Category Archive: Anti-Credit Articles

An Interesting Conversation About Store-Branded Credit Card Applications

Today, I went shopping for Mother’s Day gifts. As I was checking out at one particular store, the woman behind the cash register asked me if I wanted to apply for a credit card and receive a 10% discount. As I’ve written about before, I’m not interested in credit cards, especially high-rate store-branded credit cards. But, I’m also not interested in being a jerk, so I politely declined her offer. But, I couldn’t resist asking her if she ever tired of trying to get people to apply for the cards. She sighed and said yes. Then, she went on for about five minutes about how she and the other customer service people were required to produce a certain number of applications, every week, or they would be ‘written up’. Having worked in retail when I was in high school, I was familiar with that type of company policy. Apparently, her particular manager asks each CSR to get 2 credit applications, per week. I asked her what she thought about credit cards – in general. She cocked her head, slightly, and said – almost at a whisper –

“They tell us if we can get someone to sign up, and be approved, that we have guaranteed that that customer will shop at our store, on average, three times more often than they would have if they didn’t have a card with our store’s name on it.”

I hope those customer’s enjoyed their 10% discount.

(As a side note: I have no idea if what she said is true or not, but I am inclined to believe that part of the allure of the store-branded card is that it gives its owner a false-sense of belonging. Think about it. When you sign-up for the card, what type of process must you go through. Ah – an approval process. Interesting word, don’t you think?)

Cool thing about cash – no approval necessary. I don’t need a ‘cash’ score. And, I’m not paying for my shirt, three years after it went out of style, at 23% interest.

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My Life After Debt

Here is our current plan to live debt-free and stay debt-free –

  1. We fully-fund four retirement accounts – my wife’s Roth IRA, my wife’s Pension Plan, my Roth IRA, and my 403b.
  2. We save money for future ‘major purchases’ – newer cars, new furniture, new appliances – in our ING DIRECT Savings Account.
  3. We are saving for a future home purchase in our brokerage account.  While not as tax-efficient as our retirement accounts, we have ready access to this money.  Should we need to purchase a home before we can pay full-price, we can use the money in this account for a healthy down payment.

We live on a strict budget, we fully-fund our retirement accounts, and we save as much as we can for future purchases.  Instead of making payments to an automobile loan, we make a ‘car payment’ to our savings account.  Instead of making mortgage payments to a mortgage company, we make a ‘mortgage payment’ to our brokerage account.

I like having interest and time work ‘for me’ and instead of ‘against me’.  Now, when I want to buy something, I save up for it, and then I purchase it.  Radical, I know! :)

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Credit Card Fees (Further Motivation For Getting Out Of Debt!)

I’m a pretty unique guy. I do not use a credit card. Why? I like using ink and writing checks. I enjoy the process of using “real money” and I simply dislike the “hassle” of managing credit card payments. Also, I have no desire to pay the interest, fees, or penalties associated with carrying a credit card balance. (Plus, it takes too much Ink to write all those checks.) Sure, I could pay my credit card balances off “in full” at the end of each month, but I have found that I will spend MORE whenever I use a credit card than I do when I use cash. Now, I may not be able to persuade you to give up credit cards forever, perhaps I can motivate you to get out of credit card debt as quickly as you can so that you can avoid the following FEES!

Interest: While not technically a “fee”, credit card companies charge you interest on the money that you borrow from them. According to Bankrate.com, the current AVERAGE interest charge associated with a “standard” credit card is about 13%. The greatest motivation for getting out of credit card debt (for me) was the idea of never paying credit card interest again!

Late Payment: If your payment arrives late (for whatever reason) you will be charged a late payment fee. I did a quick “search” and found that the average late fee associated with credit cards is $35! Remember, it does not matter if the postal service “loses your check”, you still have to pay the late fee. (If you get hit with a late fee, it never hurts to call and ask (politely) for them to waive the fee! It just might work.) Again, because I do not use a credit card, I never have to worry about paying a late fee.

Over-the-limit Fee: Credit cards have a pre-set limit, which indicates how much money they are willing to loan you. If you exceed this limit, you will be assessed an over-the-limit fee. Guess what? If you are “close” to the limit, and only pay your monthly minimum, and your card accrues interest, and the interest plus the balance = over your limit, you can (and will) be hit with an over-the-limit fee. Oh yeah… The average over-the-limit fee is about $30!

Payment processing Fee: If you find yourself in a ‘bind’ many credit card companies will allow you to pay via your telephone. Guess what? You’ll pay a FEE to make a PAYMENT. Not only will you be sending them a payment, they’ll gladly charge you for the privilege.

Cash Advance Fee: Many credit cards allow you to use your card at an ATM. But, they charge a pretty-penny for this service. In most cases, you will pay a 3% cash advance fee, up front, regardless of whether you pay off your entire balance at the end of the month. If you get a cash of advance of $1000, you’ll pay $30.

Annual Fee: While many credit cards do not charge an “annual fee”, some do! That’s right, you pay them for the privilege of carrying their card in your back pocket, regardless of whether you use the card or not!

Convenience Check Fee: Those nifty checks that you receive with your credit card bill are called “convenience checks.” Use one, and the credit card company will treat it like a cash advance and charge you a cash advance fee!

These are just a few of the fees that credit card companies CAN and DO collect each year. (According to this report in USA Today, credit card companies collected over $17 BILLION in fees last year. Yes, friend, that’s BILLION, with a “B”. How much is $17 BILLION Dollars? Well, if we equally divided $17BILLION between, say, 300,000,000 Americans, each man, woman, boy or girl would receive a check for more than $56!) My advice, based on two years of not having to WORRY about these fees and charges? Get out of debt, stay out of debt, use cash, and relax. Let somebody else pay your share of the $17BILLION!

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The Value of Waiting

The single most over-rated “benefit” of credit is that it allows you to have what you want, right when you want it. We live in an “instant” society. We have instant oatmeal, instant pudding, microwave popcorn, always-on internet, universal cellular coverage. We demand, as a society and as individuals, that our wants be met on time, or even better, early. There is a tragic downside to this mentality. Stop, for just one minute, and try to remember the last 5 meals you ate, the last 5 conversations you had, the last 5 emails you answered, the last 5 people you hugged. SEE. We have so much going on, and we demand that so many of the things in our lives be NOW NOW NOW, that we rush through our lives. Knowing that we have this desire for instant gratification, credit companies make borrowing extremely easy. Walk into a store, see what you want, swipe a card, sign your name, and out you go. Bing-Bang-Boom. But, there is a sinister downside to the “convenience.” People are credit-spending themselves into deeper, and deeper financial holes. It’s so EASY to use a credit card. It is painless. I liken using credit cards to eating cotton candy. The next time you are at a state fair, buy a big bundle of cotton candy, and eat it as fast as you can. Trust me, an adult can eat an entire bag of the stuff in less that 15 minutes. Why? Because it FEELS light and airy, easy to swallow. Then, go ride a few rides, wait awhile, walk around a bit. That sinking feeling in the pit of your stomach? That my friends is the cotton candy doing its work. That sicky, sweet, nauseous feeling. It comes from eating too much, too fast, because it was too easy to consume. The same is true with credit. It will make you sick if you do not realize, QUICKLY, that it is extremely easy to over-endulge in its “sweetness.” So, the next time you want to use your credit card…STOP…Put your card back in your pocket, go home, read a book, watch some t.v., wait 24 hours, take a cold shower, take a walk…Now, do you really NEED what you were about to purchase, or did you just WANT it? Huh, huh, huh….well, if you NEED it, go out and earn the money for it. Stop the insanity of feeding your credit card obsessed financial sweet-tooth. Comments welcome…ncnblog

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