How I Saved Over 10,000 Of Dollars In Six Months – SAFA SALEH
Yes, you read that correctly.
I saved over 10,000 dollars just by cutting my credit card in half. I learned this tip seven months ago, when I was in a rabbit hole of YouTube. I looked up how to make pumpkin pie and down the rabbit hole I went. I ended up watching Entrepreneur Mark Cuban give financial advice to college students. In the hour long video, he said the best thing to do to get rid of credit card debt is not to have one. I thought to give this a try considering I would have to pay my college loans after I graduated, in addition to my credit card debt, so I didn’t have anything to lose.
For six months, I used the re-loadable debit card from GreenDot. This was a debit card you have to reload with cash at a local Rite Aid or Walgreens. Yes, it was a inconvenience to have to walk to Rite Aid and pay the $4.00 tax to reload my card, just to order a top from H&M. It would have been easier and saved me time to just pull out my Discover card from my wallet to make the purchase. But, It was all worth the trouble once months later when I realized that my bank account had more zeros than before.
I was not alone in my battle with credit credit debt, according to CNBC, 55% of Americans also have credit card debt. But why? What about the plastic card that makes us swipe so often with no hesitation. Well, there are a number of studies that indicate that people do spend more when paying with a credit card for psychological and cognitive reasons.
The first reason is that its just easier. Let’s say you have $100 budgeted for a romantic dinner with your significant other. If you only have the $100 in cash, you will pay careful attention to what you are ordering to make sure you have enough to pay for your meal and tip. However, if you have a credit card, there is really no immediate penalty for over-spending, so it’s easier to go over your budget.
In a study by behavioral Scientist, Manoj Thomas and his colleagues recently found that spending differences between tightwads (who chronically find spending painful) and spendthrifts (who don’t find spending painful enough) were smaller when people were required to use credit to make purchases than when people were required to use cash. Credit helps to anesthetize the pain of paying, and it caused tightwads to catch up to the spending levels of spendthrifts nearly.
Credit not only helps to reduce the sting of payment, but there is some evidence that it also stimulates desire. In a series of experiments in the 1980s, Richard Feinberg manipulated whether or not credit card logos were visible while participants contemplated how much they would be willing to pay (in cash) for several products. Feinberg found that hypothetical willingness to pay and actual cash donations to charity were significantly greater when credit card logos were visible than when they were not. (These surprising findings were replicated two decades later by Priya Raghubir and Joydeep Srivastava.) The results suggest that consumers have been conditioned to associate credit card logos with consumption. Exposure to credit card logos may therefore stimulate craving, much like smelling fresh cookies stimulates hunger.
In addition to these emotional factors, cognitive factors can also contribute to the credit card premium. Credit limits, in particular, can give credit users benchmarks against which to compare prices. Research by Dilip Soman and Amar Cheema suggests that high credit limits can signal future earnings potential (at least among consumers with limited credit experience), and these expected earnings can make prices seem relatively small, which in turn stimulates spending.
If throwing out your credit card makes you nervous to even think about, another tip to do is write down what you purchased with your card once your home. Writing down what you spend your money on can make you more aware of your spending habits.
Despite saving thousands of dollars I recently started to get back to using my credit card again after I paid my debt. But, I have been more aware and smarter about using my credit card. I am able to treat it like cash, as I did with my re-loadable debt card. So, I suggest anyone who is currently in the position I was in six months ago and suffer from debt that keeps one up all night, to give this tip a try. It may effect your credit for a little while, but if you save thousands of dollars that could pay off the debt, its a helpful strategy.