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[personal profile] robotech_master
Decisions, decisions.

I just paid off the last $14.15 I owe Capital One. Now my card balance reads zero (or will after the payment processes). Of course, I now owe Commerce Bank the sum I had previously owed the credit card, and will be paying it off at a rate of $100 per month for the next year and a half or so, and the first payment comes out of my account on the 26th—but at least I'll be able to make progress on the debt at that rate.

But this brings me to another decision. I got a letter today noting that the $59 annual fee on this card comes due in October. I can decline the fee before then, but that will also end up cancelling my card.

If I cancel the card, I lose my "safety net"—the ability to make vital payments like my electricity bill or other miscellaneous charges if I miscalculate my finances and find myself short at a crucial time. And I also lose the ability to do things like rent cars, which tends to require the use of actual credit cards. It's annoying to be saddled with an annual fee for the privilege of going into debt and paying greater fees—but on the other hand, my credit score is such that it doesn't look like I'm going to be getting any more free card offers any time soon, like I did back in my college days.

And using the card as a "safety net" is what largely ended up saddling me with the debt I had to take out a personal loan in order to pay off.

And I'm also still going to be paying on my student loans until approximately forever.

Yeah, I know, I probably ought to just bite the bullet and cancel the card. It just leaves me a little nervous to know I'm not going to have that little bit of backup I came to rely on, even if I know it would be foolish to rely on it anymore.

(no subject)

Date: 2010-09-17 12:38 pm (UTC)
From: [identity profile] copperhamster.livejournal.com
Have you ever read/listened to Dave Ramsey? (His show, book, and plan are called 'Financial peace' so that may jog your memory as well.) (I ask because if you haven't, I can summarize his 'get and stay out of debt' plan, which is not fast but is effective, and if you have and don't care to follow what he suggests, then I can not waste your time.)


Credit cards...

Date: 2010-09-17 02:28 pm (UTC)
From: [identity profile] amigoid.livejournal.com
You are paying it off with a bank loan which I assume is at a lower rate.

If you are trying to rebuild your credit, I would keep the card, but store it in a safety deposit box, or frozen in a block of ice, or even held by a third party. You want to keep the credit and I see the annual fee as an investment to help aquire credit and improve your score.

Then set up a couple purchases during the year with cash you already have, use the card, and then send in the cash to pay the card off. Repeat.

Don't keep it in your wallet, and don't use it for impulse buys. Its very helpful to have a specific card you use for web-purchases, and the credit cards have fraud protections that debit cards don't.

I've screwed up using cards for vacations in the past and when I was out of work for 6 months, it brought the whole mess down. However I should have all my debts (aside from my mortgage and my wife's student loans) paid off within the next 6 months.

(no subject)

Date: 2010-09-17 02:36 pm (UTC)
From: [identity profile] masonk.livejournal.com
Amigoid has the right of it. Especially the bit where you don't keep it with you. It's for a safety net, not for impulse buys. You don't want to rationalize spending money you temporarily have because you have the credit card and so you can use that to cover a need later. Make using it part of your budget process, not part of your going-over-budget process.

Credit

Date: 2010-09-17 09:32 pm (UTC)
From: (Anonymous)
These comments are right on the money. Your Dad and I didn't have credit cards till we started thinking about building the house. We had to establish credit for getting a construction and then a mortgage loan. It was hard to get cards because we had no credit history! We got cards through our bank and investment company. Somebody trusted us and made us a loan for our building plans that we could pay off over a year to help establish credit.

I applaud your desire not to use the card! However, if you cancel your card it lowers your credit rating. If you could eventually get a card with no annual fee that would be great. We buy gas and a few other things on our credit card and then pay it off right away without interest. Online purchases are insured if you use credit instead of debit cards. But one must pay them off before they accrue interest! You need to get your credit rating built up so that you can buy a newer car on time in a few years.

I borrowed the Dave Ramsey book from our church, haven't read it yet. You could borrow it from me. I'm too cheap to take the course, but Aaron and Karen have taken it.

Love,

Mom

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