I have to admit, I love my credit card!  Credit cards aren’t bad.  I know that some financial advisors suggest cutting up all of your credit cards and paying cash when you’re trying to get out of debt.  Now, when I say that credit cards aren’t bad, it reminds me of 1 Timothy 6:10 which states that “the love of money is a root of all kinds of evil…”  Many people leave out the beginning of that verse and think that money is the problem, when the real problem is the person that has the money or is seeking financial gain.  So, my take on credit cards in light of that verse would be that it’s not the credit card that’s the problem but the person using it.

So, I suppose if you’ve incurred tons of debt because of your lack of self control or addiction to shopping, then cutting up your credit cards would be a good idea.  I would think you should also cut up your debit card so that you don’t overdraw your checking account.  Using only cash would be ideal in that situation, and that’s just my opinion.  And, as with any addiction, you should surround yourself with supportive people.

Anyone that feeds your shopping addiction, or encourages you to spend money when you don’t have the cash, should be avoided.

I’ve definitely known people that have had to do that very thing.  One of these people in particular has been successful in paying off all of her shopping binges, but not without much support and patience.  She didn’t just pay it off overnight.  She had to work hard maintaining her self control and put all of her extra income toward her credit card balances every month.  She was so happy to be free of that debt once it was all paid off.  She said it was like a weight being lifted off her shoulders.

I feel confident in saying that I don’t have a shopping addiction and can control my spending habits.  The debt that my husband and I have incurred has to do with two major decisions we made.

Mistake #1
The first one was definitely not the best decision we’ve made in our 7 years of marriage.  We needed a new car, so we decided to take the only $2000 we had and use it as a down payment on a practically new Honda Civic.  Again, I say this was not the best choice we’ve ever made.  That was 5 years ago and we’re still paying it off.  We’ve transferred the balance to a very low interest rate now, 1.99%.  But, we still have nearly $7000 left to be paid.

Mistake #2

The second choice we made that lead to more debt was to make home improvements.  This has been our most recent headache.  Our family is growing and my husband needs an office at home, since he works from home twice a week.  So, we decided to make our basement into usable space.  My husband used to work as a carpenter under his father, who is a master carpenter.  They restored the house that my in-laws are currently living in, so my husband knew what had to be done with our basement.  He decided that we would have to get the basement completely waterproofed before doing anything else.  We knew it had to get done now if we hoped to start finishing the basement soon.  We also consulted a trusted and experienced real estate agent about what needed to be done to sell our home.  Getting the basement dry was one of the number one things needed.  With our fourth child on the way, we knew we would be running out of room fast since my husband had to move his office into the family room after we had our third child.  So, we decided to put the project on 0% interest credit cards and pay them off with our tax return next year.  Although I’m confident that we will be able to pay off the $9000 balance before the introductory rate expires, seeing our debt increase that much has increased stress within the household.  And, since we used up all of our savings in addition to that $9000 just to waterproof the basement, we are now living paycheck to paycheck.  Doesn’t that suck?

I know that we could be in a much worse situation financially, but I know that if we had made wiser decision and been more strict with our basement budget, we would be better off right now.  When you’re living paycheck to paycheck, the anxiety can be overwhelming at times.  But, I know that we have a plan to pay off the majority of our credit card debt by the end of 2012 and I believe that we can do that.  We are no longer putting money into the basement at this time.  We’ve decided that we can live with the space we have as long as we can use the basement for storage.  So, we’re happy to have the basement dry and usable for storage.

Now, back to why I love my credit card.  Right now, we have one credit card that we use for all of our expenses each month.  Then, we pay it off when our statement comes each month.  We’ve had our American Express card for years, but we just recently upgraded (per Mint.com recommendation) to the preferred card.  Although it is $75/yr, it really makes sense for us.  We get 6% cash back on groceries, 3% cash back on gas, 3% on department stores, and 1% on all other purchases.  Monthly, this adds up to about $35/month cash back.  So, we pay back the $75 fee in just about 2 months!  The rest goes toward our monthly expenses so that we can have extra at the end of the month to start paying down debt.  That’s why I love my credit card!  It actually helps us pay down our debt!

If you’re unable to pay off the balance each month, I don’t recommend using a credit card.  Many people find it difficult to stay within their budget when they’re using a credit card.  I think it has been easier for us since we started using Mint.com.  We see what we’re spending every day on our ipod.  It’s a great resource that I highly recommend.