In an effort to better organize my financial documents, I’ve been going through a box of old bills. I was somewhat surprised to see just how many of those bills were from store-branded credit cards. I found old bills from Belk, JC Penney, and Sears. The bills were dated January 2003 – December 2004. As I was flipping through the bills, I noticed the following::
- I made purchases at one or more of these stores, every month, for the two year period starting January 2003 and ending December 2004. That’s right. I shopped at Belk and/or JC Penney and/or Sears consistently for two years. I was a loyal and dedicated customer. I returned, again and again, like a horse to a trough.
- I never once, despite repeated promises to the contrary, paid a balance “in full”. I paid interest on every purchase. I did manage to pay (at times) more than minimums, but I never took a balance all the way to “zero”.
- The lowest interest rate for any of these cards appears to have been about 19.99%.
Wow. Those bills represent only a small portion of the store-branded credit card bills I’ve received over the course of my adult life. I hate to think about the amount interest I’ve paid over the last decade and a half. But, more important than the amount of interest paid, is the fact that I continued to shop at the same stores, over and over, despite the fact that I already owed them more than I could afford pay back. Why? Why in the world did I continue to shop at these stores?
Now, let’s take a quick look back over the two year period from April 2005 until April 2007. Remember, it was in April of 2005 that I decided to stop using credit cards and to get out of debt. So, I put all of my store-branded credit cards in a drawer and “forgot about them”. In March of 2007, I had transferred the balances from all of my store-branded credit cards to a single Visa card. I had a “clean slate”. I was no longer receiving monthly bills from the above mentioned companies and I was working hard to pay off the Visa card. Let’s take a look at my “new relationship” with these same companies:
- During the two year period from April 2005 until April 2007, I made one purchase from Sears, four purchases from JC Penney, and six purchases from Belk. I used cash.
- I never received a bill, so I never had to worry about paying interest, and I never had to worry about “minimums”.
- I never paid interest on a single purchase, because I paid cash.
After making the decision to no longer use credit cards, not only did my interest payments go to “zero” but my spending went down. Dramatically. I broke a cycle. I am no longer “store loyal” or “brand loyal”. I do not feel “privileged” to have a store-branded credit card.
Now, before someone leaves a comment suggesting that I was irresponsible, let me be the first to agree! I was also foolish, ignorant, and naive. I believed that I would “one day” make enough money so that I could pay off all of my debts. I believed that I “knew what I was doing”. I made promise after promise. But, nothing ever happened until I put the store-branded credit cards away and forced those stores to EARN my business. If you want me to shop at your store, you better offer low prices, good customer service, an easy-to-understand return policy, and friendly cashiers. I’m no longer impressed by the name on your door. It’s no big deal to me where my clothes come from or how much they cost. Plus, I’m not longer enticed by “save 10% when you use your store-branded credit card” deals. Why? Because, I know that I am saving MUCH more than 10% because I take the time to compare prices and I go to the store with the best deal, not the store with the easiest financing options!
Recognizing that some of you will think I’m crazy, I challenge you to do the following. Put your credit cards, all of them, in the back of your dresser drawer, and live without them for three months. Then, examine your spending habits. I’m not much on “guarantees”, but I’d (almost) guarantee you that you’ll spend less money, you’ll be less “brand-loyal”, and you’ll find newer, less expensive places to shop. I dare you!
(If this post suffers from grammatical inconsistencies, I apologize. As I type this, my son and daughter are running laps around me, playing freeze-tag. I am, to say the least, a little distracted!)
Horray NCN! Same thing happened to me. I had to look up a credit bill from 2001. I couldn’t believe the mindless spending I used to do month after month. Stupid! Stupid! Stupid! We’re so much better now. Completely cured.
What an excellent essay!
I love it! Good for you to be so disciplined and posting this to encourage us all.
Great recap about your experience. It’s amazing how stores try to get sign ups for cards. I’m sick of seeing the Lowes ads these days!
Why didn’t you just cut up the credit cardss? Do you still have the cards? If so, why?
Um…had it ever occurred to you to just pay off your balances in full every month? Convenience of credit card – meet frugality of cash.
I have a few store credit cards, but I pay them off every month (now). However, looking at the cost, I’m not sure the rewards are worth it.
I have two, now three store cards. What are they? Best Buy, Home Depot, and a furniture store. I can count the number of times I’ve used each card on one hand.
I got the BB and HD in 2002 when we bought our first condo. We bought a washer/dryer 0%, and stuff paint the house on HD 0% and got the 10% off. We paid it off in 1 year and threw the cards in the dresser after the day we opened then. Then they sat and never saw daylight.
About 3 years later we moved and we again bought a washer/dryer, and more house stuff and again did 0% financing and we asked for the 10% off discount. So we pulled out the cards and used them. Again they went into the drawer. And they were paid in full after the 18 months.
Will I ever use them again? I do not know. But because of the CC I do get BB coupons in the mail, but I only use the card for planned purchases.
How is a CC different from a check register? It’s not. If you don’t have the money to buy something cash don’t buy it. I don’t go into HD and BB unless absolutely necessary.
I know my tracking of our spending for 7 years we do not shop period. It’s a conscious decision to spend anything.
Also think of it this way if you “pre-loaded” your card and only spent it on planned expenses, there is no difference between it and a debit, except you get float, more protection, and better rewards.
Also I track my spending so at any given time I know what I’ve spent like your cash envelopes. If I get to $200 eating out I say no more for the month. It doesn’t matter if it’s on the card or not, i just can’t spend anymore period.
So it’s really not a problem to use a store card. I’ve never been in a kohl’s, and in a penney’s or sears for years. It took 2+ years to step into a walmart (and then only with friends who needed to go after dinner). So spending just isn’t in our cards.
Although I did spend a horrific weekend shopping for a sofa.
This comment is in response to your site and posts in general:
I am happy that you provide an avenue to discuss personal finance, however I must disagree with you in regards to credit cards.
A person who understands all the rules associated with credit cards can only logically conclude that credit cards are a boon to their personal finance.
Using a credit card does not promote spending more money than you would with cash. People who say otherwise are simply trying to give credits a negative image because of their prior bad experiences with credit card debt.
If you have good enough credit (I cannot give an exact score) to qualify for a card that gives 1% cashback on all purchases, and potentially more on supermarket and gas station purchases, you should always use your credit card as opposed to cash. Why? The answer is simple and follows from a logical analysis. If you pay with a credit card you will save 1% of your purchases, while if you pay with cash you will receive 0% of your purchases.
Never get a card that has an annual fee.
Set up automatic recurring monthly payments to your credit card from your banking account for the full balance.
Check your credit card account and ensure you are not near your credit limit.
While everyone’s situation is different, anyone can benefit from 1% savings on purchases. For example, if you spend $5,000 annually on purchases that could instead be made with a credit card, you would save $50 a year without doing any work besides applying for the card and setting up the automated payment system. Not to mention, tracking your spending habits is actually easier to do with a credit card as purchases are recorded automatically. With cash, you will inevitably spend money on something and forget to record it.
The only real problem I have with credit cards is the potential for big brother to inspect your life. However, I tend to believe that if anyone really wanted to spy on me and had the ability to access my accounts, they would also be able to find out whatever they wanted through other means.
Phillip, Thanks for taking the time to leave such a well-written, well-thought-out comment. However, after living WITH credit cards for 15 years, I was flat broke, in debt, and I had less than $500 in savings. Now, after getting rid of my credit cards, less than three years later, I’m debt free, I has 12 months worth of expenses in savings, and I’m well on my way to fully-funding 4 retirement accounts and 2 educational savings accounts. So, while others might love their credit cards… for me… No Credit Needed…
NCN
@Philip… you said “Set up automatic recurring monthly payments to your credit card from your banking account for the full balance.”
How can you you set up an automatic monthly payment when the amount to pay off the CC in full will vary from month to month?
Also, isn’t it better to VIEW your credit statement every month to check for errors and overspending, rather than just blithely think that your auto-paying has the situation covered?
I myself use a CC, but I do pay it off every month. I’m also fortunate that I do not like to shop and see it more as a chore than entertainment, so I do not have issues with impulse spending. I know others have different attitudes about shopping and I can fully understand the stance of eliminating credit cards to eliminate the temptation to overspend.