Dear Nick

I saw something in the papers about getting rid of credit card debt. Forgive me, but I couldn’t help but sigh when I read this. Isn’t this as easy as just putting money on the card until it is repaid? What could possibly be so difficult about that?

John

Hi John,

Thank you for your question and I must admit – it is simple, at least to a point. I think the problem is not the card itself but the relationship people have with a credit card.

A long time ago I had a love-hate relationship with my credit card. I would pay it off completely and then within a few months the debt would be right back up. I fought for a long time to pay it back in instalments but something always kept coming up and I had no choice but to swipe or take a cash advance. It was almost as though the card had a power over me.

I felt a sense of security just having a credit card in my wallet – it was like a financial saviour. Now I know that that security was misplaced and I now have more security or confidence in just enough cash in my wallet and back up cash in my savings account.

Why have we developed such a fear of not having a credit card? What did people do long ago when credit cards didn’t exist? Is it our fault or the fault of the organisations that promote and advertise the long list of benefits of owning a credit card?

It has been many years since I developed the habit of paying off my credit card every month. However, only recently when the bank doubled my annual membership fees, I said “NO THANK YOU” and cancelled the account. Would I get another card in the future? Maybe! I do admit that some things like paying for my website hosting fees only accept credit cards, but as long as I can do without it I will.

You would recall a major credit card company had a spiel saying that – some things in life are very cheap or $1.00 or even Free or but for everything else use... Card. Have we been subliminally brainwashed into thinking that cash is no longer good, carries little value or is even inferior? The last time I bought fruit from my regular vendor he didn’t seem to have a problem with the blue note he quickly snapped out of my fingers.

Do you know that with credit card interest in the vicinity of 25% per annum (unlike interest on your savings which is less than 2% per annum) it is one of the largest revenue generators for financial institutions? No wonder it sometimes receives the most advertising dollars in marketing budgets. Do you also know that in addition to the high interest rates, credit card companies also make loads of money from: membership fees, transaction fees, late payment fees, over the limit fees, cash advance fees and foreign exchange trades (when you buy something in another currency and repay in TT$)?

Now don’t get me wrong, I believe all financial tools have their rightful place, however I firmly believe that the average person has placed less trust in themselves and their money and has left that responsibility to someone who profits off of them.

I think that even though paying off a credit card is simple arithmetic there is a greater force at work that is keeping people in credit card debt.

If you have any further questions or need advice on today’s subject please email me at: This e-mail address is being protected from spambots. You need JavaScript enabled to view it or web me at: www.FinancialCoachingCentre.com