How to Stop Going into Credit Card Debt for the Sake of “Points”
First you have to have this revelation: Spending money now to save money later does not make sense. It’s illogical. Points systems make you think that spending extra on your credit card, right now, is a responsible thing to do. It isn’t. It took me six years to figure out why.
Back in 2007, I got an Amtrak Guest Rewards credit card. I knew the interest rate was double that of my old card, but I wasn’t worried. I always paid my bills on time. Plus, I’d studied the card benefits and determined that this card was going to be a financial boon. If I used it for my regular purchases—stuff like groceries, Friday nights, and clothes—I’d be traveling on Amtrak for free about half of the time.
I’ve been East-Coast-city-hopping on Amtrak for over a decade now. I’ve lived in Washington, Baltimore, New York, and Boston. No matter which city I’m in, I go to one of the others at least once a month. There have been whole years in which I’ve ridden Amtrak six or even eight times per month. What could be more sensible than a credit card perfectly tailored to my bizarre lifestyle?
The card worked exactly as I thought it would. Amtrak’s points system is honest, so I traveled on a free “points” ticket almost every second trip. What’s more, I paid the bill in full and on time every month. I never paid interest or late fees.
So why did I give up my Amtrak Mastercard and all of the free travel that came with it?
Sometime in 2010, New York Penn Station started to make me physically ill. Penn Station smells. There are too many humans in once space, and you inevitably touch one of them. (Ew.) The workers at Primo Cappuccino pretend they can’t hear your coffee order so that they can squeeze an extra dollar out of you by giving you a larger size or extra foam. And you’re stuck with a vat of prissy caffeine. Every bathroom is disgusting. Sure, having so many points that you get unlimited access to the first class lounge helps. Points-ing yourself up to the first class car helps. But bearable is not the same thing as pleasant.
Then in 2012, I realized that I was losing money on this card. Despite my ability to beat the interest trap, I was living my life one month in debt. I always knew how many Amtrak points I had, but I never knew exactly how much money I’d spent that week. I was swiping my card more often than I wanted to because credit card money didn’t feel like real money. And it isn’t real money. Credit is money that you haven’t yet earned.
I’d forgotten what cash was. Cash is a thing you use to buy ice cream at the ice cream truck when you’re seven. A credit card is a thing you use to make an impulse purchase at H&M because you had a bad day and you think, for a moment, that an ill-constructed but brightly colored shirt will make your life better.
So how do you free yourself from the “points” addiction? It’s not easy. If, after rent and bills, you spend $1,000 per month, it would take you $2,000 to go cold turkey on your credit card. You’d have to pay this month’s bill ($1,000) and then have your upcoming month’s spending money (another $1,000) in your checking account, waiting to be withdrawn from the ATM.
Maybe your finances are stable enough that you could switch from credit to cash today. You have double your monthly spending money just sitting there, ready to make an honest spender out of you. Congratulations! But beware: If you’ve been relying on a credit card for the past several years, you may not know your own spending habits anymore.
It took me five months to make the switch. I failed during the first month. I didn’t have enough cash to both pay last month’s bill and allot myself next month’s spending. I didn’t want to break into savings, and I was terrible at penny pinching. Even though I’d given up buying clothes altogether for one year, I couldn’t let go of the other treats that have become routine for me.
The second month I decreased spending in general, and tried to make all purchases with either cash or my ATM card. After doing that for three months, I became cash positive. On the fourth month I was finally able to spend cash only. But on the fifth month, I allotted myself too little cash and I ended up spending $150 on my credit card in the last week of the month. On the six month I got it right.
There are a million ways to go wrong with a credit card. Some people are impulse shoppers. Some are spending on their cards because they don’t have enough income to meet basic expenses. That’s a different scenario than the one I’m talking about here, and one that I have great sympathy for.
But if you’re a person who thinks you’re outsmarting the system by earning your points, take a closer look. Are you? And do you even want the things your points can buy?
You know what does make sense? Saving money now to spend later on something you’re looking forward to. Just ask your grandmother, or this woman who moved to Paris and spent her days sipping coffee in cafés for a few months because she saved for it. You can’t buy joy on points.
See also: “How to Play the Airline Miles Game”