Finally Debt-Free, and it feels good

Credit card mandala

For the last 16 months or so I’ve carried a £5800 balance on a Tesco credit card. Yesterday it was due to be paid off, so the day before, I rang up Mr Tesco and paid it off. It’s the last piece of long-term consumer credit debt I’ve had, and it felt good to discharge it.

The Ermine is unlike those exemplary 1-4 users of Drew’s Making Peace with Credit Cards. Hell, I buy luxuries and non-luxuries on my cards. I don’t pay the damn things off every month, I’ve been making minimum payments.

Has there been a secret Ermine gadget buying spree going on? No. While I was working I ran up a debt on this Tesco credit card. Each time I bought something on the card, I paid about the same amount to a Nationwide savings account. I had a serious credit card habit – Barclaycard had offered me interest-free credit for a year, and so I took them up on the deal as well.

Then Martin Lewis of Moneysavingexpert introduced me to this MBNA deal where I could transfer a balance to it interest-free for 12 months, so I shifted the Barclaycard balance to them as it was due to time out. Nationwide gave me a paltry rate on their savings account, so I shifted that to National Savings and started saving up the amount again in a different account. I paid MBNA down last month. The Tesco card had been running at the same time, all in all I had about £10,000 worth of consumer credit accumulated over about three years. A lot of it was equipment purchased for the farm, although there were a few meals out, shedloads of fuel purchases and some groceries and wine purchases too 😉

When is 0% interest not 0%? When there’s a 3% handling charge!

There seems to be some collusion between card providers, because Barclaycard and MBNA have been regularly sending me 0% balance transfer offers. But with a 2.9% handling charge, so they can get on their bike. A 12 month 0% balance transfer with a 3% ‘handling charge’ is a 3% p.a. loan. Some of the offers were six month, making a 6% APR. Some people may be daft enough to get caught out by that but I’m not one of them.The frequency of these offers has increased over the last couple of months, presumably as they suspect I am getting desperate to pay the Tesco card off.

I got about 2.1% on the savings, so I guess all this kerfuffle meant I made about £300 in interest over a year and a bit. Yes, it’s worth having I suppose. However, I do remember times when this game was a lot more worth doing.

Even 0% debt has a cost – it complicates my life.

Debt is still a claim on my resources. It takes away a little bit of my soul. It was good to pay down MBNA last month and is was even better to pay down Tesco. There wasn’t a monetary cost to either debts, that’s the whole point. And yet I’m not sure I want to carry that sort of debt any more in future. Stoozing is very hard work at 3% interest rates, it was much more fun at 6 or 7%. Stoozing isn’ simple living, it’s taking extra complexity on to make money.

It’s possible that Equifax and their ilk already know I don’t have any income and the blizzard of faux-0% offers is a cynical ploy to take advantage of that. Hell, I got rejected from Zopa as a lender because of something that wasn’t right at Equifax. Maybe I should check it out so I can have another bash, I certainly wasn’t going to send Zopa a notarised photocopy of my passport just to lend money to them!

My credit score probably stinks now, because credit scoring is all about looking for the out of the ordinary. I am going to stick out for miles as out of the ordinary because I have no income they can detect, and I don’t hold revolving credit card debt now. I don’t have a job, I don’t draw a pension, indeed the God of Shopping will probably send a SWAT team out to crush this sort of dissent before it catches on. I presume at the moment Equifax doesn’t have its tentacles in accounts where I have capital, because it doesn’t have any business there.

I will still use the credit cards I hold for the other advantages, particularly the consumer protection. But if a credit card company decides I shouldn’t hold a card from them then so be it. I don’t have to borrow money on a credit card. I don’t buy enough Stuff to be worth chasing cashback deals and the like, stoozing isn’t worth the candle for me so to hell with that. Simplicity has its own rewards. If interest rates on deposits tick up to useful levels in the future I’ll review that, but I’m not holding my breath.

My values are not objective, they are often irrational

Being debt-free is a very different feeling from having more than enough capital to pay down all debts, ie net-worth debt-free. My net worth in Quicken hasn’t changed one bit. It’s irrational as hell, a bit like paying down my mortgage; I could have held on to it and invested instead. Objectively the two are equivalent, indeed carrying the debt to invest is a classic use of other people’s money for leverage. However, personal finance is not objective, it is also about values. These values are not universal and independent of the observer. My values are that owing this money probably cost me more than I was being paid to owe it. That is the time to stop chasing the small freebie and live those values. For any month now, I owe nobody anything that came from previous consumption.

For a long time I have craved simplicity, too enmeshed with claims on my existence, and in the last few years of work I found servicing those claims meant I was doing something every day which pissed me right off in some respects. In these recent years, I have been reducing this noise and hum, to quieten the enervating racket and the grasping hands and entities demanding I live by stupid rules. Then I started to turn the tables and lay my own claims on others’ work, because the process works in reverse too. Among others, from the end of the year The Firm will pay me in dividends more than a month’s salary every year, without having me on their payroll. They need to start working for me now, rather than the other way round.

Being debt-free in an absolute sense feels good. Now the process of reduction in almost complete. The quieter time of the year is coming, the darker months are for introspection and reflection sometimes in front of the fire, occasionally with a glass of some fine red wine. For elimination of what is wrong is a necessary part of the process, but it is not sufficient to live intentionally and well. I have cleared the way by elimination, but then need to build anew by synthesis to shape a life that matches my values.