I cut up my credit card!
Jonny and I have had a joint credit card for probably 17 or so years and during that time we would have swiped hundreds of thousands of dollars through it, taken holidays using it, used the ‘free’ travel insurance and gathered rewards from it. A year or two back I must have listened to too many US podcasts about ‘travel hacking’ on a credit card and seen too many bank ads on TV and I felt it was time to get a ‘better’ credit card, one with more bonuses, fewer fees, more rewards, Airpoints and cash back. I blogged about shopping for a new credit card here: The Great Credit Card Hunt
But that exercise didn’t go so well and you can read about that here: Credit Card Application: DECLINED
The long story short was that it turns out customers who don’t have any debt are not actually that sought after by banks because there is no opportunity to make money off us and no matter how hard I tried they would not give me a credit card! Banks, after all, make the bulk of their money dealing in debt and I spend my life avoiding it. We were never a match made in heaven and the outcome was that we stuck with the status quo, a trusty Westpac credit card.
Yet, increasingly I’ve been getting more annoyed when swiping it or more recently waving it vaguely over the eftpos terminal. The points programme on our card started out as a healthy one, helped of course by the fact that in the early days we swiped a hell of a lot of money through our card and we used the points to convert to “air dollars” to book flights. We have always been “excellent” credit card users and EVERY purchase went on our card and we have swiped, internet shopped, snapped up bargains, bought stuff we needed and didn’t actually need for such a long time that it has just become a HABIT.
Our available credit limit crept up as we were ‘trusted’ with more money and rewarded for our spending habits. It was textbook marketing really and we were continually offered a higher and higher limit. I think at one point we were offered up to $50,000 (it may have even been more) but WE declined that offer and settled on a $17,000 limit instead. How handy is that, to have a possible $17,000 debt right at your fingertips? And to be fair, from time to time we used it up to that limit. But whatever the balance was we paid it in full each and every month because we very much used the card just to delay taking the money out of our actual bank account for another 30 days or so.
Every couple of months I would convert the points we had diligently earned into Airpoints or more recently cash and we would feel like we were winning. But over the years the points we ‘earned’ have been dwindling. There are two reasons:
We are spending less on the card (we are spending less in general)
They keep subtly mucking around with their points scheme
Over time we were not the best customers in the eyes of the bank because we always paid it off and as time went by their banking algorithms have twigged onto this and the rewards they have offered have dwindled.
I re-read the blog posts I had written about applying for a credit card and getting declined and I finished off by more or less saying “oh well, they might not give me a new card with a better reward scheme but I’ve still got a credit card getting ‘some’ points - so we are still fine”.
But since writing those posts I have changed my mind and I’m now done with having ANY type of credit card. What was once a convenient thing to use has now become more time-consuming. Each month when I update our spreadsheet and budget I go through our bank statement and also our credit card statement and I’m getting sick of doing both. Lazy I know. Then I have to make sure that enough money is sitting in our current account to cover the credit card bill that comes out every month. It would be worth it if the rewards for a bit of extra paperwork were there, but they are dwindling by the month.
I know you like it when I share specifics so here are some numbers for you:
In the last 12 months, we have put $35,825 through our credit card
The Hotpoints Spendback we received was $256
But then we paid an annual $70 card fee
So after 12 months the total we received back was a paltry $186
That equates to rewards of $15.50 a month
Can you now see why I think MY credit card reward scheme is complete rubbish?
I used to get something for nothing but now it seems as if I get nothing for doing a whole lot of something. How does your card compare when you actually look at the numbers? I love rewards as much as the next person but to me, this just really is not worth it anymore.
So, over the last couple of months, we’ve been winding down our usage of our credit card and have switched to using a debit card with our main bank TSB instead. I have been checking my Visa account online regularly, just making sure no payments have been coming out that I have forgotten to change and now I keep getting this:
NOT using the credit card has taken a bit of a mindset change, to be honest, because with a credit card you CAN just buy stuff even if you know you don’t have the money and it gives you time to work out where to find it! Whereas I just used to know when the Visa payment date was and have that money transferred into the right account to pay it off, I now need to remember to keep the balance of my chequing account high enough to handle all of our day to day spending. But keeping a budget really helps me plan for this. I was conscious of my spending before but I feel even more conscious now because the transaction is IMMEDIATE. I have not had “transaction declined” when standing at the checkout since I was a broke uni student and I would be mortified if it happened now, so I’m keeping our chequing account balance higher to make sure we are covered!
Side Note: I found my old bank books recently and my account got down to .09c the day before my student allowance came in. That’s cutting it a bit fine!
Jonny has had his reservations about cutting up the card and pointed out that we will no longer have automatic travel insurance which we got if we bought flights on our card. Therefore, next time we do a trip that will be an additional expense, but I have always had doubt in my mind about how good this insurance would have been anyway? We have had to use it once or twice when we had things stolen while travelling but have never had to use it for a more serious emergency to test it out. Thank goodness! And we can still buy stuff online using our new debit card - yep, you can be sure that Jonny has been testing that one out!
Often the marketing behind having a credit card tells you that they are so handy to have in an emergency, well, we have an emergency fund firmly in place anyway (and I won’t charge myself 20.95% interest to use it), so that is no longer a good argument for keeping the card either.
And at age 44 it feels like a bit of a milestone, to finally turn my back on ANY access to credit and lending of any kind. Judging by my failed attempt to get a new credit card a few years back I’m pretty certain that without me jumping through a lot of hoops NO bank will give us a card again. But that’s fine by me. I’m done.
I seriously feel a bit like a grown up now! I just don’t need one anymore. So, I’m kicking another Australian owned bank to the curb and chopping up my credit card. I actually had to go into the bank and do a transaction last week, because I could not do it online, and I mentioned I will be closing my credit card off shortly. The sales pitch to retain me as a valued and loyal customer after 17 years went something like this “meh, enjoy your afternoon”.
Therefore, it's time!
And what use could this old card possible serve now? Well, I Googled it:
Credit card potpourri (yep, its a thing)
Decorate a photo frame
Credit card mosaic
Earrings and bracelets (yep, as tacky as it sounds)
After seeing my list of what you can do with a credit card, Jonny couldn’t resist and made me a pair of earrings out of his cut up credit card. Don’t expect to be seeing me wearing these anytime soon.