Is revolving balances on a credit card a good idea or a bad idea? I was recently talking to someone who believed that it was a great idea to have revolving balances on a credit card. His rationale was that by limiting the available credit he would be less tempted to spend on the credit card.
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I was totally flabbergasted by the thought that someone would actually do that. By keeping a balance you are paying interest to the credit card company. In other words you are paying the credit card company to use your own money!
That makes no sense to me since I am not revolving balances on a credit card at any point in time. In fact my credit cards get paid multiple times during the month. By paying smaller amounts multiple times I accomplish three things:
-I don’t miss a payment date
-I get to keep my money longer (earning interest)
-I don’t pay the card company interest (no revolving balance)
In fact you can check out How I Manage My Credit Card Payments which is an older post showing how I set up my credit card payments. I have actually reduced the payment times now to twice a month since I have gotten a better control of my budget.
In any case, back to the person I was speaking to about revolving balances on a credit card. He claims that he does not have the self control to not spend and will just buy things as long as there is available credit! He does not want to try other methods like using cash to limit his spending because the credit card is shared with his wife…who also has a shopping problem.
I recommended using a debit card but they do not want to try that either since they get more rewards from the credit cards.
I think this revolving balance idea is a BAD one but what can you really do when someone does not want to try other methods? Do you know anyone who does this intentionally? What advice can I try with this individual?