This post written by Seth Busetti.
This was years in the making, and we knew it was inevitable, given our trajectory towards being financially independent and willingness to be counter-culture. But we finally did it. And I got the privilege of cutting up our family credit card! Closing the credit card account and cutting up our Chase Freedom credit cards wasn’t very painful at all. Not at all like throwing out something sentimental. So far nothing bad has happened. And I don’t feel like a pariah of modern society. It really wasn’t that exciting. Just a pair of scissors and a brief phone call did the job. Here’s a paraphrase of the transaction.
Guy: “You are calling about the Chase card, right, you have a $14,500 limit?”
Me: “Yeah, that’s the one.”
Guy: “What is the reason for wanting to close the account?”
Me: “Your interest rates are too high.”
Guy: “I see your rate is 14.9%. That competes with anything out there.”
Me: “Yeah. Way too high. I want you to pay me 14.9% instead.”
Guy: “I can’t do that. So you want to close it? Please hold… Okay, I cancelled the account.”
And that was it. For years and years we used our credit card “responsibly”, meaning we only used it as an infrequent transaction convenience. And sure, we’d get a meager reward back occasionally (albeit way less than 14.9% than the reward they’d have gotten from us on any late payments!). But we payed the bill promptly each month, didn’t carry over a balance, didn’t get behind. Responsible, right? Note that using a credit card in this responsible way doesn’t actually contribute to a better credit rating. For example, you can go to the FICO website and read about it – your credit improves by reliably paying down your credit balances, but not for maintaining a zero balance. So you have to actually be in debt to improve or maintain your credit score…crazy.
Here’s how this works. The fact that someone is willing to lend cash to us with high interest sends a clear signal that they’re not acting as our friend or family. No, they are out to do business, and you and I borrowing helps them make money. Do we really think we’re sticking it to the man with airline miles or cash back programs? Think again. So great for them, but if we’re all interested in doing good business, I’m much more concerned about building up my own family’s wealth than I am in keeping the wheels of the global financial system greased.
Deuteronomy 15:6 is pretty clear about the one-sided borrower-lender relationship and who is the one receiving the blessing:
“For the LORD your God will bless you, as he promised you, and you shall lend to many nations, but you shall not borrow, and you shall rule over many nations, but they shall not rule over you.”
The consumer credit system is premised on the assumption that average people won’t be very good with their money and will inevitably spend more money than they have – the system then facilitates that exchange of debt and scores everybody on how nice they play. So what about those of us with no consumer debt? For one, we don’t need a credit card for anything. In our household, we’ve worked hard to ensure that we have more money on hand than the credit card maximum. We can get to our money any time we want, using a debit card, a money order, a bank transfer, etc. We actually started an liquid savings account just for that purpose: it’s called Busetti Savings and Loan and it allows us to borrow from ourselves at zero interest and with no late fees. Its purpose varies, it might be a car fund, or business startup fund, or house down payment fund, or anything that we might otherwise use credit for.
So why finally quit credit cards now? This is another important step in our financial paradigm shift. I mentioned the card-cutting ceremony wasn’t terribly exciting, but breaking free of the credit cards is a big deal. There’s a lot of financial wisdom we wish we’d have known starting when we were teenagers, and still lots of lessons to learn, but we’re confident we’re moving along the right trajectory. The bible seems to be clear that believers should strive to be lenders and not borrowers, heads and not tails. If you are still wrestling with financial baggage, are stuck in cycles of consumer credit, or are just wanting a guide to help you walk the path of financial freedom, please reach out to us. We can help!