When I was young(er), I opened a credit card account. This was when I lived in the United States and had a US checking account. I sent in my payments faithfully every month, more or less, and even had zero balance on it at several points.
Then I became a student, and the balance slowly went up, and up, and up, to where it is today: an authorized credit limit of $8180. It was maxed out more often than it wasn’t, but I (almost) always managed to make payments on it. When I moved to France, it became a bit more difficult to send in the monthly payment, but eventually I started the same system I use for my student loan payments.
A little over a year ago, we got tired of the uncertainty of making payments. Oh, the monthly due date and minimum payment were always the same, but the payments weren’t always promptly deducted from our checking account. We were also fed up with sending the credit card company lots of money, but never actually seeing the balance decrease.
So we decided to take out a loan to pay off the credit card. First of all, this simplified things immensely. We were making payments to a French bank, and they were automatically deducted from our French checking account. Second, it was much, much cheaper. We are now paying 5.89% interest, instead of the 22%+ that we were paying before. And third, we have ease of mind: we know that this loan will be finished in February 2011; we have no clue when the credit card would have been paid off.
As a side note, I’ve had the chance recently to go over my past credit card statements. There was recently a class action settlement and I’m entitled to some money. To get it, I have to give them the total amounts charged on my US credit cards abroad from 1996 to 2006, year by year. I’ve been looking at all my statements in amazement! What did I spend all this money on? A lot of Starbucks, books, clothes… some travel and more living expenses than I care to admit. The travel I will always remember, but the rest? Ephemeris.