Stop the Bleeding!

Posted: July 7, 2007 in breaking free of debt, change, credit card debt, credit card diet, credit cards, debt, finances

We took the big plunge and cut up all but two of our credit cards.  I won’t cancel the accounts, as doing such could seriously hurt our credit score.  But since the cards are cut up I won’t be able to use them- at least not on the spur of the moment.  The two we saved not only had the lowest interest rates, but both offered rewards (one based on redeemable points, and the other based on cash back).

From here we will pay down one of the cards we saved (as it has the lowest balance) and use it ONLY for gas so we can easily track how much we spend on gas each month.  The gas card will be paid in full at the end of each month, within the cards grace period for interest charges.  The other will be for emergencies (like car repairs that savings won’t cover).

So why don’t you take this step today too!  Cut up all but one or two cards.  If you can’t bear cutting them up, drop them into some Tupperware filled with water and put the Tupperware into the freezer.  At least that will keep them out of site, out of mind, and most importantly- out of your wallet.

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Comments
  1. mommyzabs says:

    Good for you! I would cut up all but one or 2 of ours- except we only have 2 🙂 I think this is great though!

  2. Why do you say it would hurt your credit score to close the accounts? If they are paid off and you close them that shouldn’t hurt your score at all. It would actually probably help your score. Maybe I’m misunderstanding what you mean though??

  3. There is some debate MLBH, but most credit experts agree that closing out credit accounts can be more harmful to your credit score than maintaining them.

    See this:

    “While closed or open accounts both count in calculating your credit score, once an older account is closed it may drop off your credit report, and that may shorten the overall length of your credit history. When it comes to credit reports, an older credit history is better.

    More importantly, maxing out revolving accounts can hurt your score. Anytime you use more than 50% of your available credit on a revolving account such as a credit card, your score can start taking a hit. (It’s impossible to say exactly how much, though, since it depends on other factors in your credit history.) FICO scores evaluate your “utilization” level both on individual accounts, as well as the total of all revolving accounts. Extra available credit can be helpful in keeping this utilization level down.

    What about the notion that your score will suffer if you have too much revolving credit available? Fair Isaac says the amount of available credit is not a stand alone factor, so it shouldn’t be of concern to consumers. One of my colleagues, Scott Bilker, founder of DebtSmart.com has eighty open credit cards and a score in the 800s!

    Fair Isaac recommends leaving unused revolving accounts open. If you do want to close accounts, however, they recommend you close more recent retail cards and those with smaller credit limits. Don’t close your oldest accounts.”

    http://originatortimes.com/content/templates/contrib.aspx?articleid=806&zoneid=7

  4. silverneurotic says:

    I don’t have a credit card. I’m not a big spender anyway, and credit cards just don’t appeal to me. However, because I need to start building up credit, and there’s a possibility that I’ll be traveling out of country soon…I’m looking towards opening ONE card and doing like you said, paying it off before the grace period ends and all that.

  5. If you are seeking out a good card I would recommend

    http://cardweb.com/

    The site breaks down card offers based on interest rate, incentives, etc.

  6. Lady Rose says:

    **applauds**

    I only have ONE credit card – I only use it for Christmas shopping and ordering online (but the money is in the bank to pay for it, I just don’t like carrying that much cash), I keep it for emergencies too just in case – but my rule is to not use unless the money is already in bank!

    Hubby keeps one credit card too – so if there was a big emergency we’d have enough to cover it if we had too but we use his for vacations — again the money has to be in the bank first (or coming soon – like a tax refund) once in awhile we will use it for big ticket — but we have worked out the montly payment ahead of time to pay it off in a two or three months (not just minimum payments) so it’s worked into the budget

  7. petite mommy says:

    We got rid of all but one credit card. I wish I could cut up those student loans! Our student loan debt is huge with 2 bachelors degrees, 2 master’s degree, and a soon to be PHD. Sigh!

    Thanks for the comment on my blog. Luckily, I’m not sick yet.

  8. Lady Rose says:

    Hi TT – the chocolate meringue cookie recipe will be posted Monday Morning!

    Also can you please email – can find email on my site top of the page tab says email. I would like to be able to contact you about a project I am working on and you are one of the most inspirational bloggers I know — any way please contact me if you might be interested or not interested.

  9. Angel says:

    I dont abuse my credit cards but must have em!..heh 🙂

  10. […] – you go girl! 7/6 Southern Fried Fatty is drinking more water and taking spin classes. 7/7 Total Transformation is not only getting healthy in body – but financially too with lots of good tips to […]

  11. LOL. Everytime I walk around ant shopping center, I am chased by credit card salesman, offering me great gift if I join at the moment.

    Phew, It’s hard for me to say NO =).

    You’re great.

  12. Randy says:

    You should read the book Maxed Out. It’s a story about the tactics of the credit card industry and the reasons (profit).

    I don’t agree with all of the book, it takes a strange anti-war twist at the end. I plan to post a full analysis on the book in my blog in the next couple weeks.

    Also, as for the freezing credit cards in tupperware, I really like that idea. I heard it before from Ron Blue (Christian Financial Counseling). The idea is that before you can use the credit card, you have to thaw it out. That prevents impulse buying. Just as easily, you could wait 24 hours before any purchase.

    One other idea (thanks to Blue) is to put all your credit cards on a cookie sheet and bake at 350 for 30 minutes. With all the colors running together, it would be an attractive ornament.

  13. The only problem with freezing your cards is that if you want them to order something online all you need to do is stick the container in the microwave or place it under hot running water.

    I like the baking idea.

  14. Thanks for the explanation, total. That makes sense. I’ve never thought about it that way.

  15. Interesting, we cut up a card today and cancelled the account, because we don’t really use it and wanted to clean up loose ends. ………..steve

  16. Maxed Out:

    I want one comment about the Credit Card industry that I believe is almost criminal. Many college kids come out of college with a lot of debt and bad credit. These kids don’t know what to do with the credit they have (had). I think Credit Cards shouldn’t be approved for limits in excess of what the holder asks and if a bank approves credit in excess of that they would lose recourse against the holder of the card in collection. These banks give these kids $500 credit and they run it up at their own discretion. Ok, but I’d say they lose access to the courts for collection.

    Speaking of Frozen Credit Cards. Is that anything like “cold cash?” …… steve

  17. […] over $16,000 in credit card debt (costing us over $500/month) we took a big step last July and cut our credit cards into tiny little pieces.  So how are we doing now thus […]

  18. tv bracket says:

    First time I read doing a cut up can stop a bleeding 🙂 Actually I tend to emphasize on discipline and strong financial planning with credit cards, but usually it doesn’t work for some people. I believe your trick cutting up inefficient plastics can be good extra trick for sharing. Thank’s

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