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March 1, 2013, at 5:00 am If you're new to BFS, please subscribe to my RSS feed. It shows me a vote of support and keeps me motivated to keep your attention. If you have any questions or comments for me, please contact me and I'll get back to you asap. Thanks for visiting! Okay, so I have written about using credit cards for everything we’d normally buy anyway and getting cash back for it. My favorite credit card company, Discover, has apparently created a new card – Discover it™.*
Looking Into a New Card
Here was a comment that my blogging buddy, Andy from Tight Fisted Miser, left on one of the guest posts here on February 5:
Crystal, you should upgrade your Discover More card to the Discover IT card. The new card has all the same features as the More card but it starts at 1% cash back while the More card starts at just 0.25% cash back. I was able to upgrade mine in about 5 minutes with online chat.
I can’t argue with making more cash back, so I checked this new card out. It really does look identical to Discover More except it does simply start at 1% cash back each year without having to hit a certain spending mark. It even has the 5% cash back rotating categories that my card has now. So I logged in to use the online chat yesterday, but all of the chat agents were busy and I was too lazy to call. I’ll get my butt into gear tomorrow. 
Why I Use Credit Cards
I know most financial blogs dislike and even hate credit cards, but I look at them as a bonus if you can keep your spending in check. If having a card tends to make you spend more freely, than credit cards are not for you.
Mr. BFS and I actually have a problem with spending cash - it just seems to disappear. So credit cards work well for us since the charges just stare at us in the face all month. Plus, I use our credit card statements to keep up with our budget. I just print them out and input our spending into the correct categories on our Excel budget for the month. Plus, I like getting 1-5% cash back on bills and purchases that we would make anyway.
Cash Back 2012
Just to give you an idea, here is what we got back in 2012 for using our credit cards.
Discover Cash Back (we use this for everything but gasoline)
- $580 cash back (redeemed about $300 worth throughout the year in gift cards to get extra cash back, for example, $20 at Bath and Body Works for a $25 gift card)
PenFed Visa Cash Back (we use this for 5% back on gasoline and for anywhere that doesn’t take Discover)
For us, getting $665 for simply charging our normal expenses instead of using cash is considered a win.  I wish I could make our mortgage payment on Discover, lol.
Do you use credit cards for their rewards? Or do you prefer cash?
*If you cick on one of my links or the banner to open a card account, I will receive a commission. But I was going to write about my 2012 cash back on credit cards anyway...it was overdue and I am out of Reader Profile Friday posts...
February 5, 2013, at 6:00 am
The following is a guest post from Mike, the author behind Personal Finance Beat, a blog that covers and links to a host of personal finance and money management topics. You can follow him on Twitter at @PFBeat.
I Use a Credit Card
I use a credit card to pay for almost everything I buy. If my landlord would allow it, I would even pay my rent with a credit card. I take out $200 a month in cash just in case I need it, but everything else goes on my American Express Blue Cash card (note: not an affiliate link). Using a credit card helps to keep me organized, it’s safer than using cash or a debit card, and it offers cash back rewards that is essentially free money in your pocket.
These benefits, of course, are contingent upon one crucial thing: you must pay off your balance — in full — every month. If you can’t be disciplined enough to pay off your balance in full every month, then you probably shouldn’t have a credit card. But this is a system that works for me. Obviously, not everyone agrees with this approach.
Dave Ramsey’s View
Take Dave Ramsey, for example. Dave offers a lot of great personal finance advice, but I could not possibly disagree with him more when it comes to using credit cards:
Myth: Aren’t there positive uses of a credit card? Like rebates and airline miles?
Truth: Responsible use of a credit card does not exist. Credit card debt is a major problem in America.
There is no positive side to credit card use. You will spend more if you use credit cards. Even by paying the bills on time, you are not beating the system! [...] Personal finance is 80% behavior. You need to cut out habits that make you spend more. You do not build wealth with credit cards. Use common sense. When you play with a multi-billion dollar industry and you think you’re going to win at their game, you are naive. You cannot beat the credit card companies.
Where We Differ
Let’s take a look at some of Dave’s argument and see where we differ: Responsible use of a credit card does not exist.
This is ridiculous and only true of people that are irresponsible with their money and spending. If you cannot control your spending, then of course having a credit card is a bad idea, because it makes it a lot easier to go into debt. No argument there.
But the problem in those instances lies with their overspending, not the credit card itself. For people that are responsible with their money, a credit card simply acts as an effective tool for managing their money. You can be responsible using a credit card if you know what you’re spending your money on and why you’re spending it. I do it every day.
There is no positive side to credit card use.
More nonsense. As I explained above, the benefits I see for using a credit card are threefold:
Staying Organized
I keep a budget and track my spending every month using Mint. There, my transactions are automatically uploaded and categorized for me every time I make a purchase using my card. I know, for example, that I spent exactly $212 on groceries last month. That’s because when I go grocery shopping, I pay for my items with my credit card, and by the time I get home, that transaction has already populated for me in Mint, automatically.
And the same goes for nearly every single thing I buy. Swipe my card, and the transaction magically uploads to Mint, where I can sort and review what I’m spending my money on. Now, theoretically, you can manually enter transactions into Mint for cash purchases. And I do this myself when I have to pay for something in cash, but it’s only a handful of times per month. Can you imagine having to manually input the data for every single purchase you make if you’re paying in all cash? Chances are, you’d never do it. And if you’re not tracking spending, how can you know where your money is going and what areas you could cut back on?
Security
This is more of a credit card vs. debit card discussion, but it applies to cash as well. Debit cards offer less protection than credit cards (and cash essentially offers zero protection if you were to lose your money). If someone steals my debit card and withdraws money from my checking I account, I may get all of that back (depending on my protection limit), but in the meantime, that is actual, real money that I no longer have access to. My checking account will have less money in it.
On the other hand, if someone steals my credit card and charges a bunch of things to it, not only is my protection limit higher, but no actual money has been withdrawn from any of my accounts. They haven’t stolen my money; they’ve stolen the credit card company’s money. And if your wallet is stolen and you have $200 cash in it, what protection do you have for recovering that money? You have none, because you are paying for everything in cash.
Rewards
I know some people who are pretty fanatical about their rewards and the benefits they offer, but this is more of a secondary feature for me in the sense that it’s nice to have, but not something that would make me choose one credit card over another. (I understand that some people would disagree.) I have the “cash back” rewards for my Amex card, and last year this netted me about $525 total – that’s real, American greenbacks — definitely a nice perk to cash in at the end of the year.
Now, getting back to Dave’s argument:
Personal finance is 80% behavior. You need to cut out habits that make you spend more.
This I actually agree with. And like I said, if your spending behavior is destructive, then you shouldn’t have a credit card. But people can change their behavior. People are capable of growing and getting better and learning how to spend their money responsibly. And when you get to that point, when you’re responsible and when you’re an adult, there’s really no reason you shouldn’t use a credit card.
You cannot beat the credit card companies.
Well, I am living proof that you can. Not only did I not pay a dime toward interest or fees last year to American Express, but they paid me $525 for the privilege of using their card, while also offering me the benefit of keeping my budget organized, and providing fraud protection that simply does not exist by paying for everything in cash.
Bottom line: Whether or not you think a credit card is right for you is only a decision that you can make. My personal belief, however, is that if you’re responsible with your money, then the benefits of having a card far outweigh the risks.
Crystal’s Comments: Mr. BFS and I are fans of our credit cards too. We use a PenFed Visa for gasoline and a Discover More card for everything else that we can possibly charge. I’ve been doing this since 2001, carry my balance off in full every month, and earn 1-5% cash back on nearly everything. As long as you don’t spend more than you would any other way, I don’t see credit cards as a problem at all. They should be avoided like the plague if you feel more spendy with them than without them though.
October 18, 2012, at 6:00 am
The following is a guest post from My Honest Answer, an advice site solving your dilemmas daily. Less of an agony aunt, and more of an agony sister, my honest answer gives good honest advice: minus the sugar-coating, plus a bit of sass.
Step One: Get Real
When you owe money on credit cards it’s easy to bury your head in the sand, and ignore those mounting bills. With various debts spread across providers, it’s hard to stay on top of how much you actually owe in total.
I’m going to show you how to pay off those debts, starting today. But, none of these steps will work unless you realize that enough is enough, and it’s time to stop accumulating debt, and start paying it back. You need to be committed.
Step Two: Get Organized
Sit down, and list every single debt: amounts owed to friends or family, credit cards, car loans and store cards.
Pull out all the paperwork, and create a ring binder with all your statement and bills. Use dividers to keep each creditor’s information separate. If you do everything online, consider printing your current balances. Make this binder your Debt Control centre, where all the information you need is in one place.
Once you’ve listed every debt, order them from the highest interest rate, to the lowest interest rate. Then, check your terms and conditions for non-credit card debt to see if you can make early repayments without penalty. This is crucial, because, if possible, you want to pay off the most expensive debt (the ones with the highest interest rates) first. You should now have a hit list showing which bills are your top priority.
Step Three: Get Automated
The last thing you need is late penalties and charges increasing your debt. Now you have all the information in one place, it should be fairly simple to set up regular payments to cover the minimum amount required for each debt, if these are not already in place.
I would suggest doing this for every single debt, to make sure you are never caught out by being out-of-town, or down with the flu for a few days. You can then make all your extra payments manually.
Work out how to do this for the first debt you plan to pay off – directly through your internet banking, by phone, or by check. If you will be making payment by check, address some envelopes, stamp them, and put them in the file. When you’re ready to mail a check you don’t want anything holding you up!
Step Four: Get a Budget
List out all of the minimum payments on each debt, plus any other ‘must pay’ bills such as taxes, mortgage or rent, and utilities. You need to know exactly how much ‘disposable’ income you have left at the end of every pay period. And you may be surprized by how low the figure is compared to the amount you were spending. I know I was!
You need to divide up the remaining money to pay for everything else. And I don’t just mean food, entertainment, and gas. Everything else. Haircuts, auto insurance, life insurance. Every single expense that you incur in the year.
This is often where people fall down. They set unrealistic budgets, or forget to include small items, such as lunch money for the kids, or parking fees, which, over the course of a year, really add up. Be honest here. It doesn’t matter if there doesn’t seem to be much left over for debt repayments. We’re going to work on that in a moment.
Step Five: Get Thrifty
Look at all those items in your ‘discretionary’ list. Is there anything you can cut? Dance lessons for your child that they don’t really enjoy? Could you have your hair cut less often, or try an ‘at home’ color?
For those working outside the home, an easy area to tackle is lunches. You can make cheaper, healthier, and tastier things to take with you, and save a ton of money, and time.
Look at your grocery spending. If you eat a lot of meat, try to introduce two meatless meals a week. A homemade pizza, or pasta and salad is a good choice.
To save on take-outs, consider batch cooking and freezing some of your favorite meals. It’s really very little extra effort to make double your usual casserole and freeze one for a later date.
Look again at all your insurances. Have you shopped around lately? Do the same for any utilities you might be able to switch. Call your cell phone provider and tell them you may have to close your account as it is too expensive. You will be surprised how hard some companies will work to keep your business.
Step Six: Get Decluttering
Once you start paying close attention to where you are spending your money, and how much things really cost, you will probably start noticing things around your home that you bought, which you now realize you do not need. If you’re anything like me, these expensive impulse purchases will really annoy you as you struggle to pay off the debt they left you with.
The solution? Sell them. You can get really good prices for good quality items on Ebay, Craigslist, or Amazon. You probably won’t recoup what you spent, but that’s no reason to hang onto things that you don’t need, use, or that make you feel bad.
For the best prices, you need to put in some effort. Spend the time to clean up the item. Take good, well lit pictures from lots of angles. Include as much detail as you can – especially measurements. And make sure you check postal prices before you list items to ensure you’re not going to get a nasty shock at the post office.
Step Seven: Get Motivated
A few months of following these tips and being serious about paying down your debt should have seen a few extra payments going to those creditors. Doesn’t it feel great? Using a spreadsheet to monitor your total debt as it falls is a great motivator. Crossing off each debt as it is paid off will really spur you on.
Step Eight: Get Serious
If the debt isn’t falling as fast as you’d like, it might be time for more drastic measures. Can you sell your car for an older, cheaper, or more efficient model? Or can you get away with selling one car altogether? It might even be time to look at cheaper housing options, which, though drastic, will leave you with more disposable income in the future, too.
Step Nine: Get Snowballing
Snowballing is a tactic to pay off debt faster. Once you’ve paid off one debt, you move the total amount you were paying each month to the next debt on your list. Do this each time you pay off a debt and it has the effect of a snowball rolling down a hill, getting bigger, and gathering momentum. By moving the cash allocated to that debt straight to the next one, you can compound the benefits, and gradually you start paying off each debt faster.
Step Ten: Get Debt Free
Finally! You’ve done it. It may take a while. In my case it took a couple of years, and at the time, it seemed never-ending. I’ve been debt free since 2009 now, and boy do I sleep easier. I’m also much more careful about where my money goes, and I enjoy the purchases I do decide to make so much more.
But, one last thing. Don’t forget Step Eleven: Start Saving!
Does anyone else have any great tips for paying off debt? Or other ways to stay motivated when it feels like you’ll never be debt free?
January 26, 2012, at 6:00 am
The following is a guest post from YFS, the owner and author of Your Finances Simplified. He was born and raised in West Philadelphia and is now a financial adviser, IT contractor, landlord, and treasurer of a non-profit. He created his blog partly due to his desire to help people with their finances. Join YFS’s mailing list for straight forward easy to understand financial advice by clicking here.
Improving your credit score seems like it should be a fairly easy thing. Pay your bills on time, and you should have a good credit score, right? Well, that is not always the case. While it is always a good idea to pay your bills and to pay them on time, simply paying on time will not always guarantee a great credit score because other factors are involved.
Credit Scoring
Credit scoring is somewhat of a mysterious realm, and the people who score your credit are not letting the mere mortals in on their secrets. These people put your information into their system, and then they give you a number. The FICO score is the most common, and it ranges from 300 (bad credit) to 850 (excellent credit). Banks and other lenders check your credit score to determine your creditworthiness. Your credit score, in part, helps determine how much money a bank will lend you. This is important when you want to make a big purchase like a car or a house.
Due to the mystery surrounding credit scoring, it is not exactly clear what improves your credit score. Nonetheless, there are some general tips that are likely to improve your credit score, and many of them are good habits. Some of the following tips are good common sense, while others are less readily apparent. These tips will also be helpful if you want to repair your credit after a bankruptcy or want to have good credit to buy a foreclosure.
1. Number of Credit Accounts – In order to have a credit score, you have to have open lines of credit. This generally comes in the form of credit cards, and it is thought that having around five or six credit open credit accounts is best for your credit score. Anything you finance, such as a car or your college education, is a form of credit.
2. Balances and Limits – On one hand, just having open credit accounts is not the best way to improve your score—you need to have a balance on the credit account for it to be as useful as possible. So, while having an open credit account is good, having an active credit account (one with a balance) is better. On the other hand, having a balance on your account that is close to the limit (especially multiple balances that are close to the limit) is not good for your score.
3. Payments – As discussed, paying your bills is important. Late payments will negatively affect your credit score. So, you should be sure to pay everything, student loans, mortgages, etc, on time when possible. If you ever have trouble making payments, you should contact your credit company. For example, if you are unemployed, you can often defer your student loans for a time.
Also, if you do have late payments, their effect will be reduced over time. For example, late payments last year will be less important than late payments last month.
4. Credit Inquiries – Every time you have your credit checked, it will affect your score. However, this should not stop you from checking out a few lenders if you are preparing to buy a home, for example. Also, you checking your score on your own does not affect your score.
5. The Credit Score Killers – Certain things, such as tax liens, collections, multiple late payments, and foreclosures will kill your credit score. Bankruptcy will negatively affect your score for years.
The Bottom Line: The best thing for your credit score is to have multiple credit accounts with relatively low balances, to pay your bills on time, and to avoid the credit score killers.
Have you worked to improve your credit score? What did you do to improve your score?
Feel Free to See your Free Credit Scores!
January 20, 2012, at 6:00 am
A re-habbed spendaholic, The Happy Homeowner began blogging as a way to stay accountable and to chronicle her quest for financial freedom. From paying off over $14,000 in credit card debt in one year to purchasing her own condo in the expensive Boston real estate market (on her own!), she shares her financial ramblings, musings, and fabulously frugal ideas here.
I have a confession to make: I used to be a complete financial disaster. Not only did I carry mountains of credit card debt (over $14K at one point), but I had no semblance of a budget, I had no idea where my money was going or how I was spending it, and I developed habits of sticking my head in the sand and shredding statements before even opening the envelopes.
Ignorance is Bliss, Right?
For years I ignored the signs of my impending financial doom. On the outside, I was a cheerful, well put-together, intelligent young woman. Inside, I was one nervous breakdown away from being carted off to the nearest psychiatric hospital. The source of my inner conflict? My financial—or lack thereof—habits were keeping me from living the life I desperately wanted and I had no idea how to change my ways. I was consumed by the stress of my daunting debts, meager income, and inability to get a hold of myself financially.
And so I continued to stumble through life in a debt-induced, materialistic-loving haze. I shopped my heart out, took vacations I couldn’t afford, and dined in restaurants in which I had no business being. If I maxed out one credit card, I simply opened a new one. If I couldn’t pay the monthly balance on a particular card, I blindly sent away only the minimum payment. I subsisted in this semi-permanent state of flux for nearly 4 years before I began to wonder if I had missed the financial responsibility boat.
On one particularly low day, I found myself mindlessly browsing the Internet when I haphazardly clicked on a link for a series of financial message boards. For the next 6 hours, I poured over the contents, amazed at how people were struggling with managing their debt, budgets, and financial futures. Then it hit me: I was one of those people! I needed to change my situation, and I needed to do so immediately! But what’s a gal to do when she has very few options? I couldn’t ask other people for money to bail myself out. I had no interest in taking on another job, and I certainly wasn’t in the frame of mind to cut back on my spending.
Balance Transfer Heaven
The next day, the daily mail delivery held what I thought (at the time) was my ticket to financial freedom: an advertisement for a balance transfer program at Citibank. I instantly tore through the envelope, sat down at my computer, and signed up for the program. With a few clicks of the mouse, I had sent most of my high interest credit card debt to the new card, which boasted a glorious 0% for the next 12 months. I rode the subsequent high all the way to the mall, where I charged another outfit I didn’t need in celebration of my newfound financial literacy.
In a few weeks, reality hit me when I saw what I owed as a minimum payment to the new card given its (very high) balance. Fortunately, I had always found a way to keep up with at least the minimums on all of my cards, so I scheduled the online payment. Then I went to another website to research more balance transfer deals. Over the course of the next 4 months, I opened, closed, and transferred thousands of dollars of credit card debt between countless cards. Because I had always made my payments on time, my credit score was still relatively high so I continued to take advantage of all of the offers I was solicited with.
At first, it was all a game to me. I loved the feeling of being “in control” of my debt; that I could simply transfer the balance elsewhere when I didn’t like the terms of my current card or account. Somehow, I mistakenly thought that I was being financially responsible. I filled my browser favorites folder with links to my various accounts, and I diligently logged into the accounts weekly or monthly to manage my balances. I sailed along smoothly for months, eventually chipping away a few hundred dollars of my credit card debt that had now ballooned to over $14K.
Then I went on another vacation—to a place where I would not be taking my laptop with me. Distracted by the high of the vacation excitement, I completely forgot about (disregarded?) my debt and boarded the plane with gusto. I had the time of my life for the first 4 days of the trip. On the fifth day, my credit card was denied. As was the second, third, and fourth card. I withdrew some money from my ATM account and went on my way as if nothing was wrong. But deep inside, a pit was growing ever larger in my stomach; I knew I was going to return home to a mess.
Balance Transfer Hell
And a mess it was. During my absence, I had missed multiple payment deadlines and was hit with late fees that pushed me over my available credit balance which in turn yielded over limit fees. As I sat on the phone with rep after rep after rep, trying to repair the damage, I felt as if an elephant was sitting on my chest. I couldn’t breathe, I wasn’t seeing straight, and I certainly had no clue how to calm my racing heart and thoughts.
In essence, I was suffering from my very first (and luckily only) panic attack. After hanging up the phone with the last rep, I asked my roommate to drive me to the emergency room. While being examined, the doctor asked me about my current stress levels, to which my response was to burst into tears. After clearing me medically, he made me have a consultation with one of the attending psychiatrists. It was clear to her that I was just tuned up beyond belief, so she sent me home with strict instructions to relax or else I’d end up seeing her again soon.
Enlightenment
On the drive home, I felt an odd sense of calm flood my body. It was then that I realized why I had experienced a panic attack: I needed a financial intervention the size of Texas, and I wasn’t going to get it by playing balance transfer roulette.
Over the course of the next 3 weeks, I laid out a plan to go cold turkey with my spending habits. I also made some changes professionally and personally in order to set myself up with as much success as possible. I’m pleased to report that I paid off my $14K in credit card debt in less than a year, and I haven’t carried a hint of a balance since.
Crystal’s Comments: I could almost feel the stress!!! I am so glad you took the bull by the horns and killed your debt and I am so sorry that you had to learn the very hard way. I’m trying to kill our last debt now, the mortgage, but I can only imagine the stress you felt on those phone calls. Thank you very much for the guest post!
Have you ever hit a wall like this? Learned a lesson the very hard way?
November 17, 2011, at 6:00 am
One of my readers, Aimy, asked me to “find the best credit card that racks up the most points for travel” for her daughter. Well, I passed along that question to Dave who runs Free Travel Genius, a website dedicated to teaching readers how to travel for free by leveraging credit card points. Here is his response:
That is a very open ended question, so I will do my best. First, let me caveat that one should only be focused on getting reward points when they have good credit and are able to pay off their credit cards each month. If you are having difficulties, please read advice such as this post by guest blogger Ross. Otherwise, read on.
“Best” Travel Reward Credit Cards
There are three types of “best” cards. First are the ones with the best signup bonus. Next are the ones with the best long-term return on your spending. Finally, there are the cards that give you direct benefits (such as lounge access or free bag check). I am going to focus on the “Mega Bonuses” today since, for most people, this is how to amass a lot of free travel quickly. If you want to learn more about Long-Term Spending Cards or Travel Benefit Cards, please see my website.
My Suggestions
My general rule is that I won’t sign up for a new credit card unless I get at least $400 in value back. There are just too many lucrative offers available today and there is a limit to how many new cards you can get each year. There are techniques to pull in hundreds of thousands of points each quarter, but I am going to give more realistic advice for a first timer and assume you will start with 1 or 2 cards (if your credit score is < 720, I would probably start with 1). Note that all of these techniques can be replicated for each family member over 18 with a good credit history and enough household income.
For those that fly domestic and live near a Southwest hub, the best card available right now is the Southwest Rapid Rewards Plus Card by Chase. This card gives you 50,000 Rapid Reward points after your first purchase which translates into $833 of discount economy tickets on Southwest for a $69 annual fee. $833-69 = $764 net value by getting this card. Sounds great to me!
If you don’t fly domestic a lot, I would consider the Chase Sapphire Card to be a great alternative (note that it is difficult to get two new Chase cards within a few months). This card has no annual fee the first year and gives you at least 53,000 ultimate reward points after spending $3,000 within 3 months. You can simply have them send you $530 for the points (not bad for 30 minutes of work), get $625 toward airline travel or 53,000 United miles. If you travel international and/or business class a lot, the United Miles could be worth well over $1,000 to you.
If you are going for a second credit card on your first Mega Bonus run, take a look at my site for more ideas.
Crystal’s Comment: Hope this helps, Aimy! I just use my Discover More card to get 5% cash back in rotating categories and 1% overall. Then I can use the cash back on gift cards or just get cash directly for trips…
October 25, 2011, at 6:00 am
The following is a guest post from Martin of Studenomics. Martin has just released a super-helpful guide that shows you how to completely conquer credit before you hit 30. “You can’t leave your mark on the world if you spend your 20s paying off credit card debt. I did all of the boring research for you so that you can see how easy it is to figure out credit.”
I’ve learned from Crystal and many other internet entrepreneurs that transparency is the way to go. Today I’m going to be more transparent than I’ve ever been before. I’m going to make a confession about being in credit card debt. I often mention (perhaps brag?) that I’ve been able to avoid credit card debt and student loans. Well today I need to confess to something.
I recently spent just under a month being stuck in credit card debt.
For the first time in my life I found myself in credit card debt and scrambling to get out so that I didn’t start getting hit with interest payments. I finally knew how it felt to be on the other side of the war against debt. This is my story…
How did this happen? How did I get myself into debt?
I was traveling through Europe for a month with my backpack and my laptop. I was using my laptop to work on Studenomics and my other online ventures (don’t worry, I’m not becoming a lifestyle design blogger). I pretty much bring my laptop everywhere I go because I can’t go more than a day without checking up on my blog stats, responding to comments, and checking my email.
There’s just one problem with this. I had been using some crapy laptop that I bought for like $500 three years ago. It was nothing special, but it got the job done. Considering the amazing technology out today, it was embarrassing when I pulled out this brick in a coffee shop. I had debated purchasing a new piece of equipment before I hit Europe because I knew that I wanted something more reliable and a lot lighter. I ended up not buying a new laptop because I put it off for too long.
Everything was going well until one day my laptop just wouldn’t start up. Normally I would just go to the computer store on the corner or call a buddy up to help me out. The only problem is that I was in Budapest, Hungary. So I sort of freaked out! A few of my new friends at the hostel tried to help me figure it out. I used a friend’s laptop to Google every possible solution. I found out that the software had just died.
The good news was that I was able to recover some of the files through using Linux (well the German version since my new friend Toby didn’t understand English and he was doing all of the fixing).
The bad news was that I was out of a laptop. I knew that I needed a new laptop. I didn’t know that this would happen in Budapest.
Then it happened. I guess you can say it was a blur. You can compare it to a drunken night out on the town because I don’t really remember much. All I remember is walking around town with my friend Zack from Long Island. Then I vaguely remember walking into an Apple Store. Then my next memory is walking home with a MacBook Air.
I went from using the worst laptop on the market to holding a brand new MacBook Air. I had my credit card to thank for this. I was officially in credit card debt.
How did I pay off my credit card balance?
I don’t write about my financial infrastructure as much as Crystal does and I definitely understand that I need to be more transparent. I wanted to try being transparent by showing you how I paid off my credit card debt.
I have two main banking accounts:
1. An account with ING Direct where I keep all of my main savings and my free checking account. I also have my sub-accounts setup for my various goals.
2. Then I have an account with a local bank where I’ve connected my credit card, retirement account, and investment accounts.
I took some money from my Random Savings Account in ING Direct, transferred some money from Paypal, and moved some money from my checking account. I was finally able to become debt-free.
It took me almost a month (until my balance due date) to pay off my credit card because I didn’t know where I should pull the money from. I had the money saved up, I just didn’t have the money budgeted in for a brand new MacBook Air. You can bash me in the comments!
How can you prevent this from happening?
This credit card debt dilemma could’ve easily been prevented. I want you to prevent yourself from getting stuck in a similar situation. Here’s how you can do it:
- Don’t be a sucker for a brand name. I obviously didn’t have to get the MacBook Air. I could’ve easily purchased any other laptop for like half of the cost.
- Always be prepared. You can call it an emergency fund or you can call it a savings account. Call it what you want but you need to save up some money just in case.
- Invest in yourself. I preach the gospel of investing in yourself and yet I still found myself using some old laptop to get my work done. It never hurts to have excellent technology on your side.
How did it feel being in credit card debt?
I absolutely hated being in credit card debt. The stress of knowing that you owe someone money is just too draining for me. Even though I had the money I just couldn’t handle knowing that I had to see it go. I really couldn’t get myself to transfer the money to my credit card. That’s $1,800 that I’ll never see again.
Now don’t get me wrong, I believe in using debt as leverage (which I’ve done but that’s another story for another guest post). It just totally sucks to spend today’s income on yesterday’s fun. If you’re in debt, I want you to get out of debt. If you’re not in credit card debt, I want you to avoid it at all costs.
Have you ever found yourself in credit card debt out of nowhere? How did you handle this?
Don’t forget to pick up your copy of Completely Conquer Credit.
Crystal’s Comments: Based on this definition of credit card debt, simply having a balance but paying it off before interest hits, I am in credit card debt every day of my life pretty much. My husband and I use credit cards for everything but pay off the balances within a week of the monthly statements being emailed to us. BUT, MD doesn’t seem to have all of those little, crazy emergency fund and savings accounts my husband and I have for splurges and pop up expenses, so I can understand why he freaked out. Thank you MD for sharing here! Good luck with your new book!
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 Hi! Thanks for visiting! My name is Crystal, owner and author for BFS. I'm 30 years old, married, and proudly live in the heat, humidity, and hurricanes of Houston, TX. Feel free to check out the archives or just pop around. Hope to "meet" you in the comments soon! DISCLAIMER I am not a professional or a financial advisor. BFS posts are informational opinions only. Please make your own financial decisions based on personal research or see a financial advisor.
Also, there are paid links on this site. There is no obligation on your part to purchase any products advertised on this website.
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