The Credit Card Dilemma

Saturday, April 3, 2010

I've been meaning to make a post for a while related to our credit card philosophy. It's of course related to our Financial Peace journey of which I blogged most recently about here.

Dave Ramsey is completely opposed to credit card use and we have come to agree with this. Not because of any noble reason, but pretty much because we just really suck at controlling it. We've heard of families that can use their credit card wisely and with much deliberation, and pay off their balance every month. We would not be such a family.
But not only do we lack the self control to keep credit cards from getting the better of us, we just sorta despise them. Even if we were paying off our balance every month and getting all sorts of perks (points, trips, whatever) we just hate the thought of supporting a huge industry that is destroying our society on so many fronts.
Dave has alot of good arguments about credit card use, even for those people who feel they use it wisely. One that I think is quite pertinent is the evidence that when you use a credit card, you don't feel anything. When you lay down a wad of cash for that TV you've saved for, it hurts. I don't remember the numbers, but apparently you spend a significant percentage more when you use credit, because it doesn't hurt. This is why McDonalds started accepting credit cards---'cuz they knew they'd snag more business.

I got my first credit card when I was in university, although I'm pretty sure it was a credit/debit card. It was in Chicago with 1st Chicago Bank and I remember trying to explain to my dad that it wasn't really a credit card even though it had the Visa logo on it, and the purchases just debited out of my account. I think sometime soon after though I was offered a real credit card with maybe a 500$ limit.

We've fortunately never had more than 2 or 3 cards at one time. James had one for his business and a couple times I've opened one for reimbursement purposes either for a job or church. It always ended up being more annoying than helpful.

So, at some point in our Dave Ramsey journey the last few years, we came to the conclusion that we wanted to live without a credit card. Dave regularly advises this, and insists that it's completely possible. We believed it.

One small issue however, is that in the States, credit/debit cards like the one I had in Chicago are fairly common. They can be used anywhere a credit card can. Having come from a culture where our Interac system was spreading like wildfire (around 1995), having a credit card that wasn't really a credit card was awesome, as the States didn't have our debit system, or any, really, apart from the credit/debit cards. Because we have Interac, a credit/debit card is not nearly so common. None of the major banks carry them in Canada. For a while I did copious research on the reloadable Visa cards, but I was quickly disenchanted with them. So many fees....the inconvenience of reloading...I didn't even go as far as trying one.

About 3 years ago or so, I was searching for someone (some bank, that is) that carried the credit/debit cards. We had paid off and gotten rid of our Visa and we were feeling the inconvenient pinch of not having any credit card. Hotel and flight reservations. Ordering online. Car rentals, and a few other was annoying and we'd have to sometimes call upon my parents to help. We didn't like being in that situation.
Someone in a forum I believe mentioned a credit union near them in Ontario that carried the credit/debit card. They were too far away from us to be helpful, but it gave me an idea; what if other credit unions had the same? There was a Teachers Credit Union not too far from us. I gave them a call....and was very pleased to find out that they indeed had a credit/debit card. It was called a Global Payment Card and it has the MasterCard logo on it.
To get it, I had to open an account with TCU and put a small amount of money in a side account for "shares". It's a credit union thing, I believe. Then I applied for the card (oddly, just like a credit card, even though there's no credit involved) and I was of course approved. Bingo! Problem solved!
Our intent at first was just to transfer money into this account only when we needed to make a purchase using the Global Payment card. This didn't end up being terribly successful. It was a bit of a pain, because I couldn't transfer online. I had to physically go over to the branch and make a deposit. If I deposited a cheque, I had to wait 5 days for it to clear. If I didn't want to wait 5 days to make my purchase, I had to go over to our bank and take out the money, then go deposit it in the TCU.
So for about 2-3 years we did this and while it was better than having a credit card (now a banned word in our house) it did have it's annoying times.

The answer, we decided, was to switch our banking over to TCU. That way we'd never have to mess with transferring money over. Plus, Dave Ramsey often recommends credit unions because they are usually smaller and give more personalized business. It's the small town touch.

It's been great so far. I love having the convenience of a credit card, yet it comes right out of my account. The services of the credit union have been good, although there's been a few small gliches--nothing I've been ready to turn my back on them for and they've been very good at fixing problems quick.

So this has been my personal recommendation for going credit-card-less with the help of Teachers Credit Union!


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