How Not Using Your Credit Cards May Hurt You
From the moment I received my first credit card, I charged EVERYTHING. That $1.50 cup of coffee got charged, that $300.00 semester of text books…yup that too. I even charged my college tuition when I could. I NEVER carried cash and had a plethora of plastic in my wallet. I ALWAYS paid off the balance each month. I kept a very, very watchful eye on what I was spending and never overdid it. I am happy to say that I’ve never been charged finance or annual fees. I accumulated cash back, points, miles, you name it. I used my points to double up on merchant rewards and then went on shopping trips. More importantly, I built up a solid credit history.
Recently, due to a change in my living situation and the timing of my paycheck I decided to try the envelope method. J. Money over at Budgets are $exy has a great post here!
I did see a small decrease in the overall amount I was spending
I loved not having to worry about due dates on credit cards
I shied away from making large ticket item purchases because I didn’t have the credit card protection backing me up
It was nice knowing that I wasn’t trying to time the arrival of my paycheck with the due dates on my card(s)
I was very uncomfortable carrying cash with me. I’ve the kinda gal who sticks a $20 in her back pocket.
I was concerned about not having larger return options or credit card protection on purchases.
I had to track my spending by keeping a million receipts (which I despise)
Overall, I liked the cash option……UNTIL I started reading how credit card companies were slashing credit card limits and closing accounts. (I think the original post was at Blueprint for Financial Prosperity , but I had a hard time finding it.) Next thing I know, I get a letter from one of my credit card companies telling me they are reducing my limit to $300. Yeah, from $6,000 to $300 because I was not using my card enough. WTF? What happened to customer loyalty? What happened to the other 10 years that I used the card religiously? I wouldn’t charge that much at any one time in the first place but having reduced credit affects your credit score. And these days, your credit score can dictate the how much you pay for insurance, whether you rent an apartment, whether you get screwed on financing in general….
So now I’m rethinking my cash strategy and reverting back to my credit cards. Heck, I’m even considering charging a little each month on each of my cards just to keep them active! I have a trip to SF planned in March and will be using credit cards to pay for all aspects. I will be sure to contact my respective credit card companies and ensure that my cards have not been reduced ridiculously or even canceled like what happened to Kevin Johnson with his Amex card.
I am pulling an envelope method with my credit cards. I keep a running tab on all expenses for the month using BudgetDroid or Loot on my android. Every time I swipe my card, I round up the amount and enter it against my preset budget in each category. So far, its been working for me.
How have you been working your budget in these credit slashing times?
The general advise given above notwithstanding, it is always wise to keep a fresh cvv in handy with you all the time as it can be changed immediately so as to avoid any kind of mishap in case the card goes missing or is lost and stolen.