that route for about $50 in gas, compared to $300 in plane tickets (for 2). But the real motivator for me was the sheer hassle of flying commercial, anywhere, these days. When you add up the time & aggravation to get to the airport, park, take the frakkin’ shuttle, check bags, stand in line at security, stand in line again at the gate, all before you actually fly — it made every other option look better.
Re the credit cards, I do what most of y’all do — pay it off monthly — but we charge what we can to get those FF miles. Went to HI on them this year, but it will be a while before they add up to that point again. My older daughter’s private school finally started taking credit cards this year — but the catch is that they pass the CC co. fees onto you. Suddenly those FF miles didn’t look so good, and it really brought home to me how much of a favor you do small merchants to pay them in cash.
Bob said on May 19, 2009 at 1:37 pm
Didn’t have a credit card until I was 32, and talking about credit and debt with me is about as much fun as asking a Southern Baptist preacher about secular humanists and radiocarbon dating. The only quick tip I’d offer is that using a home-equity line is a better deal for people than credit cards, at least for moderate amts of borrowing.
Alex — that heart-attack-on-credit story is horrifying in several ways, not the least of which is the hospital allowing her to do it without its social workers intervening.
Julie Robinson said on May 19, 2009 at 2:10 pm
Mindy–I pay a lot of bills through mycheckfree.com. They get the CC bill several days before my mailed copy arrives, so I just pay it as soon as I get the notice. It’s very convenient–they send you an email, you pay it, and they don’t make a charge for their services. You can even schedule the payment a day or two before it’s due if you think the CC company is playing games as regards to the time of day the payment is received.
caliban said on May 19, 2009 at 3:03 pm
Where are those sanctimonious bastards that invaded Notre Dame?
Catherine. George Will was never an idiot. He used to be a pedantic sophist jerk like Buckley and JJ Kilpatrick, willing to twist facts and ideology to justify whatever had got his granny panties bunched up. To this day, if he thought he could accuse Obama of some civil rights impropriety, George Will would be all Thurgood Marshall. It seems fairly obvious to me that George never actually believed in anything.
The problem now is that the poor old guy is senescent. He really needs to just trot off into that verdant pasture where chauvinist piggies grumble about grammar and talk to Andy Rooney about how all those kitchen implements he doesn’t like got there. Buckley and JJ and Safire were actually good writers, so Will should expect to be peered at through lorgnettes down long Patrician snouts.
Oh, and being a Raygun shill is not excused by hiding behind self-promoted love of baseball. George Will don’t no dick about baseball.
And this is a wonderful bit about Detroit:
Credit cards? Well, even 15% used to be called usury. But you play, you pay, you get your legs broken. Meanwhile, there are little Kennyboys running around that want to repeal the Sarbanes-Oxley Act and let the smartest guys in the room start stealing again:
Dexter said on May 19, 2009 at 3:45 pm
I remember I was quite content with no cards until I wanted to order tickets for a rock concert and I had to have a card. I went to my bank and applied.
Jimmy Carter was President and he had curtailed credit extremely. I had the best credit possible, judging from car loans and mortgage payments, but no dice…no credit card. A year later and I had a card, then another and another.
I always paid them off in full each month. Now I have two with a few hundred owed on each one.
I never have had a debit card. I never used an ATM until I was 52 years old.
I had ordered Chinese and was writing a check…no checks accepted…so I used a gas card at an ATM to get a fast forty quick cash…a storm was brewing. As I was about to receive my cash , power went out all over town. No cash, but worse, the goddamn thing kept my card.
Here’s that routine: Report the loss to the bank that has the ATM .
Call or write the petroleum company explaining the story.
They void the card and send you a new one with a new card number ( as in card 1, 2, 3)—the account # stays the same.
The bank, meanwhile , shreds your card. They will NOT give it back! I can just see someone driving a long distance, using the card for gas, and just be fucked as they are stuck in the wilderness of highway hell.
beb said on May 19, 2009 at 4:47 pm
One of my Uncles used to pay cash for everything, unless late in life he decided to get a Sears card and charge for a washing machine. Only he was declined because he had no credit history. You’ve got to use credit cards some to create a credit history but that tempts you into using them too much.
My current dilemma has to do with PayPal. I cancel my account years ago because I was constantly getting emails saying my account had been hacked and would I please confirm my account information. Even after closing my account I still got those messages. But now eBay has ruled that sellers can only advertise Paypal as a means of payment (which eBay owns). They can still take checks but you the buyer have to ask them in a email first if they do. Also you need Paypal to sell on eBay which I’m considering to do. But Paypal wants access to your bank account numbers and I’ll be damned if I’ll give them that. What a pain in the butt.
Jenflex said on May 19, 2009 at 5:01 pm
I haven’t had to give out my account # for Paypal??? Yes, if you want them to process credit card transactions/accept money for you, you have to allow it via ACH and provide routing and account #, but not if you’re just paying???
(I mean, yes, they ask, but no, they don’t receive.)
Mark Gisleson said on May 19, 2009 at 5:09 pm
The bank gave me an unsolicited MasterCharge card when I was in high school. My younger brothers also got one, as well as my Dad who farmed for a living. Mom, the only person in the family with an actual paycheck, didn’t get one.
Since then banks have gotten worse in this regard. I understand part of the current fight is to get them to stop giving credit cards to preteens.
Oh, I guess I should mention that I’m in my late 50s, and that it’s my understanding that women are allowed to have credit cards now.
Jeff (the mild-mannered one) said on May 19, 2009 at 5:51 pm
We pay off our one credit card each month, and the one debit card is credit protected but checking account linked, and all the grocery and gas goes through that one.
This all works fine except — my Lovely Wife (24 years today, thanks for asking) says i may need an intervention on that dastardly One-Click button at Amazon.com.
[But eeets so shiny! And pretty . . . ooooo, one-click, yessss!]
I have friends who hear that mi esposa sees everything i buy (and vice versa, mind you), and they react with something approaching horror. So one might call it a useful spiritual discipline . . . but we did the “write each and every purchase down” thing for the first two years of our marriage, and it really got us on a good path. When i gently offer that as an option in pre-marital counseling, the shock and dismay is usually equal on both sides.
If you get in a big fiscal mess, though, it really works. It’s when the pain of doing it becomes less than the pain inflicted by out-of-control, unconscious spending that it suddenly becomes do-able.
Cosmo Panzini said on May 19, 2009 at 6:14 pm
OK, I’m willing to at least listen when the nabobs tell us that x% of us no longer ID as R’s. And when they talk about the declining favorability ratings of the Right, I quietly feel better. But if all this has been going on since 2001, HOW THE HELL DID THE MOST ARRANTLY INCOMPETENT BOOB TO EVER SIT IN THE OVAL OFFICE GET RE-ELECTED? Can there be that many bible-thumping automatons in the body politic? As for G. Will, in about 1979 or 80, he was exposed as (I believe) a paid shill for the Reagan campaign. Yes, he was paid. That was around the time that I stopped paying any attention to his bleatings. (And I voted for Reagan that year.) It mystifies me how he has survived so long now as a talking head. Come to think of it, the real mystery is how ANYONE can take him seriously.
Danny said on May 19, 2009 at 6:14 pm
Jeff, we’re Quicken nerds at our house and we’ve never even countenanced making purchases that we aren’t both aware of, much less the idea of having separate accounts or anything like that.
However, next week is our anniversary and I did ask the wife to skirt her eyes or squint at one particular account if she fires up Quicken. Otherwise, she’ll spoil her surprise.
alex said on May 19, 2009 at 6:55 pm
Cosmo, people were still in shock and awe mode and feared jumping ship with 911 still fresh on their minds, and frankly the media were being the Republicans’ patsy. Remember orange alerts every other day, along with preposterous claims that a major atrocity bigger than 911 had been subverted at LAX? That’s all it took for the GOP to win, though not by much. It took well into Dubya’s second term before the general public finally got it that the link between Iraq and al Qaida was fiction and that they’d been snookered.
I was surprised that Dubya managed almost half the vote in 2001, but then times were prosperous and most people weren’t paying attention.
coozledad said on May 19, 2009 at 10:14 pm
Plastic used to be a nightmare, especially interstate. Shortly after the collapse of the Soviet Union, me and my wife, on a visit to New York, elected to dine at the Ukrainian People’s Home. I gather they must not have had many non-Ukrainian guests. We ordered borscht and pirogies. I asked them if they accepted Visa, and the waiter nearly crawled under a table. It would be nice if we were one country, but it’s a slight source of amusement we aren’t.
MichaelG said on May 19, 2009 at 10:30 pm
I’ve used and abused credit cards for forty years. There have been several periods during which I hoisted balances to over $20,000 and then managed beat them back down to zero. I’ve had a whole pocket full of Masters and Visas and a couple of Discovery’s and AMEXs. I cancelled AMEX many years ago because I didn’t like paying fees and couldn’t see any advantage to AMEX over the others. I had two AMEX cards for a while there. A regular one and one that was colored black and allowed me to accrue a balance a la Visa or MC. I even had a Diners’ Club card once and several others whose names escape me. Oh, and some oil company cards.
In the past two years, after splitting from my wife, I let things balloon back up to around $17,500. I had, oh, I can’t remember how many cards and they all had frightening limits that ranged from $25,000 to over $50,000. Talk about the potential for problems. I never got into the airline mileage thing, although I probably should have. Or maybe not. I did get an Amazon card and they toss me an occasional $25 credit slip good for purchases from their site.
I’ve been lucky enough to be able to keep up with payments and even wipe out balances. I’ve also never gotten crosswise with any of the credit card companies. As a result, I’ve had a steady deluge of offers from card companies offering zero percent interest with balance transfers. Even up to today. Right after splitting up, I bought a rather pricey new computer from Dell. I reluctantly agreed to finance it through them to gain a favorable discount.
Around this time I had a “Holy Shit” moment and realized that my spending was out of control. It was a wonderful computer (still is) and I love the new stove. But I came to the conclusion that I had to rein things in.
The Dell account was interest free for a year and I paid that off well before the time was up. One point for me.
Then I took advantage of those interest-free-for-six-month-with-balance-transfer offers from the credit card companies. I’ve been transferring balances and cancelling cards back and forth for the last 18 months until I now have the whole nine yards down to around $6,000. I plan to kill that off by the end of the year. I can’t envisage a life without cards, but I can sure imagine a life without a balance.
I’ll freely admit that it is easier for a single person with a decent job to economize and to pay cards off. At the same time, being single with a decent job is a situation that can easily create the illusion that one can charge anything one wants. I pay cash, as in greenbacks, for a lot more stuff now and use my debit card. I do not, however, use my debit card for internet purchases.
Lesson? I dunno. I’ve been lucky in my stupidity, I guess. Very lucky. I was an eyelash away from getting into some really horrific debt. Credit cards are a useful tool, like a sharp knife, and should be kept and used with great care.
I can’t believe I just spilled all this personal stuff out onto the web.
Dexter said on May 20, 2009 at 12:29 am
Norm Sinclair, retired from the News, was in Bloomfield Twp. yesterday and he graciously granted Craig Crawford some time to tell about Jimmy Hoffa…
Dexter said on May 20, 2009 at 12:41 am
Sports. Red Wings won in overtime, are up 2-0. Lakers won, of course, no way the refs were going to allow St. Kobe to be denied.
I always loved Joe Dumars, but firing Flip Saunders for Michael Curry last year really soured me on his decision making. Under Curry’s coaching, the Pistons are now a second-tier club. Dumars traded Chauncey Billups to Denver for Allen Iverson, a washed-up player who quickly was relegated to the Piston bench. Billups meshed perfectly with “Melo” Anthony in Denver and they are battling for the west title now…I miss Billups teaming up with Rip Hamilton and Tayshaun Prince. What’s Joe D gon’ do now?
Jeff (the mild-mannered one) said on May 20, 2009 at 8:33 am
C’mon, Blackhawks! [Ducks….]
coozledad said on May 20, 2009 at 9:57 am
Hey! more Kodak moments from the Banquet of Life:
Rana said on May 20, 2009 at 3:11 pm
beb – here’s the simplest way to deal with PayPal – assume that ALL emails “from” them are fake. That’s been my experience – PayPal sends out maybe 1 email a year, and it’s just info, and doesn’t tell you to do anything. Check in to the site yourself maybe once a month to see what your account’s been up to, and send all the emails to the trash (or back to PayPal – they have a phishing dept. and if you forward a copy to them at firstname.lastname@example.org they’ll tell you what’s real and what is not).
Rana said on May 20, 2009 at 3:13 pm
Also, you do not in fact need to have a PayPal account to use PayPal. You can just enter your credit card info and PayPal will process it, even if you are just a “guest”. (I use PayPal for donations and for my online store, and only some of my customers are actually registered with it.)