Blasting Away Our Consumer Debt

We e-filed our federal tax return on Wednesday, February 22 using the IRS’ Free Fillable Forms — and received our refund on March 1. We got back a nice chunk of change — although I know many of my fellow personal finance bloggers abhor the idea of getting a big tax refund.

There was no doubt about what to do with 1/3 of the tax refund: pay down our credit card debt, which has been lingering for a year following the arrival of Baby Frugalista. While initially the bulk of it was from the hospital bills from her birth, the rest came from the accrual of months of buying baby-related items and things we wanted for our home following our down-to-the-wire upstairs bedroom renovation around the time she was born. Coupled with an extended 6-month-long maternity leave, with less than 2/3 of my pay coming from disability/family leave insurance for 12 of those 24 weeks (the other 12 were unpaid), the debt started adding up.

We’ve been paying a good amount toward the debt each month, but by continually making purchases, we kept winding up back where we started. To remedy this, I put a moratorium on purchases and tossed $2,000 at the credit card debt, eliminating the balance on a credit card with a 6.24% interest rate on purchases. That leaves $2,300 in debt, split between two other credit cards, both at a 0% balance-transfer rate. One card’s 0% interest rate expires in June, and the other in December. The earlier one will be paid off next.

What about the other 2/3 of the tax refund, you ask? It’s in our savings account, and a portion of it will be used to fund our upstairs bathroom renovation. We’re doing one room at a time to minimize our cash outlay.

Paying off that credit card felt great. I can’t wait to get back to our pre-baby state of no consumer debt!

The Best Credit Card Deals For You

Is there such a thing as a good credit card? It can be good if you benefit financially from being the proud owner of one.

Money Beagle wonders if the Costco American Express True Rewards credit card will be a good fit for him and his wife. This card offers a rewards program that gives a yearly certificate toward an in-store Costco purchase after you earn 3% on gas purchases (4% if it’s the business version of the Costco Card), 2% on other categories (such as restaurants) and 1% on everything else. If you’re a Costco member, there’s no annual fee on the card.

This sounds like a good card for his family, since they are already Costco members and do a bunch of shopping there. Obviously, if you choose to go with a card where most of the perks revolve around a certain store or restaurant, you’d best be a good customer to make the most out of your perks.

I’m a fan of my Chase Sapphire card, which is one of the best credit card dealsI’ve found that benefits me and the way I spend money (you can find the credit card deal that suits you best via comparison sites like http://www.comparethemarket.com/credit-cards/). Since I don’t use my credit cards for the typical gas purchases and restaurant tabs, this card is a one-size-fits-all for me, as I earn 1 point for every dollar spent on purchases. Sometimes, there are bonus points for viewing a Chase promotional video or other customer-driven interaction.

Instead of using my points on gift cards or baubles, I’m able to use them to reduce my credit card balance, which is exactly what I did this week — $60 came right off. My Capital One Rewards credit card points can also be used in the same manner, but only after I meet a certain threshold of 5,000 points. The Chase Sapphire threshold is 2,000, I believe.

But the best credit card deal I’ve got going is definitely my FIA credit card, with a paltry 6.24% interest rate — that’s half of what my other two major credit cards are charging in interest. And I’ve got a stellar, near-800 credit score (or above, depending on the credit reporting bureau). So if I’m going to carry a large balance for more than a month or two (think new furniture or the medical bills from Baby Frugalista’s birth), I’ll put it on the FIA card.

Of course, there’s always something: I just received a notice that Bank of America (gasp!) is taking over my FIA card. I’m not thrilled about this development, but we’ll see how it shakes out. Hopefully, it will still be the best credit card deal in my wallet.

Do you have a go-to credit card? What makes it stand out for you?

Confession: We’re Overspending

Our credit card balance is still much higher than it should be, even with us making major payments toward it. We went overboard at Christmas, with a laptop for my husband and a new desk for my home office for me, gifts for Baby Frugalista’s first Christmas, and also had bought a new TV stand with a hutch for our living room to replace the old unsafe stand meant for an old-school TV. While we have been upgrading our furniture in the past year, it’s the first time I’ve done so in 8 years. These new items are sturdy and well-made, and I hope they’ll last us 10-20 years. So they’re not everyday expenses. That being said, it’s time to put the credit cards on “freeze” and stop using them until our balance is paid off.

The good news is that about 2/3 of our credit card debt is at 0% interest through the summer. I’d originally wanted to pay it all off by March, but now I see that won’t happen. I could use some of our savings to pay it off, but I’d rather keep that account untouched because it’s our emergency and house-repair fund. Instead, I’ve been freelancing and selling a few of our old things, such as furniture pieces, and using that money to pay down the debt. I will have the one credit card that is charging us interest paid off by March, at least.

Little Bites

— Baby Frugalista is almost 1 year old! I can’t believe how quickly time flies. We’ll celebrate her Groundhog Day birthday with a little cake and thankfulness that our preemie is thriving — you’d never know she was only 4 pounds when she came home from the hospital.

— Also one year later, I’m finally getting closer to my pre-pregnancy weight. 14 pounds down, 10 to go. Not too shabby for doing it through the December holidays and all the food that comes with that time of year. I’ve also been jogging on the treadmill at the gym a few times a week, and I can do about a mile in one shot. Which is absolutely amazing, considering my previous record was 1/4 mile… at the age of 19. If I ever get pregnant again, I will NOT gain 45-50 pounds. And remember, I only had a 4.5-pound preemie!

— New year, new health insurance. And higher co-pays for my birth control pills. My husband’s employer claimed everything would stay the same, but I guess the prescription drug list is different for this company.

 

I Missed a Credit Card Payment

True confession: I missed a credit card payment. Oops.

I’ve never missed a credit card payment before…NEVER. It’s embarrassing to admit, never mind to blog about it.

How did it happen, you ask? Well, it’s not that I forgot it. On the contrary, I thought I had paid the bill through my online billpay portal. But instead of paying this particular credit card creditor, I mistakenly entered the payment into the wrong payee field. And I didn’t notice it until I’d logged back into our online banking — 3 days AFTER the due date. I immediately sent the payment to the correct creditor, but it was technically late.

If he’s reading this, I know exactly what my father is thinking at this moment: “This is why I still mail my bills!” True, it’s hard to screw up and pay the wrong creditor when you’re writing a check and mailing it, but you could always write out the check to the wrong company… right?

My Punishment

The creditor charged me a $15 late fee, which was the minimum payment due, and upped the next month’s minimum to $33, plus the $15 from the previous month, for a total of $48 due. As a rule of thumb, I pay much more than the minimum payment, so it’s not an issue.

The payment wasn’t 30 days overdue, so I’m hoping it doesn’t get reported to the credit agencies — that would suck. But I don’t plan to need any credit anytime soon, and the last time I checked, my credit scores hovered around 800 for all three agencies.

A Debt Confession

Since the baby’s been born, I’ve been using our credit cards. And not just lightly — I’ve racked up about $3,300 in debt in 3 months.

Flame away.

We had no credit card debt prior to Baby Frugalista’s unexpected arrival, but then there were costs. About $2,500 in hospital and doctor bills, baby items to be purchased (we were caught unawares with her early arrival), and formula. I was due for a new eye exam, glasses and contacts, as I was on my last pair of contacts and needed a new prescription to order more — that came to $625.

There were other items that weren’t truly necessary, but I had planned to purchase them as part the house renovations that were underway at the time of Baby Frugalista’s birth. So I wound up with $160 in curtains to match the new sofa and loveseat (which were paid off already), and a new $110 comforter set for our renovated bedroom. Our house was so out of sorts that I “needed” to get it into some order, despite all of the baby stuff going on.

Since I’m taking 6 months off for maternity leave, I decided that rather than deplete our cash-on-hand, it was better to use a little “plastic loan” in the meantime. I’m making more than the minimum payments but not aggressively paying it down as I normally would. I do intend to pay it off in about 6 months.