Two conversations this past Thanksgiving (I paraphrase):
Conversation #1, on Thursday:
Bro’s girlfriend: So what’s the interest rate on your new car?
Hubby: Um… I’m not on a finance plan.
Bro’s girlfriend: But how’d you pay for your car?
Hubby: I put it on my credit card.
Bro’s girlfriend: … You can do that?
Hubby’s mom: How’d you pay for your new car?
Hubby: I paid for it with my credit card.
Hubby’s mom: You did? How? Why?
Hubby: I had more credit than what the car’s price was, and my card’s at 0.99% APR for the next six months. We plan to pay it off by then.
Hubby’s mom: … Ah, my rich son! You do know that I live vicariously through you, right?
My brother’s girlfriend and the Hubby’s mom gave normal responses to something that usually gets relegated to the rich: being able to buy right out a big ticket item, like car (as we did) or a house (as we didn’t). But, my mother’s-in-law opinion notwithstanding, we’re not rich — we’re solidly middle-class.
However, we’re middle-class with (cue Monty Burn’s voice) *EXCELLENT* credit history, and it’s creative debt management that allowed that to happen. The credit card that the Hubby used to pay for the car had only a $2000 limit back in 1997. Over nine years, through creative debt management, that card’s limit ticked up higher and higher, often with no balance, so that he could use 2/3 of his card’s credit limit to buy a car and thus get clear title. According to the finance guy at the dealer, only 9% of car buyers actually do that — the rest usually go through the typical 36-month finance plan.
Through disciplined personal financial habits, we have four cards to work creative debt management with: one with the car, the others with no balances on them whatsoever. Through further post-BA education, years of slogging in the adjunct track, and gaining our present full-time teaching jobs, we have two middle-class incomes to also work creative debt management with.
With the mortgage paid through March 2007, paying down the mortgage is on the back burner. Front and center is the credit card, with the five digit balance. We plan to slam that balance, paying quadruple digits worth each month. A negligable balance should still be there when the 0.99%APR promo expires in early April 2007. Before that happens (in March), we’ll transfer the remaining balance to either the 2.99%APR card or one of the two Amex cards. Then we’ll slam the remaining balance, just in time for us to start making mortgage payments again.
Advantages: 1) Gaining clear title on the car. 2) Building more credit history. 3) Increasing our credit scores (since we’ll use both the Hubby’s card and my card).
Creative Debt Management is one of my hobbies — it’s like a huge, complicated strategy-and-tactics game, but with real-life rewards and prizes. It’s funny that I never considered this — financial planning — as a profession. I suppose if I actually did this for a living, I’d come to hate it. But as an amateur one, I’m having a heck of time. 🙂