Why do you need a fistful of credit cards? They’re heavy. They make your wal-let bulge. They cost money. You can’t remember how much you’ve charged on them. Now that even the hoi polloi carry platinum, prestige lies in flashing a plain-vanilla card. For an even bigger thrill, pay cash.
As a status symbol, the fancy credit card is finished. It’s now just a transac¬tions workhorse and having too many of them says that you’re dumb. Assuming, as I do, that you want to get out of debt and build some savings, plastic ought to serve a single purpose: convenience. You put it down instead of writing a check or paying cash. At the end of the month, you pay the bill. The whole bill.
Not that you’re perfect. You’ll still stretch the occasional bill over two or three months—maybe during holiday seasons or after a vacation. But your goal is to never charge more than you can easily repay. In a slowdown economy, sav¬ings are more important than ever.
How to get rid of consumer debt?
It’s so simple that I’m almost embarrassed to mention it: Don’t borrow any¬ more.
That’s all there is to it.
Say to yourself, “Today I am not going to put down a credit card for anything.”
When you buy something, pay cash, use a debit card, or write a check. Tomorrow say the same thing: “I am not going to put down a credit card for anything. I am not even going to borrow ten dollars from a friend.” Take it slowly, one day at a time. It’s like stopping smoking. You’ll be nervous at first; you won’t see how it’s possible to live; you’ll suffer relapses and sneak a new debt or two. But when you get up every morning, renew your pledge. To make it easier, quit carrying credit cards.I hear you saying, “I can’t get along without a credit card!” Of course you can—at least, most of the time. You can pay by check or debit card. You can buy your Starbucks with cash (they still take it, you know). You may have to show a credit card to rent a car. But when you bring the car back, pay the bill by debit card or personal check.
If you object that you can’t pay by debit card or check because you don’t have enough money in the bank, you’re missing my point. When you don’t have the money in the bank, don’t buy. If you find that you have to put down plastic, use an American Express green, gold, or platinum card. They’re not credit cards, meaning that you can’t stretch out payments. You have to pay your bill in full by the end of the month. (Okay, there’s an annual fee for using these cards, but when you need discipline, Amex is it.)
Once you stop using credit cards, three things will happen:
1. You will buy less—and whatever you do buy will probably be a less expen¬sive model or make. Studies have found that people spend more when they pay with plastic because it doesn’t feel like real money. When it is real money, you’re more sensible.
2. Your total debt will shrink rapidly. By paying off back bills and not add¬ing new ones, you leave yourself pots of extra money to apply to debt reduction. You’re also paying less interest, a big saving right there.
3. You will grow incredibly smug. You’re the first on your block to get out of debt. Others will follow, but you’ll be the first.
I’m not against credit cards. They’re easy to use. They’re handy. If your card has no annual fee and a 20-day interest-free grace period for paying your bills, you’re getting free monthly loans. What I’m against is buying more on your credit cards than you can pay for at the end of the month.
Once you’ve fought your way out of debt, you can start using credit cards again, but only for the convenience of not carrying cash. Your days of debt are done. A big expense may sometimes drive you over the limit. A flat-screen TV. A llama. A hot-air balloon. Whenever you limp home back in debt, recite your mantra: “From now on, I’m not going to put down a credit card for anything.” Stick with it until you’re free again.
From MAKING THE MOST OF YOUR MONEY NOW by Jane Bryant Quinn. Copyright © 1991, 1997, 2009 by Berrybrook Publishing, Inc. Reprinted by permission of Simon & Schuster, Inc.
