Pay Now, or Pay Later

Until about two years ago, we subscribed to the "Pay It Later" philosophy. College, cars, and stuff in general were financed by Sallie Mae, Ford, and Visa, respectively. The plan was to pay for everything once we get jobs. Sounds good at the time, until it's time to pay! Every month, Sallie wanted $450, Ford wanted $250, and Visa wanted $100.

What exactly were we paying for again? In order of least stupid to most stupid, I'd rank them: Sallie, Ford, Visa. Notice I didn't call any of them smart, but that's for another day. I am going to start with that little plastic genie. Some people want a security blanket, some people want a time machine, some people want to beat the system, and some people want a little too much. The credit card all too often seems like the answer. Because, let's face it: Life takes Visa.

If the commercials wouldn't conveniently end after we hear that, the next sentence would be: And Visa takes your money.

There are really two camps when it comes to credit cards: Those that are accumulating credit card debt, and those that buy things with credit cards but pay the entire balance each month.

I think the biggest problem with accumulating credit card debt is that one day you wake up and you have a few hundred or thousand dollars in credit card debt and you have no idea what you spent it on. So let's group all that unknown stuff together and call it nothing. That's right, you're paying all that interest on nothing. Your payment was late last month? Another $30 in late fees for nothing.

Wait! You remembered that you used the cards for groceries a few times and to go out to dinner every now and then. We can finally put a name to what the balance, interest, and fees are going towards. So what can you show for all that stuff now...umm...nevermind, we'll stick to calling it nothing.

For the accumulators, it boils down to the fact that this is a very expensive way to live. The situation is worse when you add the fact that credit cards make it easier to buy more stuff than you really need. It is almost universal that if you pay later, you always pay more, and this is very evident when you are carrying credit card debt. You may as well be flushing your hard-earned money down the toilet. (In some cases, as we almost discovered above, you are.)

It is not easy to break this cycle, but it is worthwhile. Then you can live a much less complicated life, the way people used to do it before credit. When you want something, you save up for it. If you're in a hurry, make some extra money by doing some extra work. Maybe we can just call sweat the "early fee." Imagine: no more statements, no more paying interest on everything, and a wallet with more paper and less plastic.

If you are an accumulator and would like to stop being one, I recommend Dave Ramsey's plan. It has worked for thousands of people who were probably in much worse situations than you are. If you are an accumulator and would like to continue being one, wow.

But the full balance payers have it all under control, right? Well, as a former member of this passionate group, I would have to say, "No!" I will give my reasons next time, and you will earn one point for every minute you wait.