Life without credit cards – 2 week update

I did not announce it on this blog, but the week of November 6th, my wife and I stopped using our 2 credit cards, AMEX Gold and BMO Mosaik Mastercard, altogether. We basically told ourselves to stop using them, and to start using cash or debit for everything. I had thought for a long time that we were overspending because we were buying on credit, much like a university student will spend more money if they have a student loan then if they didn’t. As long as we paid of our cards promptly, I thought, they were a pretty good deal. One month interest-free plus the convenience. Wrong, according to The Wealthy Barber:

For most people, they’re not a good deal. The convenience that you view as positive can combine with human nature to form a destructive force, especially in the hands of someone who loves to shop. How many times have you bought something with your credit card that you wouldn’t have bought if you’d had to pay cash? And isn’t it usually something that you know you could live without? Then how many times have you opened your credit-card bill, clutched your throat, and shrieked, ‘Five hundred dollars! What the heck did I spend it on?’ So the fact is that many people who pay off their balance each month are still hurt by their use of credit cards.”

This described us pretty much exactly, so it was after reading this that I decided to work towards not using credit cards EVER. I realize that I will have to use them for many online purchases. However, those will be few, and it will be easy to transfer some money from chequing to the credit card immediately after making the online purchase.

We have made good progress so far. The last charge on our AMEX was on November 6th. The last charge on our BMO Mastercard was on November 11th. There was one other $4.25 parking fee charged to our BMO which was then paid down immediately that day and I also charged almost $200 to our Mastercard for dental work but I expect to get reimbursed for that from my employer well before it comes due (unfortunately we have to pay our dental claims up front before getting reimbursed from my company). I find that I have spent far less in the past few weeks than I have in a long time. I almost made a $300 purchase on a new computer case and hard drive two weeks ago, but after looking at the balance in our chequing account, I hesitated. That is a typical expenditure that I would have treated as a need before, charging it to my credit card without thinking. Now I realize that it is a want, and that I can live without it. We have a savings account for these wants and I will reconsider that purchase once there is more saved up. I was also wooed in the past by the Air Miles scam (both our credit cards are Air Miles credit cards). After 8 years of collecting, and enough points for just one flight, I am completely turned off by them. Nothing more than a scam intended to get me to spend more on my credit cards.

Here’s more thoughts on cash vs. credit cards from “Free Money Finance: Eight Unusual Ways to Create Cash“:

It seems impossible to exclusively use cash in today’s credit-oriented world, but those who do “create” significant cash. How? By spending dramatically less. Ron Blue, author of Master Your Money, notes that the mere use of credit cards causes a family to spend 34 percent more even if the statement is paid off monthly. Author Nancy Dunnan agrees in Never Call Your Broker on Monday by noting, “People like your parents or grandparents actually went through life using checks or cash. It worked then and it works now. Do the same and you’ll wind up spending 20% to 45% less.”

Check out the first comment on that post, and also the comments on this post. Unbelivable how attached people can be to their credit cards and those “cash-back rewards.” I am still firmly of the opinion that the best credit card out there is no credit card.

Money NUT

Just read a great article about being a Money NUT. Since I am a money nut myself, I agreed with a lot of what he said, including the part about financial blogs which I am have recently become more a part of:

I read financial related blogs. Over the past year, by both posting on my blog, and by continually reading all the other personal finance blogs, I’ve found that I am always reinforcing my values. Being a part of the PF blog community has given me the motivation to always make our net worth number go up and to follow the principles that most of us share. It’s like a support group without the circle of chairs.

He asks “Do you get the jokes about being ‘cheap’, or a ‘tightwad’?” I have definitely been called cheap before, but I don’t mind any more. Actually my dad and my dad’s dad are probably called “cheap” more than me so maybe it’s going to get worse with age. But they’ve also done better than anyone else I know at saving their money and building significantly large nest eggs without having ultra high-paying jobs and without sacrificing quality of life.

Time for Change

Recently, my wife and I have been severely punished for not carrying around change:

  • In October when we arrived in Maui, I lost my wallet (don’t ask). We made 4 calls from a payphone to 2 of my relatives in Canada to see if I had left the wallet at their house, or our house, the previous night. When we saw our credit card statement a couple weeks ago, we saw that we owed about $15.58 CAD for each call, $46.74 in total. Had we had plenty of US quarters on hand, I am sure our calls would not cost this much. Another idea would have been to buy a pre-paid phone card.
  • Recently my wife got a $50 parking ticket because she only had enough change in her wallet for half the time she needed to park for. The machine unfortunately did not take credit card and there was no teller who could take cash. A backup stash of loonies in the glove compartment would have come in handy.
  • I checked my accounts in gnucash for the keywords “bell” and “telus” and found a slew of payphone credit card charges. If I go back a year, it’s quite a bit. I’ve gotten so used to the convenience of swiping my credit card in payphones. I’m so hooked (and I never have any change on me), so I always look for the machine with the swiper.

I think I need to get one of those keychains that can hold two quarters, although the fact that we both have cell phones now should prevent these silly charges (too bad we didn’t bring them to Maui). If I get around to it, I think I’ll stick a roll of quarters and loonies in the glove compartment for “emergencies” such as meter parking. I park at meters so many times without paying it’s a wonder I haven’t been ticketed more.