Thriving on a Teacher's Salary: Let's Talk Credit Cards

by History Gal

You know the slogans.  You hear them on the radio and see the commercials on television and online. You get mailings from credit card companies enticing you with fantastic rewards and bonus points.

So, how many cards are in your wallet? I intentionally have just 1.

Reality Check #1: Credit card companies don't offer us credit cards out of the goodness of their hearts. Credit cards companies run a business. If they weren't making a profit, they wouldn't be enticing us to sign up.

Credit card companies make their money by charging businesses fees when a customer uses a credit card and by charging us interest on any unpaid bill balances we carry.  Do you know what the interest rates are on your credit cards?  Did you know that if you make a late payment, credit card companies can increase that interest rate? For example, if I were to miss a payment, my credit interest rate jumps from 18% to almost 30%! 

Credit card companies are now required to show you how long it would take you to pay off your credit card bill if you just made the minimum payment and what the total cost would be.

Imagine you had a balance of $3000 on your credit card and you pay the minimum balance of  $30 a month. If you did not charge another penny to this credit card, it would take you 15 years and over $6000 to pay off your credit card bill!

According to a 2013 Survey of Consumer Finances by the U.S. Federal Reserves, 38% of Americans carry credit card debt. If you have credit card debt and are wondering where to even start in paying down your debt, check out Credit Card Insider's article How to Pay Off Debt.

Reality Check #2: When you make a credit card purchase, you are getting a 30 day or so no-interest loan from your credit card provider.


Thriving on a Teacher's Salary
It's not free money. It's a loan with terms and conditions. Yes, I love the ease of making purchases with my credit card, but it is really easy to overspend since I don't have to actually pay for my purchases until later.


My mom gave me very important piece of advice when I got my first credit card as a freshman in college. She said to treat every credit card purchase like a debit and deduct it from the balance in my checkbook. That way, when the credit card bill arrived, I would have already deducted the money from my account and all I would have to do was write the check. It's a strategy I use to this day. There is no stress when the credit card bill arrives because I know the money is there in my checking account. At any given time, I know exactly how much I have left in my account to spend because I have counted that credit card purchase, not as a loan, but as if I had actually used my own money for the purchase.


Reality Check #3: You may not need all those credit cards in your wallet.


When my husband and I made the decision to live on just his teaching salary so I could stay home with our kids, we took a long, hard look at the credit cards we were carrying and made the decision to cancel all but two (one for him and one for me).

 I probably had half a dozen retail credit cards from some of my favorite stores. I realized that these cards encouraged me to spend more than I really should. It was too easy to buy $300 worth of clothes and just swipe the credit card. I canceled the cards and cut them up. Now, I always say no when the sales clerk asks if I would like to save an additional 20%. Of course, I'd love to save that extra 20% - I am a bargain hunter at heart - but, I have committed to staying within our budget and not overspend. Maybe, you don't have the same problem I had. But, if you are carrying debt on multiple cards - especially retail cards - it may be time to take your own long, hard look at what you are carrying in your wallet.

Credit cards definitely have their uses and I use mine almost daily. It is just important to use credit cards as part of a budget and not as a way to buy more than you can afford.

What are some ways you keep your credit card spending in check?

 

Looking for some other ways to Thrive on a Teacher's Salary? Check out these posts! 

Musings of a History Gal
Musings of a History Gal

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