Banking in the Now
This month we are trying something different: banking in the now instead of the tomorrow. Oh, it is nothing new, really. I used to operate like this in my single days. But then the lure of credit cards with reward programs persuaded me otherwise. While I never gave Visa the joy in collecting any interest payments from our bank accounts and I always payed our credit card bill before the 21 days of grace were up, I probably spent more than I should have some months. Why? Because I didn't have to pay for it immediately.
It was not until last year that my credit card habits started to bother my conscience. Up to that point, I felt proud of the fact that the credit card company was paying me to use their plastic. I received stuff for free, even after paying my annual fee. Free fuel. Free flights. Free hotels.
Free is good, right?
My perspective started to change after I read a blog post penned by my sister. Her and her husband cut up their credit cards after a series of events, one of which was reading "The Total Money Makeover" by Dave Ramsey (it's on my radar to read one day). Their decision to do so was not because they were wallowing in debt (they too paid off their balance owing during the period of grace and collected a 1% reward), but rather because they believed the system was unjust.
Unjust?
Yes, they believed the credit card companies preyed on the financially ignorant and trapped people into debt with the lure of "buy now, pay later" along with their sleek reward programs. After all, the company can afford to "reward" responsible people like me because they are collecting 19 - 22% worth of interest off of other people's financial misery.
To be completely honest, I still find it difficult to fully believe that I am oppressing the poor by skimming off rewards earned through someone else's interest payment. After all, I am just a clog in the grander financial machine. I don't have much control, or at least I feel I don't have much influence on the morality of the system. I doubt that the financial institutes that keep our money "safe" are angelic. I honestly don't know exactly where my bank is investing our money so I can make a measly 1.6% on my RRSP. Can't I just view my credit card in the same light, that it is an investment of sorts, where I earn more than I put in each year?
There comes a point in time when you gain a deeper understanding about an issue and you reach a crossroad of decision. When you come to that crossroad, you have to decide whether to keep walking your current course in spite of what you know OR to walk the other way.
I think I am starting to turn around.
Let's face it. If everyone, EVERYONE, cut up their credit cards today and banked in the NOW, then, in theory, almost everyone would be in a healthier financial situation than their original state. While the credit card owners' losses would increase, our nations debt load would decrease. Businesses would not be charged fees for accepting credit cards (which is why many small businesses refuse to accept them). Our insatiable desire to "buy now, upgrade now" would be curbed. And we would be motivated to actually have a CASH emergency fund instead a borrowed one. Also our children (yes, my dear A. and J.) would hear us say "debit card" more instead of "credit card", which is almost enough of a reason for me to turn away from the rewards programs that have kept me loyal for so long (our country is raising a generation of children who believe that money grows on trees).
Yet, I still have not taken a scissor to my cards. Why? Because our bank isn't at the accessibility level of banks in the Unites States (where my sister and her husband reside). While our bank has introduced the Debit-Visa (acts as a Visa card for hotel reservations or on-line purchases; acts as a debit card by directly taking funds from one's account instead of borrowing), the daily and weekly limits on the card make large purchases inconvenient (e.g. I could not make a $4000 airline ticket purchase with the card, even if the funds were present in my account. I would have to call the bank to temporarily increase my weekly limit before the transaction. Annoying.).
Therefore, I choose to hold on to this controversial, though highly used form of credit until some of these "big purchase" issues are resolved. In the meanwhile, we'll aim to use our debit card for everything else and see if it makes a difference in our finances.
(Lord, we need your wisdom and self-control.)
It was not until last year that my credit card habits started to bother my conscience. Up to that point, I felt proud of the fact that the credit card company was paying me to use their plastic. I received stuff for free, even after paying my annual fee. Free fuel. Free flights. Free hotels.
Free is good, right?
My perspective started to change after I read a blog post penned by my sister. Her and her husband cut up their credit cards after a series of events, one of which was reading "The Total Money Makeover" by Dave Ramsey (it's on my radar to read one day). Their decision to do so was not because they were wallowing in debt (they too paid off their balance owing during the period of grace and collected a 1% reward), but rather because they believed the system was unjust.
Unjust?
Yes, they believed the credit card companies preyed on the financially ignorant and trapped people into debt with the lure of "buy now, pay later" along with their sleek reward programs. After all, the company can afford to "reward" responsible people like me because they are collecting 19 - 22% worth of interest off of other people's financial misery.
To be completely honest, I still find it difficult to fully believe that I am oppressing the poor by skimming off rewards earned through someone else's interest payment. After all, I am just a clog in the grander financial machine. I don't have much control, or at least I feel I don't have much influence on the morality of the system. I doubt that the financial institutes that keep our money "safe" are angelic. I honestly don't know exactly where my bank is investing our money so I can make a measly 1.6% on my RRSP. Can't I just view my credit card in the same light, that it is an investment of sorts, where I earn more than I put in each year?
There comes a point in time when you gain a deeper understanding about an issue and you reach a crossroad of decision. When you come to that crossroad, you have to decide whether to keep walking your current course in spite of what you know OR to walk the other way.
I think I am starting to turn around.
Let's face it. If everyone, EVERYONE, cut up their credit cards today and banked in the NOW, then, in theory, almost everyone would be in a healthier financial situation than their original state. While the credit card owners' losses would increase, our nations debt load would decrease. Businesses would not be charged fees for accepting credit cards (which is why many small businesses refuse to accept them). Our insatiable desire to "buy now, upgrade now" would be curbed. And we would be motivated to actually have a CASH emergency fund instead a borrowed one. Also our children (yes, my dear A. and J.) would hear us say "debit card" more instead of "credit card", which is almost enough of a reason for me to turn away from the rewards programs that have kept me loyal for so long (our country is raising a generation of children who believe that money grows on trees).
Yet, I still have not taken a scissor to my cards. Why? Because our bank isn't at the accessibility level of banks in the Unites States (where my sister and her husband reside). While our bank has introduced the Debit-Visa (acts as a Visa card for hotel reservations or on-line purchases; acts as a debit card by directly taking funds from one's account instead of borrowing), the daily and weekly limits on the card make large purchases inconvenient (e.g. I could not make a $4000 airline ticket purchase with the card, even if the funds were present in my account. I would have to call the bank to temporarily increase my weekly limit before the transaction. Annoying.).
Therefore, I choose to hold on to this controversial, though highly used form of credit until some of these "big purchase" issues are resolved. In the meanwhile, we'll aim to use our debit card for everything else and see if it makes a difference in our finances.
(Lord, we need your wisdom and self-control.)