I felt like we dodged a bullet tonight.
I was checking balances on some of my accounts and I loaded up the balance on our primary checking account. I knew it was going to be low. We had had a couple of big expenses (a six-month car insurance premium and a replaced central air system) that gave us a whopper of a Visa bill, which was paid in full about a week ago.
After my wife balanced the checkbook, she told me "not to go to the ATM until the end of the month," which was more or less right except that I get paid next Friday, on October 3rd. I know she was thinking "don't go to the ATM until you get paid again" but I can understand why she said "end of the month."
Cutting to the chase, we had $900 in automatic withdrawals set to come out at the beginning of the month, before my next paycheck came in. Which is bad news, because we didn't have that amount in the account.
I went into panic mode. What cash did we have that I could get into that account Monday morning? Well, we managed to scrape up enough from four different accounts and most of the cash we had on hand including our emergency cash (as in the cash we had if the power goes out).
Phew. Dodged that bullet without any ill effects (i.e. bank fees or interest fees).
Now that the immediate problem was addressed, we still had to see next month's finances through. It actually popped in my head that we could just not pay our full credit card bill next month. Basically, I was considering carrying a balance on my card, which frankly shocked me a little. I'm pretty sure we can make it work without doing that, but man, that's a dangerous road to travel.
Getting into credit card debt, of course, is way easier than getting out of it. (Just ask around.) Staying out of debt takes constant work, too. I guess if I really, really get into financial trouble for a month or two it will be really nice to have the lines of credit available, but the situation has to be a lot more dire than this month, as in "my daughter needed to go to the hospital for two weeks" or "my wife needed to go to the hospital for two weeks." Not for what we did, which was pay our six-month auto insurance policy in full and our central air unit in full to save money.
For those of you who don't carry credit card debt: Have you been tempted to carry a balance? For those who have gotten out of debt: Is it difficult to resist the old temptation of carrying a credit balance?
I carry a credit card and one that I actually use a lot as the month progresses. Every now and again, I think about carrying a percentage of the balance but then I always seem to just go ahead and pay it off anyway.
As you said, it's a dangerous road to travel. I don't think I've carried a balance for almost 3 or 4 years. Don't want to start now.
In this case I wouldn't have worried too much about using loc, cc to cover a shortfall.
This is probably 20/20 hindsight but you should have been able to plan for the insurance payment.
Another thought is that you also could have waited for the a/c machine – tough call on that one since the new unit is saving you money.
Either way – while you don't want to start down the slippery slope – temporary debt is no big deal as long as u pay it off real quick.
I refuse to let myself carry a balance. My parents instilled in me when I was very small that credit cards are only for what you can pay off every month. In fact, until part way through college, I never realized you could carry a balance on a credit card. I'm very grateful to my parents for that lesson, because it helps me avoid a lot of problems.
I do, however, have friends who carry balances. One of them has told me how hard it is to stop doing so. Every time he pays it off, he ends up putting a new balance on again. Since the world didn't end the first time he carried a balance, he does it a second, third, fourth time. It sounds like it's a really tough habit to break.
I use a credit card all the time but have never carried a balance. Now that I am debt free it has been easier to build a cash surplus which means that carrying a balance is even more unlikely. If you think of debt as worse than the plague that gives you the motivation to get out of debt.
I haven't carried a balance for quite some time, but I do remember being in a similar situation about 10 yrs ago where I knew it was going to take me two months to pay off a charge. I wouldn't recommend this because it can be a slippery slope, but here's what I ended up doing…
I paid half of the balance from my checking acct and I paid the other half of the balance with a balance transfer check to another card that I normally didn't use (and didn't have a balance). The original balance was paid, and I had a 25 day grace period on the half that I transferred, which was enough time for me to pay that it full the next month w/o incurring a finance charge.
Again, I wouldn't recommend it as a regular practice, but it worked for me in this extreme case in the years before I had an emergency fund built up to handle these types of unexpected expenses.
I have removed the temptation by not having a credit card anymore. I cannot think of an emergency situation where I would need a credit card to bail me out.
@The Life Insurance Insider
That's the whole point. A credit card shouldn't ever be used for emergency situations – that's just the start of the slippery slope.
Emergencies are what your Emergency Fund is for: http://retire-at-40.blogspot.com/2008/09/if-you-l…
Hi mbhunter,
I use a credit card. I like the term "plague". I really believe in paying as soon as my credit card statement arrives (in worst case within 21 days).
@Rick
That's the spirit Rick. I totally agree with you. It is always better to keep out of those wicked credit companies: http://personalfinancesolution.wordpress.com/2008…
I never carry a balance on my cc, but I have had to use overdraft protection a few times because money didn't transfer from my savings to my checking account quickly enough to cover automatic payments. I am getting better at timing my transfers to avoid the problem.
I also absolutely refuse to carry any balance on any credit card. If we can't pay for it immediately on the next statement, I don't even consider the purchase. The only occasions we carried a balance are the few times we missed the payment date (tricky bastards). I think we have been lucky though – I know a lot of people have been forced to carry a balance due to unforseen circumstances and not a lapse of responsibility.
I had a friend in college (econ-bus major, go figure) who used to take great pride in the number of credit cards he had and how many were maxed out. At one point he had 5 out of 6 maxed out – it was like a game to him. I don't know how or if he paid them all off eventually.
I have two credit cards that I pay off each month, but I found this post out of a worry I have about the credit cards-I never carry a balance, but I never carry cash on me – Between rent and my credit card payments, I don't have any cash. So the "Hey Joe, do you have five dollars?" is always a no. I have plenty of money in my bank account, but it was already spent last month on my credit cards. How do I reverse this, and have the money in my bank account BEFORE charging it to the credit card. I have a savings account, but I keep that separate and don't want to use that money to pay off credit card bills…Should I use this savings to keep paying my bills on time, then building a future without a savings but with more cash available, or keep using my credit cards like this until I get a raise?
Hey there – I deal with clients every day that are facing repossession – not necassarily because they cant keep up their mortgage payments, but because they have in excess of £30,000 in credit card debt. I dont understand the psychology. They obviously just thought that this was money to spend. I didnt understand this at all until I got my first ( and last ) credit card and had maxed it out within a year ( £2000 ) . never again. i have a debit card, and that will do nicely…………..