Zero credit card interest

by Manshu on November 13, 2011

in Thrift

One of the things I haven’t touched upon in a while here is thrift and credit card debt.

As the year comes to a close I thought I will do a post on credit card debt and interest on credit cards because I think I’m fairly close to a year in which I pay zero credit card interest.

Last year I paid a nominal amount because I forgot one payment, and the year before last I paid a small amount for the same reason as well.

Paying no interest on credit cards is a really important thing for me and I even listed down getting out of credit card debt as one of the important things to do before you start investing.

To most people, this is because credit card debt brings very high interest with it and that is money down the drain, and while that is a big reason, it’s not the biggest reason by a stretch.

The big reason for me is all the wasteful spending that you are likely doing if you run up credit card bills. When I look at my own bills they are mainly travel, groceries and eating out, and there are several ways that I can and I have reduced them in the past.

This point becomes especially important for people who are fresh out of college and have started earning recently without much financial responsibility to worry about.

Once you get into the habit of spending a “little bit” more than you can pay off with your salary – that little bit only grows every month till it reaches a point where your salary gets over on the first of every month.

This is a ridiculous situation to be in – not only financially, but also in terms of living a meaningful life. If your number one worry is sustaining your lifestyle then that doesn’t allow you to think about growing your net worth or even branching out into things that you truly enjoy doing.  It just takes a lot of your mind space.

Getting out of this is simple – really simple – spend less than you earn, and if you think it is much more complicated than that then you simply aren’t doing it right.

This brief and excellent post by The Weakonomist both explains why this is simple, and also why it doesn’t need to be discussed a lot – just something to be internalized and live by.

{ 19 comments… read them below or add one }

Saravanan V November 13, 2011 at 7:47 pm

i ve paid intereste just once since I started using it.. which is like in the last six year.. should I be proud or what !?!? ;o)

Reply

Manshu November 13, 2011 at 8:33 pm

That’s really cool! So how do you do it?

Reply

bemoneyaware November 14, 2011 at 10:05 am

Congrats..yes you should be proud of it. Just as common sense is not so common..this basic fact of paying credit card bill on time full amount is ignored by many who just pay the minimum required is not so common..And continue doing so…

Reply

Sahil November 13, 2011 at 10:58 pm

I prefer debit card.

Reply

Manshu November 15, 2011 at 12:22 am

Like a lot of other folks here I see.

Reply

Ramesh November 14, 2011 at 10:18 am

I have not paid any interest since I got my citibank card morE than 15 years ago. credit card bills are paid in full automatically .everymonth by my bank. I find it a foolproof method. similarly my telephone, mobile and electricity bills aRe paid by my credit card automatically. I just have to keep an eye on it.
I finD it very convenient.

Reply

Manshu November 15, 2011 at 12:17 am

That’s quite awesome! I don’t think I know a lot of people like you.

Reply

Radhika November 14, 2011 at 10:52 am

I’d used the credit card for a while but my expenses were high as credit card allowed to spend the money I didn’t have!. Got rid of it. And now, there’s discipline in my spending. Also, these days, many online transactions which were earlier only allowed via credit card, can now be done using net banking or debit card payment. So it doesn’t really pinch if one doesn’t have a credit card.

Reply

Manshu November 15, 2011 at 12:16 am

I think more people than care to admit find themselves in the position where they end up spending money they don’t have. It’s quite amazing that you ended up getting rid of the credit card so quickly and got control of the situation.

Reply

Vijay November 14, 2011 at 12:14 pm

I have never used a Credit Card till now – Never felt the need to use one as Debit card serves the same purpose except on a couple of occasions
1.To book Airline Tickets Online Directly i.e Without a Travel Agent
2.While going abroad, to carry Plastic Money – But with the introduction of Vishwa Yatra Cards (SBI) where one can load cards with the currency of choice, this has been made easy!
Given the precautions one has to take while using it and the fact that a Debit Card serves most of the functions, i feel that Credit Card is largely unnecessary esp. in an era where Banks bend over backwards to issue Credit Cards without making the client aware of responsibilities.

Reply

Manshu November 15, 2011 at 12:14 am

But then how do you book tickets? I would guess that for most people that’s where the majority of their credit card spend goes – esp. people working away from home.

Reply

Vijay November 15, 2011 at 5:20 pm

For Railway tickets, Debit cards suffice. For Air tickets, i do it through a Travel agent.

Reply

Manshu November 15, 2011 at 11:55 pm

okay – thanks!

Reply

Ashok November 15, 2011 at 3:40 pm

I bet your post triggered a post on “Banks” by Scott Adams 🙂 !!

http://dilbert.com/blog

As Scott Adams wonders, why banks do not accept Auto-Debit for the entire balance? ICICI Bank which I use does not do this. And we have to remember everytime to pay the dues.

@Ramesh, surprising (and good) that Citibank offers full aut0-debit.

Reply

Manshu November 15, 2011 at 11:59 pm

haha no way! I’m sure Scott Adams doesn’t read OneMint but what’s amazing is that I was the first person to comment on that post – it was totally unrelated – I just mentioned about Steve Jobs mentioning Adams’s blog post after the antennagate to his friends.

I somehow assumed that people must have told Adams about it but apparently he didn’t know about it until I left a comment about it 🙂

Reply

Ramesh November 20, 2011 at 10:35 am

I donot think this feat of not paying interest is so uncommon in India. Many credit card holders just set full auto payments by their banks and is so simple – you just have to be motivated. All such people and others need to be encouraged.

In USA people love to live on others’ money and on credit, even if they have to pay penalties/interest.

I myself have not paid any interest during last 20 years!

Reply

Ramesh November 20, 2011 at 10:51 am

Ashok……I wish to say that ICICI banks allows full credit card payment automatically of my citibank credit card, and I have the option to pay minimal or a fixed amount everymonth. I never had any problem with these banks.

Reply

Ashok November 20, 2011 at 6:23 pm

Mr. Ramesh,

How do you set this up? I have a ICICI Bank credit card and a ICICI bank savings account but I am not able to set this up ( not online at least ). Do you have to go a branch to give a standing instruction or something?

Reply

Ramesh November 20, 2011 at 9:19 pm

Hi Ashok,

I donot know about icici credit cards, I have a citibank credit card and an ICICI bank account. we need to obtain a form from citibank either by mail through phone banking or by downloading and taking a printout. in this form we fill out details of our bank account and give our mandate for auto full or partial payment on the due date, sign it and mail it to credit card company. Similar facilities must be existing with icici credit cards. may be a call to phonebanking official would help.

Reply

Cancel reply

Leave a Comment

Previous post:

Next post: