STOP! Don't cut them up yet!

I got up this morning with the intention of following through with one of my hardest New Year’s Eve Resolutions:

Cut up credit cards

I sat down for breakfast in a rare moment of quiet to contemplate what this meant.

Not spending anything I didn’t have.
No more splurge buys.
No more giving into my childrens’ whims for a new toy or book.
And…drum roll please…. staying on budget.

Now, it’s back to my student days which means, spending only what I have in my bank account. Though I know it’s going to be painful, I also know it is going to be exhilarating. I won’t be prisoner to my credit card’s higher interest rates (up to 29% this last month!) or prisoner to my increasingly bad spending habits.  Then, just as I was resolved to go upstairs and put my cards into the shredder, it occurred to me that I better make sure I was doing the right thing.

So, I did some research. Good thing I did!

Here’s why I shouldn’t cut up those credit cards

1. You are more vulnerable to fraud by using a debit card. If your credit card is stolen, most card companies hold you liable for up to $50. Visa doesn’t hold you responsible for any fraud.  If your debit card is stolen, in most cases you will be liable for up to $50 if you notify the bank of the fraud within 2 days. If you notify them after 2 days, your liability can increase to $500 and after 60 days, you are responsible for the entire account balance. You may not have access to those stolen funds either until an investigation has been closed.
2. If you have a dispute with a merchant, the credit card will withhold payment until the dispute is resolved. Debit cards don’t have that ability. Sidenote:  in an overseas transaction where we felt we were being defrauded, we asked our credit card company to withhold payment. As a result, the credit card company went to bat for us- and helped us tremendously. The merchant, when faced with battling the credit card company, backed down and gave us the right price for our purchase.
3. Having credit cards can help establish or reestablish a credit history. Even better, if you use the credit cards well, it can improve your credit rating.  Which means you can get loans and get lower credit terms like low interest rates and low fees.
4. Some credit cards give you insurance for purchases. If you buy something fragile or that is a large purchase, this option might be important for you. These cards will insure the purchase for shipping and delivery and even after it is in your home.
   
5. Some credit cards can give you great rewards. We did our entire Christmas shopping this year from our Thank You Points. You can find cards that give you the rewards that make sense for you: cash back, points, airline miles, etc. Some cards give you advance notice of Broadway shows or exclusive access to concert tickets.
6. You may get access to concierge services. This service is available on only some credit cards, but it can help you get airline tickets, show tickets and dinner reservations that might not be available otherwise.

Okay, so even though I don’t have to cut up my credit cards as part of my New Year’s Resolution, I still need to maintain the spirit of my goal: don’t spend what I don’t have.

That means for me:

1. Use my credit card once a month for a transaction I know I can pay off.  Keeping my credit card in use will continue to establish my credit.
2. Beyond that, use the credit card only for emergencies.
3. Search for a better credit card with better rewards using these sites for reference: creditcards.com and bankrate.com,
4. See if I can get a debit card with rewards attached to it.

Here is to a new start, less stuff, and less stress!

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