Few weeks before 2019, I received my replacement credit card from Citibank. My old card is expiring this January. After, I received it, I immediately called the bank to have it cancelled. As expected, I was forwarded immediately to their retention team to convince me to keep the card with them. However, this year I have already fully decided to cut off my last credit card (thank you BAREFOOT INVESTOR for giving me the needed push). My Citibank credit card has been with me for more than 10 years.
A few years back, I had around 4 to 5 credit cards under my name and all were constantly maxed out. And the sad part was, I don’t even know where all that money went (actually I do know, I just don’t want to make that as an excuse – no matter how valid). Then, I had the debts consolidated and decided to keep just one to keep my finances in control. I even lowered the credit limit down to 7.5K AED just enough to purchase online like airline tickets, pay bills, movie tickets, purchase books on Amazon, etc. However, from time to time, I noticed that there were instances when I am not able to pay the card in full every month’s end, hence, interest will accrue, and sometimes there were even late charges specially when I was too busy and missed the payment dates. These charges, this extra cash, can supposedly be used to fill in your money jars, instead, they just go straight to the bank for nothing. So this year, I decided to give myself the Power of No Choice, by providing myself zero opportunity to use a credit card which prevents me from potentially giving free money to the banks.
There were few reasons why I kept the card with me and it was a constant battle in my head between keeping it and cutting it off. The latter won. These reasons (or most likely excuses) might also be keeping you from closing it off completely. Yet, I found more rational explanation why I had to do it. Here goes and I hope it will help you decide too.
1. Keeping it for the Points and Privileges.
This is one of the main reasons why I kept it. I get points when I pay online; can purchase 2-for-1 movie tickets. However, when I calculated the points, I just got 100AED for every 10K AED purchase. Not bad right? But adding up the annual renewal fee (350 AED), late charges, interests, etc, I would rather NOT be tempted with the 1% cash back but keep the annual fee, late charges, interests, with me. Don’t get me wrong. May be a lot of you use your credit card to pay non-discretionary (required) expenses like utility bills. You will definitely think that it will be such a waste if you are not going to use your card for the points. I totally agree with you. You can even negotiate to have the annual fee waived or get a credit card which is free for life. However, more often than not, a lot of times we will use our card for impulse buying. Even if you are not that impulsive, you are opening a door way of possibility of you missing some payments, which would result to charges and interests. I am not saying all of those who got credit cards don’t know how to control their spending. If you are that kind of person who never misses a payment date AND pays everything in full before the next billing statement, then I congratulate you. If you are not, then you might need to reconsider your card. Review your billing history. If you are paying charges more than the rewards or points you get, then you are at the losing end. (Update: I just realize that my debit card is equally earning points as well!)
2. For Emergency Purpose.
For a long time, I’m using my credit card as my backup plan. This is way before I realized that I need to have an emergency fund instead. The money in credit cards are never our own, hence, if we use them as our emergency fund, we might end up in serious debts due to unpaid interests plus the principal. I’m pretty sure you’ve heard of stories of people with debts piling up. The best way to prepare for a financial emergency is to save for it, not borrow. On a minimum, you need to have at least 3 times your monthly salary or expenses as your emergency fund.
3. Online Payments.
In the past, debit cards were not allowed to make online payments. Hence, I kept my card for those types of purchase. However, in these days, as long as you have the visa/mastercard symbol on your debit card, then you are good to go. Thus, there is no longer a reason why I need to keep one credit card with me.
4. I have a lot of registered automated payments and updating it to my debit card is too much of a hassle.
If you are really serious about eliminating debts, then you’ll do whatever it takes to take action. It is going to be just 10 minutes or less when you set up your automatic payments with your debit card instead of the credit card.
Perhaps, there will be a lot of differences in opinions from people about whether to keep a credit card or not. Weigh the pros and the cons. If you think having one is POSITIVELY helping you (money wise), then hold onto it, but if it is not, then let go. As I’ve said, my main aim is to not have ANY opportunity to use a credit card.
