Why I'm Abandoning Credit Cards

My husband and I had an extensive conversation yesterday regarding the status of our debts, income, and what our plans are in the future, as it applies to finances. I told him that we're basically treading water; for every $1000 I pay off in a month, we charge $1000 more. I told him that I want to go to a cash based budget until we're able to pay off our credit card debt so we can better manage how much we're spending.

This will be a marked change in our spending habits, as he and I have pretty much used credit cards exclusively since we moved in together. We've used cards that offered cash back awards for all of our spending, collecting the cash back incentive, but slowly increasing our debt load as we went along. One of my credit cards offers 1% back, deposited into a savings account that pays 10% interest, and it has a low interest rate too. It is through my credit union and I love my credit union. If we were using these cards responsibly, it would be a great set up. The problem is that we're not using the cards responsibly. We're carrying a balance from month to month, therefore paying interest on this card every month. You would think this is why I'm abandoning cards. It's not.

Instead, I am abandoning credit cards because of my recent dealings with Discover Card.

A little back story; last year I decided that we were going to pay off our credit cards. In order to do this, I completed a couple of balance transfers to get the bulk of our debt onto a couple of 0% interest offers. One of these balance transfers was to Discover Card, which offered 0% interest for 15 months on balance transfers. I calculated out the necessary payments to pay off the balance in 15 months and on we went. In November, I decided to purchase my husbands Christmas gift online. Because Discover Card offered 5% cash back for online purchases, I decided to use my Discover Card for this item and then immediately pay it off the following month. In the paperwork I received with my card, there was a statement regarding payments above the minimum amount that basically said payments would be applied to balances with the highest interest rate first.

And then there was one little line that I overlooked. It said, "In a way that is most advantageous to us."

In January, I paid my entire minimum payment plus extra, enough to cover my minimum payment and the amount of the gift I'd purchased my husband. When I received my statement at the end of the month, it showed that I had been charged interest on $300+ worth of purchases. I emailed the company asking why and they said that the purchases began accruing interest the day I made them, not at the end of the billing cycle, since I already had a balance on the account.

Fine.

I paid additional in February to pay not only my minimum payment, but also whatever outstanding balance I had on my account from January .... basically covering the interest so I was not charged anymore interest on my interest.

On Friday, I received my Discover Card statement for February with an interest charge of $0.50 and the description "Minimum Interest Charge".

I flew into a rage. I have more than paid off the charge from December and they continued to charge me interest. I e-mail Discover through the link on my account page and was basically told that once you make a charge when you have an outstanding balance transfer, you will pay the minimum interest charge of $0.50 for the entire duration of your balance transfer. It doesn't matter that I have more than paid it off, that I've paid more than the minimum every month since the balance transfer occurred, or that my purchase balance is the highest interest rate on my account. Discover Card maintained a purchase balance of $1.56 so they could continue to charge me interest on a purchase that has long since been paid off, and since they charge a minimum of $0.50 per statement, that will be added to my account every month until I pay off the balance transfer.

Needless to say, my relationship with Discover Card will be ending once the balance transfer is paid off.  Although I was assured that I won't see an interest charge for the duration of the balance transfer if I don't use the card for additional purchases, the shadiness of the business practice has soured my opinion of Discover Card as a company.

New Year, Same Journey

I am pretty terrible at keeping up with this blogging thing. I happened to come across a link to it while posting elsewhere and thought I'd come write an update as to where we are as we enter 2014. The sad fact is that while I feel like we're making progress, our total debt has stayed pretty stagnant over the years. Actually, we have more debt now than we did when we started this journey in 2010. On a positive note though, we have a game plan to get us through this year and it's pretty solid.

We are starting 2014 with $199,678.70 in debt. We entered 2013 with $202,017.31, so we have seen a slight decrease. Based on our payoff schedule, we'll be at $160,717.99  at the end of 2014. This will pay off all of our credit cards except for one, which is the one we use for day to day purchases. It gives us 1% cashback into a high interest savings account, and once the rest of our debt is paid off, it will be easy to pay that card off in a month or two. or May 2015 at the latest.

I'd like to take stock of what I did in 2013, since the numbers do not reflect success at all.

• I paid off my husband's Best Buy credit card. We did use it for Christmas, but it will be paid off in a few months. We only used it for Christmas because of the 0% interest for 18 months. It will  be paid off before 18 months. Payments have already been scheduled to accomplish this.
• We paid off the Target credit card, which charges over 18% interest. We used this for purchases over Christmas, because it gave us free shipping and 5% off the purchases. It will be paid off this month.
• We paid off my husband's Credit Union card in December 2012, entering 2013 with a $0 balance.
• I transferred higher interest balances to 0% interest cards;  one 0% for 12 months, the other for 15 months. The 12 month card will be paid off in October and the 15 month card will be paid off next December.
• I paid off my Perkins Loan! This was done in December and was a little bit of a Christmas gift to myself. It was a small payment, but the interest rate was 5% and the loan was smallish after paying on it for the last eight years. I only paid it off two years early, but baby steps. It was very freeing to not have to pay that loan this month.

As for what I plan to accomplish in 2014:

• January I will pay off our Target card from Christmas.
• February I will pay off our Home Depot card before it begins accruing interest.
• October I will pay off our Chase card.
• November I will pay off the Best Buy card from Christmas.
• December I will pay off the Discover Card.
• December I will pay off the 401k Loan I took out last year, three years early.

As always, the biggest obstical I face in paying off our debt is my husband's belief that we can't do it. He feels like we've been talking about paying off debt for so long that it's all talk, that nothing will ever change, that it's a pipe dream. Even when I show him the payoff scheduled with cold, hard dates, he still thinks that I'm living in a dream world and that it will never happen. We are averaging more than $1500 a month in credit card payments this year, in an effort to pay them off quickly. That's on top of paying  $620 a month for our cars, $800 a month for our mortgage, $118 a month on my student loan, and even more for our utilities and insurance. Getting that money back into our bank account in 2015.... I can't wait. I just can't wait.