Credit Cards – Cardholders (#1)

I have thought about this post for some time.  I have come to the conclusion that I will need to have several posts to say all I want to say.  Today, I will discuss the cardholder.  Tomorrow, the card issuer.  Thursday, I will combine the two. 

 The cardholder.  The person who uses the plastic.  We come in various sizes and shapes and our attitudes vary widely on the use of the credit card.  I have only chosen a few types here and many people will see themselves somewhere between these categories.  This in no way represents all cardholders.  These are groups that I see most often written about in the PF blogs.

Cardholder 1 – THE REWARDS ARE MY FRIEND -is the person who can use the card, pay it off each month and collect the rewards.  There are many people in the PF blog world that are able to do this successfully.  These people probably have their financial house in order and understand that credit can be used as a tool.  By the way, these are the people that the credit card companies don’t like.  The companies aren’t making money from them.  These are also the people who are shocked when their card limit is decreased and the interest rates go up.  These are the perfect customers IF you are giving them a mortgage, car loan, or personal loan not  a credit card.

Cardholder 2 – THE MAJOR PURCHASER -is the person uses the card for big purchases and pays off relatively quickly.  Usually a few months maybe up to a year.  This person probably weighs the cost of the interest to be paid over having the item sooner.  This person doesn’t charge the daily expenses or buy just because they have available credit.  My guess is that this person carries only a couple of cards.  The cards aren’t maxed out and more than the minimum payment is usually paid.  This person understands using credit but isn’t as disciplined as cardholder 1.

Cardholder 3 – THE SPENDER – is the person with numerous cards.  Lots are maxed out and have high interest rates.  The spender may at times feel like the banks are out to get him.  The spender likes stuff or uses the credit cards to live.  The spender may use his card for groceries, gas, the day to day expenses. In the early days of the spender’s credit card  use it was probably cool to be able to get whatever he wanted immediately.  Initially, the spender planned to pay early and more than the minimum but month after month as the charges went higher and more cards were added this became a vicious cycle.  This is actually the person the credit card companies like the most.  The person is paying the minimums at a high interest rate.  Once in a while there may even be a late charge or over the limit fee added.

Cardholder 4 – CREDIT CARDS ARE EVIL and is no longer a cardholder- is the person who swears by Dave Ramsey and truly feels that credit cards are the worst thing in the world.  Their card went in the shredder, blender or it was blow torched.  This person can’t imagine why anyone would even consider carrying a credit card.  Most of these people were at one point  a cardholder 3 person but has been disciplined and gotten rid of all of their debt and vow never to be there again.

I am more like cardholder 2 – the major purchaser.  I can tell you pretty close to every transaction ever made on my credit card.  The $8000 I have been paying off since I started this blog was a new refrigerator, washer, dryer and sofa.   Now that I have it paid off I will plan a little better for major purchases.  But I will still use it for online orders and travel. 

What type of cardholder are you?  Can you think of another category that I left out?

Student Loan Info Needed

I know very little about student loans.  I know that there are those that think they are great and those that think they are the devil.

A friend was asking me some questions and I thought I would just stick the info out for all of you to answer.  If you know of other bloggers who know a lot about student loans, I would appreciate if you either let me know their site or ask them to stop by here and answer.

Here is the situation:

My friend’s son wants to go to a school that is private and in another state.  The total to attend is $47,000.   The EFC calculator gave them a figure of $8,000 for them to pay.  They have no idea what kind of financial aid will be offered but she says they have NO money to pay.  So for a hypothetical situation say he has to borrow $30,000 per year.  That would be $120,000 over four years.  How are the terms set up -over how many years?  What types of loans should she look for?  How much would the monthly payments be if they borrow this huge amount?

Again, I know nothing about student loans but will be doing some research.  Please share your student loan experiences with me.  I would like to be able to have an intelligent conversation with my friend about student loans and what to expect.  She does have the option of paying by taking out a  second mortgage but I think this is a bad idea.

I must also say that before reading several PF I would have said ABSOLUTELY NO LOANS – but with insight from Dog Ate My Finances and Shtinkykat my opinion has lighten up a bit.

I welcome comments from parents, students, or anyone with any opinion on this

About this cash only thing

I’m spending less money.  I looked at the check register this morning and there is about $200 more in there than normal at this time of the month.

So even with the many extra expenses this month it seems that we spent less than normal.

What is your emergency fund security level?

I know Dave Ramsey promotes the $500/$1000 baby emergency fund for those working to get out of debt.  I think that is a good start but is it still applicable in today’s economic times?

Also, each person has a different set of circumstances.  For us we have had some major medical issues over the years so we have 6 months emergency fund.    I have thought several times that I should just pay off the car with the emergency fund but there is something that twists in my stomach every time I think of it.

One thing I know for sure is that by the end of 2009 I will be debt free except for the mortgage.

Would you pay off all your debt and have a small emergency fund or would you rather have a large emergency fund and continue to pay off debt?  What is your EF security level?

Spend, Spend, Spend Some More

I have spent more money in one day than I spent for the entire Christmas season.  Isn’t January the month people spend less?

Remember this post about all the change my family saves?  Well, we decided how to spend it.   We spent just under $1000 on a new fence for the back yard.  We had a neighborhood party (well just us and one other family) putting the thing up today.  We still have to put the gates on tomorrow and then the dogs can stay outside by themselves. 

I also spent part of my grocery budget buying pizza for everyone who spent the day over here working so I will probably have to go by the bank and withdraw an extra $50.   I could have written a check but since I vowed to be cash only for the year I felt like I would be cheating if I did.  Which is really crazy since all the money is coming from the same place anyway.

I did use some restrain and didn’t buy the hammock that was on sale.  Again, the cash only vow saved me.  Otherwise, I would have that thing hanging in my backyard and I would be sitting under the stars tonight. 

I’m going to start a 2010 wishlist.  All the things I pass up this year I will put on this list and next year will see if it is something I still want.

The Cash Plan and How It Is Working

I thought I would update my cash only plan.  I started a few days before the new year.  So I have used it a little more than a week.  Not really long enough to know that it will work forever but long enough to get a “feel” for it.

The first thing I did was to give $20 to Kennedy.  I told him that anything he needed was to come out of that so I would not be giving him a dollar for this and a dollar for that.  This has worked extremely well.  All the little “needs” for this or that have pretty much dried up.  For example, he needed new art pencils.  He has 7 days left in art.  It is not the end of the world if he doesn’t have new art pencils.  He has every color just some have been sharpened down lower than he likes.  He chose not to spend the $7.99 on new pencils because he would have to pay.  If nothing else works just this one thing is worth it.  He still gets a regular allowance so he just feels like he got a big raise.

The second thing is that I am more conscious in the grocery store.  I picked up a bag of chips that were $5.99 and walked around the store.  Then before making it to the checkout put them back and picked up a 99 cent snack.  (Yeah, I could have save more not buying any snack but a girl has got to live a little.)

Paying for gas with cash wasn’t as bad as I thought.  In the mornings, the cash station has an outside attendant that you pay so I don’t actually have to go into the store.  The gas is a couple of extra cents a gallon  but not more than 25 -50 cents per fill up.  Well worth the convenience. I only fill up twice a month ususally so I pay about $1 month for this.

Cons – I don’t have the security of the debit card in case I go over.  I knew that if I kept the debit card in my wallet I would use it. 

How is the cash system working for those of you using it?

Cash Only 2009

It is official.  Or at least official for me.  I will only use cash for the entire 2009.  That means I will use the Dave Ramsey cash envelope method for the entire year.  In the past I have only used the credit card for large purchases – there will be NO large purchases for 2009.  I use my debit card all the time which leads to overspending because I know there is plenty in the account to cover whatever I spend. 

Since the 1st is a holiday DH’s pay will be deposited today.  So as of today I am a cash only girl.  I think the hardest part of this will be paying for gas with cash.  I hate to walk into a convenience store.  But I can do it.

Now, just to be able to budget well enough so that I’m not short at the end of the month.

A 14 year old’s shopping strategy

I had to run out to the mall yesterday and pick up some shoes for Ashby.  They were part of his Christmas but we knew they would be on sale after Christmas so we waited to go buy them.  Kennedy wanted to go with me to the mall so he could stop by Chic-Fil-A.  While in the mall, I asked if there was anything else he wanted to shop for.  He said that he only had $5 with him.  I was a little surprised because he received a large sum of money for Christmas.  He said he had $3 for the sandwich and $2 buffer in case he decided he wanted a candy bar.  He said there was nothing else he needed or wanted.

As I added the last 20+ debits made in the account since Monday to the check register, I realized if I went to a cash only method how much easier it would be.  Having a debit card and knowing the money is in the bank makes it so easy to spend more than anticipated. 

Dave Ramsey may have a point with the cash only philosophy. 

Are any of you on a cash only basis?  No debit or credit cards.

Great Debt Free Story

I just read this great debt free story.

What a wonderful feeling that must be.