# Bye Bye Credit Card?



## genericboy (31 Oct 2008)

Age: 27
Spouse’s/Partner's age: n/a

Annual gross income from employment or profession: 29,000
Annual gross income of spouse:

Type of employment:Civil Servant

In general are you spending more than you earn or are you saving?

Rent: 450 month
Saving: 50-100 a week


Other borrowings – car loans/personal loans etc

Credit Union: 12,000 - repay 350 a month approx

Do you pay off your full credit card balance each month? No
If not, what is the balance on your credit card? 3,400

Savings and investments: 3,700

Do you have a pension scheme? yes

Do you own any investment or other property? no

Ages of children: none



My question really is should I use my savings to clear my credit card debt? I need my credit card and don't want to cancel, but am afraid if I use up my savings on paying it back I will again start to build up this debt, I suppose the obvious solution is to cancel the card?


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## CGorman (31 Oct 2008)

In reality you do not have any savings. Your savings scarcely equal your short term debt which is costing you far more than you are getting for your 'savings' (say 15%-20%pa versus 1%-5%pa).

Immediately clear your credit card bill with the savings (unless you need cash very soon). If you believe you will not be able to pay off credit card every month from now on, then you should cut it up or stop buying things. It is riduculous to be 'saving' 50-100pw when you dont pay off your credit card every month.

You say you 'need' your credit card. That is not true, no-one 'needs' a credit card, they just want them! 

Once you have the credit card debt cleared and you are paying off the full balance every month then if you still find yourself 'saving', you should redirect all excess funds to accelerating your repayments on the credit union loan. 

The basic rule here is that saving is foolish unless it attracts a return greater than any financing costs and in most cases this is never going to happen.


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## genericboy (31 Oct 2008)

Yes, I agree with most of what you say , some people told me not to use my _'savings _' even though I though about this. 



> Once you have the credit card debt cleared and you are paying off the full balance every month then if you still find yourself 'saving', you should redirect all excess funds to accelerating your repayments on the credit union loan.



Is it not wise to have some *'savings'* for a rainy day, aside for making repayments?



> The basic rule here is that saving is foolish unless it attracts a return greater than any financing costs and in most cases this is never going to happen.



I agree with you to a point here, but are you saying people should not save? I dont agree with this at all, having extra funds for a crisis might be a good idea.

Thanks for your advice, I think I will use my savings to repay my cc, and then cancel it for now, until I can afford it, and better manage my finances.


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## krissovo (31 Oct 2008)

I ripped up my credit card last year and it felt great!   Only problem is that society now expects we all have credit cards.  Booking hotels, train tickets, flights all are a nightmare without a credit card.

I now use 3v and more recently I have a VISA debit so if its not in the bank I cannot spend it.

Anyway either rip up your card or pay it off every month.  If you do not have the discipline with a CC (like me) then stay well clear!


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## genericboy (31 Oct 2008)

Thanks Krissovo - I think I will say good bye to it, and my 'savings'


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## Sunny (31 Oct 2008)

genericboy said:


> Thanks Krissovo - I think I will say good bye to it, and my 'savings'


 
Yeah use your savings to clear the debt and start saving again to build up the fund. You are young (presume in good health) and in the civil service so you have job security and therefore the rainy day fund probably isn't as important to you as it would be to other people.


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## Flax (31 Oct 2008)

There is no need to get rid of your the credit card. Just have some self discipline and don't spend money you don't have on frivolous items.


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## finoblad (31 Oct 2008)

Nobody needs a limit of 3,400 on a credit card.

My limit is 300. The bank hissed a bit when I brought it down from 8,000 but I threatened to switch cards and they backed down.

If I was you I would switch your card onto a 6 months interest free deal, pay 2.5k off your balance and work hard to clear the rest, then bring the credit limit down to 3 or 500 euro.


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## extopia (1 Nov 2008)

finoblad said:


> Nobody needs a limit of 3,400 on a credit card



Probably not the best thread to make this point, but a credit card is the best way to pay for almost anything, provided you have the discipline not to overspend and to pay the bill in full every month.

No per transaction charges, unlike Laser transactions or cheques.

So a high credit limit is good if you're routing all your electronic transactions through your CC acccount to save money on charges.

Only worth doing if you pay the bill, but worth mentioning I think.


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## finoblad (1 Nov 2008)

I would accept your point in principle extopia however those disciplined people are in a fairly small minority i would think, from my experiences anyway.

even one slip-up on clearing the balance within the month would wipe out a hell of a lot of laser card fee savings.


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## leex (1 Nov 2008)

> Only problem is that society now expects we all have credit cards. Booking hotels, train tickets, flights all are a nightmare without a credit card.



Agreed. A CC with a very low credit limit is the way to go. You can always top it up with your own cash for larger purchases.


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## birdy (1 Nov 2008)

Another option which a friend of mine did, was cut her card horizonility (sp) . This means she can only use it on line or telephone when necessary and not in shops at all.


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## DELLBOY 08 (1 Nov 2008)

extopia said:


> No per transaction charges, unlike Laser transactions



Many banks offer debit cards without any transaction or maintenance charges. 

I have one with Ulster Bank and pay no fees or charges


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## CGorman (3 Nov 2008)

genericboy said:


> Is it not wise to have some *'savings'* for a rainy day, aside for making repayments?





genericboy said:


> I agree with you to a point here, but are you saying people should not save? I dont agree with this at all, having extra funds for a crisis might be a good idea.



Of course it is certainly a good idea to have savings for a rainy day, but the point I am trying to make is you don't really have any savings at present. You should'nt consider the cash you have as "savings". 

Put it this way: if you had 3k in cash and then bought a car for 3k and said you'd pay in a months time, you would'nt consider the 3k "savings" because you will have to hand it over to someone at a specfic point in the near future. Your credit card is the exact same - you have basically promised to hand over €3,400 to the bank in the short term. 

As for a "rainyday fund"; would it not be better to use your cash to clear the CC and then in the unlikely event of a real emergency arising to just borrow that 2-3k you might need from either the card or a better interest rate loan?

I don't mean to come accross as harsh or to demean your hard earned cash; but in my view a credit card is a great way to spend beyond your means, which as everyone knows is not a sustainable way to live. I use my credit card the wholetime, but would'nt be able to sleep at night if I did'nt pay off the balance each month!


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## BoscoTalking (4 Nov 2008)

How about cut the card but keep the number for booking things online - like flights etc and it MAY reduce your spending on a whim!
I found i did this so that by the time i had left the shop, gone to the cashpoint, looked at the €€ in my hand and then went back to the shop and looked at the product i had "needed badly" i usually though the better of the impulse buy!

incidentally you absolutely need to either switch to no interest card while you pay back the bill on it or else pay it back with your savings - and i would go with the latter. dare i ask - whats the % interest on your CC account? If you don't know then go to the back of the class...


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## KatieC (26 Nov 2008)

It is also possible to transfer cash to your credit card following each transaction using internet banking, there should be no charge. I always make sure that when charges come in for flight/hotels etc the money is already in the credit card.  It is possible to have a credit card for years and never pay a cent in interest!  A credit card are also very handy because you can claim back if a company folds before the service is provided


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## Rigoletto (27 Nov 2008)

extopia said:


> Probably not the best thread to make this point, but a credit card is the best way to pay for almost anything, provided you have the discipline not to overspend and to pay the bill in full every month.
> 
> No per transaction charges, unlike Laser transactions or cheques.
> 
> ...


 
dead right extopia. i have a 5 figure credit limit on my credit card but I pay the entire amount off by DD every month. credit cards are excellent once one can afford them.


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## fjgh15 (3 Dec 2008)

Yes, definitely use your savings to pay off the CC, over two months if you think better of it. Saving is good, but you are paying more to the CC than you need to - so by clearing your CC debt, you'll save more each month.
Credit cards are fine and useful and dead handy, if used with rigid, iron discipline - maybe freeze yours in a bowl of water for a while to break the habit of abusing it?


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