For the past few months, I’ve been receiving notices of changes to card holder agreements from the various banks my wife and I hold credit cards with. I wrote them off as innocuous b/c 1) we never carry a balance so changes to interest rates didn’t matter and 2) we try not to go above 15% of our available credit for any card so we weren’t concerned about decreases in our credit limits. Then recently, I noticed several articles including one from the Wall Street Journal that talks about banks using inactivity and annual fees for certain rewards cards, which definitely affects us, as a response for the money they’ll lose as a result of the Credit Card Accountability Responsibility and Disclosure Act of 2009.
We have several cards that we never use but we didn’t close them on the advice of several reputable sources that closing it doesn’t buy us anything and it could even hurt us in terms of length of credit history and credit utilization factors for our FICO score. But now with potential inactivity fees, we may look into closing all but one or two accounts.
I’ll be honest. I don’t enjoy banks. The exorbitant bonuses, the customer service (and I use that term lightly), and having to monitor your account for changes and unexpected fees. For example, Bank of America decided that b/c he was a loyal customer, my dad was automatically enrolled in their advantage checking program, where he gets all these benefits that don’t make any sense for him all for the low, low cost of $20/month! Being self-employed, he tried to take a break and head to the bank and change to a regular checking account only to have the customer service representative (and again, I use that term lightly) tell him that a manager would be glad to help him resolve his concern in an hour and a half. An hour and a half! So I told him just ask the teller when he went to make a deposit. It’s not like he wanted to close or open an account – it should be pretty easy for them to do. The teller informs him that he has to meet with a manager, so after waiting in line for half an hour to make a deposit, he has to make his way over to the customer service representative who again informs him that it’ll take at least an hour. Thanks Bank of America. You ROCK!
A few years ago, the wife and I watched the film Maxed Out and it made me dislike banks and credit card companies even more. It’s an eye-opening film and remember thinking that all the students in my college group, which I was leading at the time, should view it so that they use any credit they have available wisely.
Despite my general disdain for them, I still use banks for credit cards b/c
- The protection it offers – if someone steals my cash, I’m done. If someone steals my card, they’ll give me a new one and I won’t be responsible for any of the charges. Travel insurance and all that is nice too.
- The rewards – my Citi card used to give 5% back at gas stations and groceries, but now it’s down to 1% pretty much everywhere. Still, 1% is better than 0%.
- Easy to keep track of expenses – you don’t have to keep all your receipts.
- Ease at check-out – swipe, sign, go is much more convenient than ummm…I know I had a 20 in here somewhere…ok, and I think I might have $0.37….
- Online shopping – yes with PayPal and gift cards, it’s still possible to shop online without a credit card, but that requires much more work.
Thankfully with good advice from friends when I got my first credit card, which I stupidly got b/c I wanted a free Maryland t-shirt and frisbee they were giving away, I’ve never had revolving credit card debt, so closing an account is as easy for me as making a phone call. But can I live without a credit card?
For the month of March, my wife and I are going to try to use cash for every purchase besides gas. For online purchases, we’re going to have to go out and get a gift card for that store. It’s going to require a lot more planning, such as going to the ATM in advance, but I think it will also provide some benefits such as:
- When I use a credit card, I don’t think about how much I’m spending; when I use cash, $40 seems like a lot.
- We try to stick to a strict budget, but since we use credit cards, going over a little bit isn’t a big deal. With a limited amount of cash to use each week, when we run out, we run out. To even go over a little bit, we’d have to drive to the ATM. This will help us be better stewards of our resources.
- If an opportunity to give to someone in need arises, we’ll always have at least a little bit on hand.
- Having to plan for online purchases will prevent spur-of-the-moment spending – which is more my issue than hers – b/c as my wife says, “Sure SlickDeals saved you 50%, but if you didn’t buy it, you would’ve saved 100%.”
So, that’s our family’s financial goal for March of 2010. I’ll keep you all updated with how it’s going.
Has anyone else tried going credit card-less? Any advice or tips?