Saturday, August 21, 2010

So what foolish things have landed me in this much debt?

On 28 Feburary I wrote this in a blog post:

Overdraft on 28 Feb 10: 2363
Credit card on 28 Feb 10: 1995,86

Today is 21 August 2010 and my current credit card balance is 3942.82.  Overdraft stands at 2477.39.

That's a difference on my credit card of 1946.96.  The just over 100 euro difference on my overdraft is mostly interest charges (charged quarterly and it was 70-something).

What I have used my credit card to purchase since the end of February:

476.87  car hire 
39.00  weight watchers (March was the last month before cancellation of subscription kicked in)
212.13  petrol/diesel for hired cars
74.73  amazon/abebooks/
470.00 cash withdrawals (at some stage I transferred 250 to my bank account to prevent my overdraft limit being exceeded, which would have caused big trouble - big official trouble I mean, not just the big trouble that being in debt is)
10.00  fees for cash withdrawals
115.85 jars/preserving supplies
19.99 megavideo
196.15  bus/train 
32.51 kaufhof (food)
15.90 DHL (finally sending my sister in NZ her christmas present)
21.22 dunnes (bought food and some supplies for my brother when home in March)
19.42 eurospar (bought some baking soda, sweets and crisps in Ireland to bring back here, judging by the amount I probably did the lotto as well)
42.17 boots (@Dublin Airport - bought sunscreen, dispirin, a hairbrush and sandwich/water)
49.99 clothes  (bought badly needed new trousers for work and a couple of t-shirts)
100.00 vodafone (deposit for my brother to get internet - I spoke to him yesterday and he should be able to send me some money this week at least)
157.09 interest charges (This includes a refund of 52.74 due to errors the cc company had made last year.  I am on a low interest rate.  I did ring last week to see if I could get a six-month interest free break but was flat out told no.  I was also told I could ring back the customer loyalty team (I rang outside the hours that team was working) and talk to them about lowering my interest rate further.  I haven't done that yet and am undecided that it would really be worth my while.)

So that all adds up to 2053.02 which explains why my credit card is 2k higher than it was at the end of February.

BUT I have made payments of 774.05 over the five months in question.  So where's that all gone.  I am confused and I think I need to go back and read about how credit cards work to figure it out.  I do check my statement every month against the receipts I have so I  know it's right every month but it is good to do an exercise like this to show just how ineffective credit cards are as a means of finance.  I made just over the minimum payment this month and last month made a payment of just enough to cover the minimum payment plus the interest but the other months I paid well above minimum. 

I should not have gone to my sister's in France in May regardless of how badly I thought I needed a holiday (this will apply for the ten days I spent at home in July as well although I did pay cash for just about all of that).  Just because I want/need to get away doesn't mean I can.

Taking cash out is a bad, bad, bad idea.  If I ever need to do it again (in a perfect world I won't but never say never - I doubt I'm going to stop messing up just because I'm admitting my folly publicly) I need to be realistic about how much cash I genuinely need for the rest of that month and take one amount out to at least save on the charges for doing so.  Or, I need to just use my card to pay for whatever absolutely necessary items I have to purchase and forget about having cash.  That is difficult to do in Germany though where the cash economy is still very much alive and well and credit cards are not taken in all that many shops.  That's a good thing overall though.

I need to continue to be brutally honest with my brother about my financial situation.

Loaning money to friends (or paying to help them move) just because I have access to some credit and they don't is a very, very bad idea.  I don't know that I would do it differently if I had to do it again though.  Like with my brother though I need to start being brutally honest with this friend about my financial situation.  I know if he is every in a position to pay me back he will but I also know that's not likely to happen for a long time if ever.  I need to at least ensure that he doesn't feel I am available for any further rescues.  To be honest I think I have already made that clear but it's important for me to remember it as well! 

But mostly I think this illustrates how easily credit card debt is built up.  Most of that actually occured in March, April and May so just three short months.  So when all those people tell you credit cards are a bad idea and if you must have one pay it off in full as soon as it falls due, do listen to them.  It's true.

1 comment:

Musical Maggie said...

I am presently paying off my credit cards. It is so easy to charge things and forget about having to pay for them in the end.