A few years ago, a friend of mine ran into mounting credit card debts. She had always enjoyed the convenience of charging her credit card whenever she went instead of paying cash. She knew she tended to spend more when she is using credit card but did not bother as she had more than one credit card.
Then, her life went into a bad turn- her beloved husband was diagnosed with an illness that was to drag on for years. She watched her husband suffered from the condition before finally passing away. And in an attempt to help her husband, she used up for her credit cards to buy supplements and medication that she had hoped will help him recover. She was faced with mounting debt, a dying husband and a young daughter to raise.
Her spending went out of control- and she had problem settling her mounting debts. Life was dealing her such a cruel blow- she never told me about it until recently.
One day, she made the decision to stop using her credit cards for any purchases. She cut off ALL her cards, and converted her credit card debts into term loans. Term loans enable one to repay back credit card debt at a lower interest as banks charge very high interest for credit card spending since the credit requires no collaterral. At first, it was difficult- she was so used to using credit card for the convenience of it and to be bringing cash everywhere takes a lot of getting used to. But she was determined- she no longer wanted uncontrolled spending and spending on what she cannot afford to rule her life.
Slowly and painful, she was able to settle all her credit card debts one by one. It took her more than 5 years to pay off all her debts.
It has been 8 years- and she had stuck firmly to her resolution. She does not carry any credit cards in her wallet at all. When I asked her, “wouldn’t you consider keeping one on standby, just in case?”. She answered me, “no, I will not risk it. I know myself- if I have a credit card, I will spend without control. Even though I am wiser now, I still will not risk falling back to my spending habit again. I have survived 8 years without possessing a card. It is possible.”
She also told me about the alternatives she uses on the seemingly necessary things that we cannot do without credit cards:
- if she has to book an air ticket online or buy something that requires credit card, she will request her friend’s help to charge it for her. She will then immediately withdraw cash to pay back her friend,
- when she travels, she does not use or carry a credit card for emergency. She buys travellers cheque and encash it when she need money,
- she pay utility bills by either going straight to the post office or sending cheques. She does not pay via auto billing or online banking that requires a credit card,
- she buys everything in cash. If she happened not to bring enough cash, she will either talk herself out from buying it or come back later with the cash
As a mother, she was able to put the needs of her child ahead of her own. Her courage is truly remarkable and her ability to overcome her over spending truly inspiring. I’ve always kept her advise and example in my mind.
Then, not long later, I had to terminate my only credit card and went to redeem some rewards (my card come with reward spending). My points were an indication of the spending I have done and I was shocked that I’ve spent so much over the years. And a lot of those expenses were impulse buys and often unnecessary. So before the application for my next card was approved, I settled my utility bills and installment payments in cash- few months in advance since I will be travelling and do not want my water and electricity cut when I get back.
Now, I only keep my credit card for auto billing- there are bills that I have to pay every month and to sign up auto billing means I only need to pay one credit card company instead of many different billers. But when I buy things, I use cash. And I am surprised to find that my expenses are so much lower because I do not tend to buy things on impulse. And with that, I realised that I no longer need a high paying job to sustain my expenditures- since I was mostly splurging when I was using my credit card.
Previously, when I see people paying cash for family groceries, I always wondered: “Why they don’t use credit card? At least they can earn points or rebates for the purchases and get some freebies from it.” Now I understand why- and these people are really the smart consumer, not me.