Seeking some credit card advice?

[gimmethesimplelife]

Due to the recent death of someone close to my family, I find myself in the position of having some unexpected cash coming in sometime not too far off. I am going to fund my emergency account with it and also pay off all remaining credit card balances. My question is this - I am thinking of keeping one card open with a $750 credit limit for travel - what do you think, good idea or just be rid of the whole concept of credit? (this card is with my credit union - so it is a non-profit, non corporate entity, and I could also pay off any balances from savings very quickly via online banking - provided there was money in savings to do so.) What do you'all think? Another point is that while I may be doing a little bit of travel due to this inflow - a trip to DC to visit someone I met through this board, actually - and (possibly) a trip to Mexico City to see the Anthropology Museum and the Museum of the Mexican Revolution - I am no Delta SkyMiles Club Lounge Frequent Flyer type and life sure does not seem to have me moving in that direction - so possibly with a debit card the travel issue really is meaningless to my situation anyway? Rob

[CeciliaW]

Don't close them. Pay them off. Put the cards away. Use one occasionally to keep it active.

Travel with a debit card can be difficult as hotels and other agencies put a hold (much higher than your actual charge) on the card when they run it and it can take weeks to be released. This can really mess up your plans if you're on the road when it happens, and it does happen.

So, keep the cards open.


Cecilia

[fidgiegirl]

+1 to Cecilia

AND the anthropology museum is incredible!

[gimmethesimplelife]

+1 to Cecilia

AND the anthropology museum is incredible!Thanks!!! I have heard such good things about this place and its been on my list for so so so long, and since this person who passed on passed on so suddenly and without warning, i am thinking yeah now might be a good time to get er done and just go.....

And so far the votes have me keeping the cards open....interesting, I was thinking there'd be some nah get those cards done and over with and out of your life in the responses. Rob

[ApatheticNoMore]

Keep them, for travel even in the U.S. for motels but also credit cards can be used to handle exchange rates (so I've heard mostly), because debit cards are less secure than credit (they are), for your credit rating if you care about that (only worth caring about that if you ever might need to borrow of course). The only reason to cancel is if you feel you really can't control your spending. They can also be used as an emergency fund, now they are a bad emergency fund, money in the bank is the right way to do it. But in a pinch ....

[SteveinMN]

The benefits to having a credit card available far outweigh the disadvantages, IMHO. The only reason I could think of for not having a CC at all is if you absolutely cannot muster the self-control to not deploy it anytime you see the CC company's logo. :) Seriously, keep one. Keep it in your desk drawer or with your socks -- don't carry it around all the time if it's a temptation -- and use it when you need to.

[ToomuchStuff]

Personally, I would keep it. Decades ago, I knew one person who really didn't believe in them, because they lacked the responsibility, so when they decided to keep only one, they put it into the freezer, in water, in some kind of container, so they would have to work to get to it. I never had an issue with them and don't understand the people that do, or that believe that "Dave Ramsey says cut up the cards" as quite a few of those I dealt with, can just as easily overspend with a debit card.
I know on Debit cards, at least locally (talked to a friend who manages a gas station), they put a $75 hold on the card, and that can take a while to come off. I have never used plastic for gas, and that would screw me up as I only put the money in the account that I plan on spending.

[rosarugosa]

I love what JD Roth at Get Rich Slowly says about credit cards, to paraphrase, "credit cards are the chainsaws of personal finance. They can be enormously useful tools, or in the wrong hands, can help cause utter devastation."
I find them to be useful tools myself.

[lhamo]

I agree that credit cards can be useful tools, as long as you have your spending in check. Especially for things travel-related.

[try2bfrugal]

I have multiple rewards credit cards. I pay them off in full each month and make money from the rewards points. I use them for paying as much as I can, like the cell phone bill, to get as much cash back as possible.

I track all of my expenses and keep a tight budget so I know I don't spend any differently because of the cards. If you can do that it is a great way to make some extra money each month.

[Float On]

We went from having 4 personal credit cards - each with limits from $30,000 - $60,000 plus 4 business cards with limits from $50,000 - unlimited AM Ex. to two debit card (personal and businness) and one business credit card with only $3000 limit. I can say that we are far better off now by only having one credit card with a small limit but that credit card has been needed a time or two when a debit card couldn't (car rental, equipment deposits, etc...)

[iris lily]

I would never be without a credit card. In fact, I just signed on for another one.

But I pay off my balance every month, always have.

[Alan]

I have multiple rewards credit cards. I pay them off in full each month and make money from the rewards points. I use them for paying as much as I can, like the cell phone bill, to get as much cash back as possible.

We use multiple credit cards as well, each with rewards attached. The only reason I can think of to not use credit is if you simply can't control the urge to spend more than can be paid off at the end of the month. We pay most everything, including gas purchases, meals out, travel expenses in the RV, etc., and haven't paid a dime of interest in years. It just comes down to discipline.

[ApatheticNoMore]

I think the multiple credit cards can get to be a pain to manage if you actually use all of them (you have to remember to pay them ALL off every month!). But if you just have one card or if your extra cards are "in ice" or as good as (not used much), then it's not very difficult to manage.

I think the credit card rewards thing can be very tricky psychologically to manage, I never thought of the idea of only using reward cards for necessities like bills, but that actually makes a lot of sense. Are you really going to use more electricity because you have a reward card, maybe not. However if I started using them for discretionary things, then yea the reward card would be just that more incentive to throw another book from Amazon on the pile or something. I don't have a reward type card, I'm forgoing stuff there so maybe I should reconsider, but they've always seemed subtly deceptive and likely to lead to more spending to me. But if that's an issue plain non-reward credit cards still add a layer of convenience to not having any credit cards.

I guess it comes down to how you think of credit cards. I have never thought of them as a way to have money I don't have (though I can understand this thinking in emergency situations etc. ... and people even start businesses on credit cards as well and in some cases that can make sense also). But I really have always only thought of them as a method of payment which I then pay off like any other bill.

[awakenedsoul]

I don't use credit cards. I did the Dave Ramsey program, and had cc debt for ten years. If you have run up a balance in the past, I wouldn't use one. In my case, I was underearning. I also used the cc for groceries, ( a big red flag,) and I would buy more than I needed when I used the card.
It's great that you've had a windfall. I would be careful not to spend the money on wants, though. I also received an inheritance, and I've got it in an ING Orange account. I know from your other posts that you've had to live on a very modest salary, so I would protect that money. It would be so easy to burn through it.
I travel with cash and put my deposit on a debit card. (I keep my baby emergency fund in that account.) I bring my own food, and have a fridge in my room. I also bring my own coffee and coffemaker.

[Tammy]

We put almost everything on the cards and pay it all monthly. I have automatic monthly purchases on each one (netflix, donations, cell phone) so each of our 5 cards has no annual fee cause they get used. As soon as we have to pay for one, we plan to cancel it. But they seem to like us cause we use them.

In the past we used them for loans for true needs ... Car repairs, etc. Now the kids are raised and our income is higher with less money going out. So we have actual savings for long and short term goals and surprises.

We are almost cashless and I love it.

[herisf]

I have 2 no-fee credit cards - one I carry and use on a regular basis, and the other one I reserve for on-line transactions only (unless I travel overseas, then it gets used as Capital One has the best foreign rate exchange). I personally don't like that debit cards carry less legal protection than a credit card, and I always pay off the balances monthly.

[jp1]

I have several open credit cards but only carry one in wallet which I pay off each month. I think it has a $5,000 limit but I've never come close to running it up to the limit. I would never use a debit card for purchases because if they get counterfeited the money taken is my own, not the banks, and is much harder to get corrected. I only use it for atm withdrawals and even then I do it $200 at a time to limit the number of times I use it and therefore the likelihood of it getting breached.

Like others have mentioned credit cards are incredibly useful for travel. The hotel and rental car agency holds alone make it worth using them.

Fortunately I've never had a spending problem, so that's not a concern for me when it comes to credit cards. To me they're just a very useful tool to pay for stuff I'd be buying anyway.

[Spartana]

Don't close them. Pay them off. Put the cards away. Use one occasionally to keep it active.

Travel with a debit card can be difficult as hotels and other agencies put a hold (much higher than your actual charge) on the card when they run it and it can take weeks to be released. This can really mess up your plans if you're on the road when it happens, and it does happen.

So, keep the cards open.


Cecilia

I agree with this. Also, even if you don't use the CC for travel but use a debit card instead, you may want to or have to rent a car sometime and then a CC is the way to go. I don't know if car rental agencies will even take a debit card, but even if they do, most CCs come with 2 week liability coverage for a car you rent for free when using their CC for the rental. That can save up to $15/day. But, other then a car rental. I would stick to all cash if possible. While debit cards are great, many people still overspend when using them just like when using a credit card because they have access to ALL of their money rather then just ther amount they have in their pockets. And even though that won't put you in debt, you probably don't want to wipe out your savings buying extra stuff on your debit card you didn't plan for. If you only have $10 in your pocket and use only cash, you can't spend more then that $10. Ever!

[Rogar]

I have only had a debit card for a couple of decades. I have traveled and used it for many things and have not ever had any problems. Matter of fact this is the first time I've seen these things mentioned, not to doubt they are real. When I swipe my card there is often an option to use the card as debit or credit and I've always punched credit, but I don't know if that matters. Anyway, I don't get monthly billings to pay off and I'm limited to the amount of money in my account.

I guess if there is a temptation to overspend it can be a bad thing, but in terms of simplicity it is much more convenient than cash and/or checks for me.

[ToomuchStuff]

When I swipe my card there is often an option to use the card as debit or credit and I've always punched credit,


It very much makes a difference. The credit system costs the vendor more (percentage) and offers you protection. However, in the non online world, with skimmers/fake readers and camera's, one can get your information and pin, if you use it as a debit card in those cases. (why debit cards generally are more dangerous)

[gimmethesimplelife]

Thanks for all the replies! I have decided to keep the one card open with the $750 limit and also a line of credit that is attached to my checking account with a limit of $500 open. This would be a total credit limit of $1250, and with my modest lifestyle at the moment that seems quite enough. I am not sure of my future, if I will be starting a business, going back to school, staying in the US or not.....I really don't seem to be moving in directions right now where my credit score is going to be that big a deal, so I am not worried much about that but will of course pay everything off on time and keep the score up regardless. I also have opened a checking account for free - an online deal - with a 1% cashback debit card, so there is a rewards source without the temptation of credit.....I'm still not sure it's a great idea for me to have open accounts with large limits as in my high spending days I went overboard with them....I know better now but still don't need the temptation. Rob

[gimmethesimplelife]

I don't use credit cards. I did the Dave Ramsey program, and had cc debt for ten years. If you have run up a balance in the past, I wouldn't use one. In my case, I was underearning. I also used the cc for groceries, ( a big red flag,) and I would buy more than I needed when I used the card.
It's great that you've had a windfall. I would be careful not to spend the money on wants, though. I also received an inheritance, and I've got it in an ING Orange account. I know from your other posts that you've had to live on a very modest salary, so I would protect that money. It would be so easy to burn through it.
I travel with cash and put my deposit on a debit card. (I keep my baby emergency fund in that account.) I bring my own food, and have a fridge in my room. I also bring my own coffee and coffemaker.Great great great advice! About the windfall - the bulk of it is going towards credit card debt - I am getting rid of it all!!!!! And also towards funding my emergency account, so I can sleep better at night. Really looking forward to the sleeping better! There will also be enough left for me to study web design at a community college provided I have some income coming in, and enough for me to have my dream trip to Mexico City.

Funny thing though is that Simple Living has changed my concept of a dream trip quite a bit. As for lodging, I have found a few perfectly adequate places such as the Hotel Marlowe for $45 a night - would cost much more here. As for food, one nice meal out, and the rest is all street vendors, stand up fonda meals. As for shopping, maybe a t shirt, a blanket, a key ring or maybe a silver ring, and that's it.....Nothing to stuff the suitcase to bursting with like I would have done in my just charge it days. For me this trip is all about museums and Mexican history, a topic I have always found fascinating. And the one other splurge, I want to see a performane of the Ballet Folklorico.....and just people watch in one of the world's great (and quite affordable if you do it right) capitals. Rob

[awakenedsoul]

Thanks Rob. That's great news. I'm so glad that things are working out for you. You've made huge strides, and really fast! When I travel, I ask for a small fridge in my room. I pack homemade sandwiches, juice, fruit, half and half for my coffee, nuts, cereal, and snacks. It really saves me money.

Sounds like you have an exciting adventure planned!

[awakenedsoul]

I also have opened a checking account for free - an online deal - with a 1% cashback debit card, so there is a rewards source without the temptation of credit.....I'm still not sure it's a great idea for me to have open accounts with large limits as in my high spending days I went overboard with them....I know better now but still don't need the temptation. Rob[/QUOTE]

I wouldn't do it, Rob. If you have a nice fat emergency fund, I think you'll find that you spend less. When I had debt, my credit score was 798. When I canceled my credit cards and paid off the SBA and car loan, my credit score went down slightly. It doesn't matter to me, since I have two years living expenses in savings.

I know other people on this board are totally responsible with credit cards, but if you've gotten in trouble before, that's a warning. I really believe you will make different choices without any credit available. I encourage you to go cash only, and be very organized. I transfer a set amount each month from my savings to checking. It's amazing how easy it would be to spend double that amount. You're setting up new habits, a new framework, and changing old self destructive behavior. It takes time and self discipline.

[ToomuchStuff]

Agreed, if a know problem has existed, then it is like a recovering alcoholic going to a beer tasting with a friend, IMHO.

[iamdavidspersonaleconomy]

In my past I used credit cards to get way into debt throughout college and into my first year of working. I have made it out of all credit card debt and use only cash and debit card now. I am one of the people who do not need a credit card, becuase of my compusilve past with credit.

I did keep one line open at $6,000, but cut up the card. I did that to keep my credit score from lowering. But in reality my student loans and other payment history is enough of a credit history for me. In reading this thread and typing this post, I have decided to close the remaining credit account. I truly do not need it, as I have savings and other resources in times of need. While it may lower my credit score, the only credit I would be using in the future would be a mortgage, which is not in the near future.

ADDED LATER: I also must say I used student loans to pay off some of my credit cards and am not proud of that decision. Making unsecured debt into secured debt which cannot be forgiven (in most cases). I did this to "keep my credit score high". Which for me, is really doing it to gaurantee the ability to borrow more in the future.