Living On Credit Cards

About 2 months ago, Linda and I decided to go back on the envelope system for all of the parts of our budget that we aren’t able to automate.

English: Money seized during

English: Money seized during “Project Coronado” by the DEA. Going in “La Familia Michoacana” article. (Photo credit: Wikipedia)

The reason we’re doing this is because we’ve been consistently over budget when we do all of our spending on our credit cards.

The reason we switched back to using our credit cards is because it’s a royal pain in the butt to always make sure we’re carrying enough cash for groceries and gas and date night and fundraisers and cover charges, etc.

It’s still a royal pain in the butt, and we still suck at it.

But one of our envelopes is labeled “This went on a credit card” and is used for those times we forgot to grab cash before heading to the store.

In the last two weeks, that’s $500 that we forgot to bring with us.

Cash sucks.

I’m tempted to go back to using the credit card for our primary spending. ¬†Yes, we are consistently over budget, but it’s not terrible….for some odd definition of “not terrible”.

We generally seem to have about $1000 left on the card after making our last monthly payment every month. ¬†Every month. ¬†The overall balance never grows, it’s just hanging out $1000 over what we have budgeted to be paid automatically on the card.

That’s a bad thing, but….

Since I make a payment every couple of weeks, the interest is never assessed on that balance. ¬† In the last year, we’ve paid exactly $0 in interest, without any funny balance transfer deals.

By my calculations, that means our credit card has given us $1000 for free.

If we pay that off and get strict about using cash, won’t that mean our free $1000 would have to evaporate?

I like free money.

That also means that the total interest we paid in 2014 is $672.91, all to our mortgage. ¬† Even if we have a small balance we carry, we’re not paying interest on that debt, and–worst case–we could raid our savings to make it vanish tomorrow. ¬† I’m tempted to make that happen, but our savings goals are more important to me that paying back the free money.

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Credit Cards: My Failed Experiment

Cash

Image by BlatantWorld.com via Flickr

Back in April, we went off the cash plan.

In the two years prior to that, we paid down about $40,ooo in debt by completely forgoing credit cards. ¬† ¬†We went on a strict budget and all of our daily expenses–other than gas for the cars–was paid in cash. ¬† The only other exception was anything bought on the internet. ¬†Amazingly enough, Amazon doesn’t take cash. ¬† When that happened, the amount we spent online was taken out of the cash supply and set in a box until we could get it back in the bank.

No other exceptions.

In April, we decided that we had changed our relationship with money and could–judiciously–move back to credit card use, to take advantage of the rewards. ¬† ¬†We’d still use the same amount we had budgeted for groceries, ¬†clothes, and everything else. ¬† I set up an automatic payment for the budgeted amount, so we could use the card for our daily spending and the bank would automatically pay it off every month. ¬† What could go wrong?

Ugh.

We are not predisposed to be able to use credit cards well. ¬† It’s just not good for us. ¬† Credit cards¬† just don’t feel like real money going out. ¬† ¬†When we were using cash for everything, we could see when money was running low, and we’d adjust our spending to stretch it out as needed. ¬† With plastic, it just became too easy to keep spending.

For the first couple of months, it was easy to overlook the problem. ¬† We paid my son’s vision therapy on the credit card, to get a discount on the therapy and cash in on the rewards program. ¬† ¬†That was around $4,000. ¬†Combined with the regular spending, it took us a couple of months to get it all paid off and current.

This month, we’ve managed to overshoot our monthly budget by $500. ¬† ¬†We’re only halfway through the month.

This weekend, we had a fairly unpleasant conversation about money. ¬† In the end, we decided to go back to cash-only. ¬† It works for us, in a way that credit cards don’t. ¬† Credit cards were a failed experiment. ¬†We’re going back to what works.

Have you ever had to switch from cash to credit cards and back?  How did that work out?

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