Saeculorum said:

<< As well, there's no reason to pay for everything in cash; >>


I can list one - when you don't have a CC that's for purchase only.

<< you should at least put a couple dollars on each so that you have to make payments which rebuilds your credit. >>


Huh? OP does have revolving credit. He has lots of it!!

<< but you need to look at the opportunity costs of your actions. >>


Not much opportunity can be lost on $1230. It's a good idea to have that so that in an emergency that costs $1000 OP will not be forced to borrow at unfavorable terms.

I think IBJanky is doing great.

Why save money while paying off debt? Most of what I have ever read about eliminating debt encourages putting money away for savings at the same time as paying down debt. While this may slow down your debt reduction goals somewhat, it does provide you with an emergency fund to deal with unexpected expenses. Having this fund allows you to avoid using your credit cards in these situations. It also gets you in the habit of saving.

Why avoid using credit cards while paying down debt? I can think of a couple reasons. One is that if you keep adding to balances you are trying to pay off, it can seem like it is taking much much longer. If you make charges on cards that currently have a low rate for balance transfers, but a higher rate for purchases, then you are really hurting yourself by using your card to charge purchases since your payments now will likely go straight toward the low APR balance leaving the high APR balance to continue increasing (This probably only happens on some cards. I know AMEX allocates payments to lower APR balances until those balances are paid off before starting to pay off the higher APR balance). Also, there is not really any advantage to using a credit card unless you have a cashback or rewards/miles card. I don't think the difference between paying now or 10 or 20 days later is going to make that big of a difference to most people. Though I can't speak for IBJanky, if it were me in that situation, I would simply avoid using credit cards until my debts were paid, then I would start using them again in a more responsible manner. Just because he is not using them now doesn't mean he won't ever use them again (though his response does makes it seem like he won't be using them anytime soon). Using cash is a good way of forcing spending control on yourself. This is more important to people who have messed up and needed to learn spending control than it is to people who have never been in this situation.

Saeculorum, you bring up very valid bottom line points. But for those getting out of a lot of debt, there needs to be a fundamental change in thinking to accompany the bottom line results.

I agree that for some people, it's harder to control their spending when they're using credit cards.

But the protections given by using CC shouldn't be ignored -- double the warranty on many purchases is one GREAT feature to have, as well as the ability to contest a charge. (Also, the "rewards" on some of the cards doesn't hurt, either!)

Here's my suggestion, IB, as it seems like you're currently pretty responsible with your finances.
1) Continue to do what you're doing. Only buy things for which you have the cash to pay for.
2) However, when you actually pay, use your credit card (an "empty" one WITHOUT a BT balance -- preferably one with rewards points)
3) Additionally, put the cash you WOULD HAVE USED into a separate pocket (a "lock box" if you will )
4) When you get home, put the receipt and the "lock box" cash into a jar or some other location.
5) At the end of each billing statement period, deposit your "lock box" cash into your checking account and pay the credit card bill IN FULL with that money.

As a result, you're doing exactly the same thing you were doing before ("only using cash" to purchase items), and at the same time, you're getting the benefits of a credit card.

Think about it. If you're as responsible as it looks here (i commend you for knocking your credit card debt down little by little), then it shouldn't be a problem for you..

IBJanky,

You should be very satisfied at the great job you are doing in managing your finances. I understand that you need the security of knowing that you have "money in the bank" in your savings account.

I got divorced after 13 years of marriage and over the next 3 1/2 years had 5 medical surgeries. I had very good health insurance, but I was left a balance of money owed on each surgery (hospital, labs, anesthesiologist, doctors, etc.) I had so many bills that I paid amounts as low as $10 a month. It was a scary time for me. I was sick and constantly off work and had medical bills and bills just to keep myself fed.

After being divorced 5 years, I met and fell in love with a wonderful man. When I got married, my husband paid my parents $2,500 that I owed them. I will never forget my husband telling me he was paying my mom and dad -- God sent me a wonderful man. It took another 4 or 5 years after I married to pay the medical bills. Of course, since there was no interest on them, I continued to make my monthly payments after I got married. I will never forget the day I paid my last payment. What a joy! I have come a long way since then.

Sorry for the long post, but I told you about my experience to let you know that you are young and in good health -- you have time on your side. You should be proud of your accomplishments and remain determined to be financially responsible.

As you gain confidence, start using a credit card for needed purchases and paying your balance each month. Only do what you feel comfortable doing. Over time, you will prove to yourself that you can manage your finances and gain more confidence.

I am happy for you and know you are happier! Keep it up!

Outstanding thread, can't wait for the ending.

Keep it up IBJanky.

03/03/04 UPDATE:

I just made another $1,000 payment today

Here's the current CC situation:

Juniper
Balance: $0
Minimum: $0
APR: 7.90%
Limit: $15,750

MBNA
Balance: $1876
Minimum: $15
APR: 0% until July 2004 (17.99% thereafter)
Limit: $2,000

Citibank
Balance: $2475
Minimum: $50
APR: 2.99% until loan is paid off
Limit: $2,500

Fleet
Balance: $5,513
Minimum: $110
APR: 1.99% until April 2004 (8.99% thereafter)
Limit: $6,000

BankOne
Balance: $0
Minimum: $0
APR: 14.65%
Limit: $4,000

Friend's CC (highest APR CC with a balance, currently attacking)
Balance: $1,408
Minimum: $63
APR: 6.99%

TOTAL CC DEBT as of 03/03/04: $11,242

Also...

1. I do NOT use any of my CCs.
2. I pay for everything with cash.
3. I've increased my CC payments to at least $550/mo, paying the highest APR card first (my friend's CC), and paying only the minimum on the rest.
4. I save money religiously. 10% of my paycheck gets taken out automatically and deposited into my ING Direct savings account. Current balance on it is $1,337

I just got an offer in the mail today for a Citibank Platinum Select card

- 0% APR on purchases and balance transfers until 12/01/04
- 7.99% fixed APR after that
- No annual fee.

I'm tempted to apply. What do you guys think?

IMO, go ahead and apply. You'll be able to transfer balance from your MBNA and/or Fleet cards.
Even though Fleet 0% expires in April and MBNA 0% apr expires in July, but it's probably better to transfer balance now, because Citi may give you certain time frame to do the B/T.

IBJanky said:

<< I just got an offer in the mail today for a Citibank Platinum Select card

- 0% APR on purchases and balance transfers until 12/01/04
- 7.99% fixed APR after that
- No annual fee.

I'm tempted to apply. What do you guys think? >>

IBJanky said:

<< 10% of my paycheck gets taken out automatically and deposited into my ING Direct savings account. Current balance on it is $1,337 >>

While I think its a great idea to PLAN to do this automatic savings and all, if you are still paying a higher APR on your debt what is the purpose of sitting on the $1337? Use it to pay off another card (unless the 0.0% balance transfer thing works out for you).

Also -- to the guy saying "credit cards aren't bad, its only when they are abused that its bad", that's like telling an alcoholic that beer isn't bad as long as you don't overdue it. While totally true, this doesn't help him much

Most of us here probably use a credit card that gives us 1% cash back, and we pay off the balance every month. In other words, credit cards are not just convenient to us, they are actually a source of income (not to mention other benefits like purchase protection). But to someone with a proven track record of racking up bills they can't pay off at the end of the month (whatever the excuse happens to be), its probably better that they just don't even own a credit card.

IBJanky, I salute you for being responsible after the fact! Many others would've buckled and gone the way of the bankruptcy route, but you're sticking it through. Here's wishing you a clear path to 0 balances on all your credit cards.