To Cut Or Not To Cut, That Is The Question?


This has been topic of discussion this week.  Do you cut up your credit cards after you have paid them off or do you continue use them in a responsible way?  Dave Ramsey advises to cut those cards up and close the account.  Others recommend to keep the account open and only use the card once a month to keep your credit score soaring.


If we take Dave Ramsey’s point a view we would pay our cards off, cut them up, and close out all accounts.  The reason being that if you aren’t using credit you don’t need a credit card or a credit score.  He calls your credit score a “I Love Debt Score”.  But what if you want to buy a house?  Apparently you can work with a mortgage company to underwrite your loan which allows you to qualify without a credit score.  So looking at the issue of keeping your credit cards open after paying them off, from this point of view, makes sense not to even have a credit card period.


But there is always two sides to the coin.  This point of view is to keep the credit cards open after pay off and use them wisely to build your credit score.  The reasoning behind this is to assure you have a good credit score for a future purchase of a house.  Many people use their card once a month on gas or food to help their credit score rise.  Having a good credit score assures you a better rate on a house loan which in returns saves you dollars.  A dollar saved is a dollar earned, right?



There are always pitfalls.  In the standpoint of Dave Ramsey there are fewer pitfalls.  Your only problem is securing a mortgage with a good interest rate.  If you put 20 to 30 percent down on your house, you are likely to get the interest rate you want.  Plus you don’t have to pay PMI (Private Mortgage Insurance).  That alone could save you quite a bit of money monthly.  Assuming you have your fully funded emergency fund (3 to 6 months of living costs) saved I don’t really see any real pitfalls with this side of the coin.  You just need discipline to walk this path.

pitfall road sign illustration design

Now the “keep those cards open” point of view involves a little more risk.  You obviously got into trouble with those cards and to have them laying around can be too much temptation for some people.  You risk reverting back to old ways.  One major credit card purchase or shopping spree could be a major setback. You could end up having to start all over with getting out of debt.  That would be a bummer after all your hard work you put into becoming debt free.  This could be disaster to the progress you’ve made.  I do see why cutting those cards up and closing out the accounts makes a lot of sense.


I wanted to write about this because this is an issue I struggle with.  I have a credit card I use every day for all my purchases.  The reason I use a credit card instead of my debt card is because when your account gets breached the credit card companies take the items off your bill and immediately issue you a new card.  The banks however give you a ten page report to fill out and tell you you’ll get your money in seven to ten days.  When this happened to me I was a little afraid to use my debt card.  So I use my credit card and get cash back every month.  I have not carried a credit card balance in 12 years.  So I consider myself a person who has learned to  handle it.



But there are questions I keep asking myself.  Would I spend less if I used cash or a debit card?  Even though I stay within my budget, I wonder if I would spend well below my budget if I were using cash or a debit card.  I do like saving money.  I keep saying I am going to try using just cash or a debit card for a month and see for myself what happens.  So I am going to do it this year and see if I save as much as I think I will.  Sometimes you just got to do it.


Going to the bank and getting cash is a hassle.  This is one of my excuses I like to use.  Never mind that I drive right past the bank twice a week.  The thought of my checking account getting wiped out again is a real fear.  That one I need to think about for a while.  I can use cash for everything though, except when I order items online.  I order everything from Amazon.  I hate shopping, so ordering has become my thing.  Again, I am within my budget but I am just challenging myself to save even more.  Using cash would probably do the trick.  So I think I’ll need to try it.  Do you have any hang-ups about trying different ways to save money?  Even if you rock staying within budget, could you save even more by using cash or a debit card?


As much as I love Dave Ramsey’s methods, I still have my own hang-ups that I need to overcome.  I am human.  His approach to debt helped us pay off thousands of dollars.  We are still working on getting the house paid off and still using his methods.  But, we all have our hurdles.  Is there anything in your way of getting out of debt?  What keeps you from pushing forward?  We have obstacles to face when accomplishing anything in this world.  The obstacles keep us moving forward because we don’t want to go back through them again.  So we press on.



Honestly we are always going to be working on our finances.  There isn’t a destination to get to with our livelihood.  You just move to different stages with this stuff.  Mainly because you will have to deal with money the rest of your life, so learn to enjoy it.  Have fun with your finances instead of dreading the bank statements.  Experiment and see what works best for you and your family.


Leftovers:  My biggest motivation for getting a handle on my finances was my son.  I didn’t want him to struggle with his finances, so I learned how to deal with mine.  Our kids are always watching us.  He doesn’t mind doing his finances because he knows how to handle his money.  Plus I love the calls I get from him when he saved money.  We talk about his finances and he seeks advice when needed.  Finances was a topic of discussion in our house while he was growing up, so the discussion has continued into my son’s adult life.  You could say finances have kept us close.




Happy Full Plate Friday!!!!

Clarissa Hallowell


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