Monday 20 February 2017

Why I cut up my credit card

Published 21/04/2010 | 05:00

We've had some good times together -- the sunshine holidays, spontaneous weekend breaks, endless dinners and romantic movies.

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In fact, no man has ever treated me as well.

New dress? Why not! Manicure? You deserve it!

Like so many relationships, though, money issues ultimately soured things.

Deep down, I always had this niggling feeling that I was paying more than my fair share. And for all those happy memories were an equal number of hours spent agonising over where things had gone so wrong and wondering if we had a future.

Yes, Mr Card and I have a complicated love -- MasterCard, to be precise.

For the twenty-something girl about town, a credit card is more than just a flexible friend -- it's practically a life partner.

But just like a toxic boyfriend, the relationship can be love-hate.

There are times I think I can't live without my credit card. Invariably though, at 'that time of the month' (when the statement thuds onto my doormat, that is), I just want to see it suffer.

In the past, ridiculous credit card debt was considered exclusively the concern of shopaholics with designer taste buds -- Sex and the City's Carrie Bradshaw was regularly shown maxing hers out on Manolo Blahniks.

But it seems the recession has transformed even the most frugal shoppers into credit-card junkies -- in the current cash-strapped climate, many of us have no other option than to take a buy-now-pay-later approach to life.

Collectively, we currently owe €2.9bn on some 2.17 million personal credit cards. And unlike the revolting bank bailouts, we have no one but ourselves to blame for the debt.

The average sum owed is €1,200, however the Money Advice and Budgeting Service (MABS) reports its clients owe €8,000 on average and in a recent phone-in to Today FM's The Last Word, callers confessed to owing as much as €17,000 on theirs.

Ordinarily, I show my money who's boss -- I don't have any outstanding loans, use direct debit to clear my bills on time and save religiously.

In fact, up until about 18 months ago I didn't even own a credit card.

But then before taking a gap year abroad, I concluded that for safety and convenience, plastic money was the way to go.

And ever since that first swipe, I've become a credit convert -- charging everything from groceries, petrol, car tax, clothes, concert tickets, flights and holidays to my MasterCard.

By the time I arrived home late last year, I had somehow ratcheted up nearly €4,500 on my card -- which still hasn't been fully cleared as I continue to flash it for everyday expenses.

Now, with no light at the end of the financial tunnel, I've decided to take a drastic step to tackle the toxic plastic.

And just like a no-good boyfriend, there's no looking back.

The Irish Independent's Personal Finance Editor Charlie Weston wrote that there's only one way to snap the cycle of debt caused by your credit card -- a deep breath and a sharp scissors (incidentally, not recommended to deal with useless fellas).

"People with big debts on their card or cards would be well advised to take out a scissors and cut it up," he said.

"That is the only way you will not make the situation worse by running up more debt when you are already paying through the nose in interest payments."

Creative types on the net have proffered a variety of colourful ways to punish your credit card for putting you in the red -- melting it in the microwave, running over it with the lawnmower or even shooting it, to name just some.

In the movie Confessions of a Shopaholic, Isla Fisher is seen hacking hers from the block of ice she had frozen it in.

But I settle on sentencing my MasterCard to the classic death by scissors.

And one swift and satisfying slice later, I've gone cold turkey on credit -- instead reverting back to a retro entity known as 'cash'.

You see, kids, apparently there was life BC (Before Credit), when consumers would trade paper currency for goods and services on the spot. Of course, in an age of online shopping and chip-and-pin checkouts, little evidence of such a society still exists.

Mine was an all-too common trap, says financial consultant John Lowe of Moneydoctor.ie.

"Lots of people get credit cards for going on holiday because carrying cash is simply too dangerous -- and then never get rid of them.

"Between the government levy, exchange rates, currency conversion fees, cash advance fees, late fees and interest, you're paying through the nose for the service from the start.

"Cutting it up should be the last resort, though. It means you've lost the plot and shouldn't have had one in the first place."

Oops! You might have warned me sooner, doc.

Sure enough, by the time I've walked back to my car I'm already having second thoughts about slicing my flexible friend in two.

Whereas normally I'd just swipe my card and go, I wind up tottering back in search of an ATM upon discovering nothing more than a few coins and an empty chewing gum wrapper in my purse.

Likewise, when the petrol needle begins to wobble precariously towards empty on the drive home, I automatically pull in to fill the tank -- but am reduced to pumping in a miserly tenner instead.

As though the Gods of Banking are conspiring against me, I also arrive home to find my motor tax, which I usually pay online, is due.

That's the thing about credit.

Kissing goodbye to your flexible friend is fine in theory. But unless you've got wads of cash stuffed in to your mattress, it may well be a necessary evil.

In the current economic atmosphere especially, struggling families, unemployed people, students and, like myself, self-starters on irregular income, often rely on that 30-day window of opportunity to get by.

And with both AIB and Bank of Ireland bumping up their interest rates making it more difficult to get a credit card, those who already have one may want to cling on to it for dear life rather than give it the chop.

Like most, I also own a Laser debit card -- but that's not much good if it's running on empty. Similarly, credit card alternatives like MasterCard Prepaid or 3V Card work on the assumption you've actually got the cash to preload them with.

Being unable to survive without your credit card is a sure sign you should never have been handed the licence-to-spend, argues Money Doctor John.

"The whole point of lending is your ability to repay," he says. "Credit cards are a great idea but you have to have a plan.

"Analyse your needs, spending habits and how you are going to repay the debt before applying for one -- and don't take on a credit limit you know you can't afford."

He recommends €500 as a sensible cut-off -- at €3,500, my credit limit was seven times that.

"Generally, I find women are more cautious than men when it comes to using credit cards," adds John (who clearly hasn't seen my shoe collection).

"One guy in his twenties called me to see if he could get away with going off to Australia leaving behind a €500 credit card debt.

"The credit card company will only keep rolling up the debt until they lose patience and bring you to court. And once you get a bad credit rating, it's on your record for life and can come back to haunt you if you ever apply for a mortgage or loan."

Even Sex and the City's credit-happy Carrie Bradshaw was refused a mortgage for her make-believe Manhattan home.

Neither, though, was she forced to spend her weekends searching down the back of the couch for loose change.

And while it hasn't come to that just yet, without my credit card safety net, suddenly those stack of unopened DVDs and dusty bottle of Aldi wine are starting to look appealing.

That is, until I hit the jackpot by stumbling upon a long-lost gift voucher for dinner in a snazzy restaurant.

So that covers this Saturday night.

After that, does anyone know how long I have to wait in the name of journalistic integrity before I can apply for another credit card?

Irish Independent

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