Financial Freak Show

I was recently talking with someone about them not wanting to pay the 29% interest rate on a credit card they were carrying. So with my personal compassion filter removed I made the comment:

If you didn’t want to pay 29% why’d you sign the stupid contract then?

Now to my FinancialFreak mind this seemed like a perfectly logical question. If you didn’t want to pay 29% why did you agree to borrow money at 29%? According to this person it wasn’t their fault (can you believe they actually attempted to shift the blame on this one?) Apparently they agreed to a 1.0% interest rate in the beginning. That was all fine and good until a payment was made late and the card company killed her on the rate with no warning. Okay in my opinion that’s not entirely true, they did send a warning, it was in the fine print when she signed up for the stupid deal in the first place. So you’re telling me since the card company raised the rate it was their fault? I’m sure it wasn’t your fault for signing onto a bad deal then not making the required payments so the company adhered to the contract and raised your rate because they think you’re a flake and won’t pay them back in the future?   

When a person signs a contract for a credit card (or anything else for that matter) you agree to the terms of the contract. If you don’t like the terms of the contract then you should probably not sign up.

So that then brought up the question of how one would get by without using credit cards. What do you do if you have an emergency? How do you buy stuff online or travel without a credit card? Actually the answer to this is pretty straight forward. So I told her what I’ve done to avoid needing credit cards.

First I removed all my credit cards from my wallet and cut them up – how are you going to stop using them if you keep using them – seems pretty obvious to me.

Then I worked to pay them all off. Since in my case this took some time to do I proceeded to the next steps while I worked on paying the balance down from buying crap I couldn’t afford to impress people I didn’t even like (that’s with interest added of course!)

Next I opened a second free checking account with another bank that also gave my wife and me a couple debit cards, just like our regular checking account so yes we now had two checking accounts and each carried two debit cards.

The next step was to fund this account. We did this by not spending more than we made for a couple months (I know another tough concept for many to grasp). By doing this for a while we were able to gather up some extra money which we deposited into this second checking account. At the time this was about a $1200 (which is where we tried to keep the balance while we were paying down our debts.)

We called this our emergency fund (well a starter version at least). This was only to be used for an emergency and we BOTH had to agree is was an emergency. Since our marriage was based on trust and shared goals there was no issue with us both having easy access to this money. We trusted each other not to let the other down. Plus if either of us was going to screw this up it was going to be me since I am a spender but I know better than to unleash the wrath of my saver wife….again!      

Now that this was all in place we were left with our “emergency cards” and our normal debit cards. These were not credit cards so we only had access to what we had in the account. True we only had a $1200 safety net between us and the world but that seemed adequate for most issues that may arise. Seriously how often do you spend more than $1200 in one shot? In our case this was not nearly enough to protect us from a job loss or major illness but it covered the occasional car and home repairs that always seem to pop up at the worst possible times. Funny thing was this was ten-times the money than I used to keeping the bank but since it was my only safety net now it scared the pants off of me and motivated me to finish the process.   

Once we climbed out from under or debts we we’re able to quickly increase this fund to several months of living expenses. Now, hopefully, we have the ability to handle much larger emergencies like a really broken car of a really broken job, without going back into debt. I will say we’re still a long way from driving around in a Bentley with $60,000 gold teeth tossing $100 bills out the window…but if we do I can pretty well guarantee we won’t be paying 29% interest to make it happen

Have you ever signed up for stupid deal you had regrets over? Did you learn any lessons?