The Credit Card

And Debt Free Living

I am one of those truly neurotic individuals who :::thinks::: that my creditors are real live people who analyze me and my financial habits. I’ve always taken my credit entirely too personally. When a bill gets crossed in the mail or mis-applied and I receive the standard dun notice, I go into a panic attack, frantically reviewing my records and answering with lightning quick Fed-X replies to solve the problem prior to immediately.

I picture an old fashioned circa 1870’s western style Banker/CPA dressed conservatively in black trousers, black bow tie and vest. He’d be wearing a black arm band over his white long sleeved shirt that was rolled up to the elbows. Daily, he’d be reviewing my credit file - just waiting for me to *BLOW* it financially … bounce a check, exceed my credit limit, use the standard snail mail and accidentally pay my bills two days late when there’s already a ten day grace period, make an error in subtraction in my check register, or — heaven forbid, double pay a bill when there’s seldom enough to pay it the first time around!

As a single parent, I cannot afford any bad marks against me because I have no significant other to bail me out! So … naturally, being the thrifty homemaker that I am, I have developed a plan that works for me. It does require just a tad more work, but isn’t budgeting a big part of our happy homemaker’s job description anyway?!!

Due to circumstances beyond my control, I do not have a check guarantee card. It makes writing checks all around town, a pain to deal with the merchants. I hate to carry cash — don’t want to give the would be robbers anything to take!! But … I do have a credit card! Since I cannot afford to be in debt nor can I afford to have no credit, I write checks for my house payment and utilities only — all other expenditures are by way of credit card usage.

This is what I do every month:

I charge every purchase I make that can be charged. Yes, from groceries (a major monthly expense) to greeting cards, from shoes to doctor’s visits and prescriptions. The list goes on…

In order to make sure that I don’t over-extend, my golden rule is that I never charge more than what I have on hand in my checking account. As soon as I charge a purchase, I immediately assign a journal entry number to the sales receipt and make a corresponding entry in my check register. I keep all my sales receipts in an envelope to reconcile to my credit statement when it comes in.

A sample check register follows so you can get a clearer idea of what I’m talking about. (My figures have been exaggerated for this example to make me feel good this month!)

When my bank statement comes in, I reconcile it the very same day. Now that’s DISCIPLINE if you ask me!!!

There’s a little more work involved at this point … I must list my visa charges as outstanding checks! What I do is list my outstanding checks in one column on the back of my bank statement and list the credit card purchases in another column. Really, this only seems like extra work! If I had written as many checks as I have sales I have charged, I quite possibly could have as many outstanding checks anyway!

A couple of days later, my credit card statement comes in. Now here’s the “little bit of work”.

• First I match the purchase against my check register to make sure that I have indeed entered every charge. I check each charge off with an “x” to distinguish it from the “checkmarks” I use for when reconciling my bank statement. This also let’s me know which charges have not hit my bank yet!
• I also write the JE number on my credit card statement. This way I can pull all the corresponding sales receipts out of my envelope and staple them to the credit card statement. This process makes finding the receipts simpler also, if there happens to be a need to return the product.
• Now, the last thing I do is make an in and out journal entry in my check register. Remember, I have been marking the credit charge purchases in my check register as I charge. Same as “pay as you go” only a little different! So now, my check register looks like the following example:

The reason for the “adjust je” as a deposit above is so that I cancel out the charges I’ve already deducted from my check register. This way, I can enter the check that I have just written for the Visa payment, so that there is a record of the check for my bank account the next month (whew, out of breath with that last sentence!). The balance does not change after this … as you can see.

Every month, there are no surprises when my credit card statement arrives. No “Uh-oh’s” because I charged just a little more than I have the money to spend. No … “I’ll pay the minimum amount due, just this month only,” scenarios. No regrets that I cannot pay my credit card bill at all. This process enables me to pay my Visa bill right when it comes in and be consistent about it!

And lastly, if I ever make an error in subtraction, I will NEVER bounce a check even if I was cutting it close! As you know, some charges do not show up on the currrent month’s statement, so there is a little cushion in what I think I have in the bank vs. what I actually have in the bank. It’s kind of like having a little pretend ready reserve!

The end result: I have a fairly high credit amount charged every month, I pay my bill in full every month, and I am establishing a good credit payment history.

It may seem like a lot of work for some, but as I say, this works for me.

Plus… it always looks like I have a lot of money in my checking account and that gives me a certain sense of security. Plus — considerable comfort when I’m feeling the financial crunch these days!

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