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.

13 thoughts on “Finally Debt-Free, and it feels good”

  1. “However, personal finance is not objective”

    Ermine, I can see we’re going to have a lot more fun over the next few years! 😉

    Great to hear your fascinating story and that you’ve made peace with your credit cards.


  2. You inspired that sentence, you’re on a roll 😉 Objective has a subtly different meaning to me from the Ayn Rand quote you cited in reason or faith. From my science training, objective also has the meaning that something is observed in the same way by independent observers. So I played on that 😉


  3. I’m glad it’s not just me! I payed off everything, including the mortgage, before I started socking away money in earnest.

    I kept reading stuff that said you should invest instead of paying off the mortgage, because the investments would yield more than the mortgage rate, but I didn’t care; in my view, the priority was to owe nothing to anyone and that is what I did first. Brilliant feeling!

    On the question of credit ratings, it’s just mad. When my daughter went for her mortgage there were loads of lenders who were not interested, because she had no real credit history (never had loans or credit cards).

    Fortunately, her bank was happy to lend because she had an overdraft facility with them which she had used carefully and then paid off. But it makes you think – perhaps she should have got a credit card just for show and paid it off every month, but that’s not what she wanted to do. Almost 30, she still doesn’t have a credit card (and nor does her young man). Way to go!


  4. I’ve thought about stoozing but, like you, I’ve concluded that the complication is not worth it. On the other hand, still having the mortgage is a complication, but its familiarity and low interest rate means that actually I can’t be bothered to pay it off.

    The “debt free” status does not mean anything to me per se. It’s not a badge I can be bothered to collect right now, since I know I can anytime I want.


  5. Hi Ermine,

    I used to stooze up until the banks got wise and started tacking on the transfer fee. I made some useful money stoozing, but those fees made it too complicated and a lot less fun.

    I have since paid off ALL consumer debt and no longer have ANY credit card. The only debt I have is the mortgage, and I’m planning to attack that too.

    Its a great feeling having no debt and no credit cards. I seldom get junk mail 😉


  6. @SG TBH I probably shouldn’t have paid mine off, objectively 🙂 There’s always that Monevator article to remind me that peace of mind is not opportunity cost-free. I would have more useful options now. OTOH, there is a certain value in owing no bugger anything, nobody has a hold on me, I can pull up the drawbridge and tell everyone to get on their bike. There’s value in that too. Not pracically, after all if zombies crawled over the land I’d be as stiffed as everyone else, but it’ a nice thought…

    I’ll get over it in due course and return to the land of the living someday 🙂

    @Yabusame don’tcha yearn for the days wen you coudl earn 6.5% stoozing,that was worth having 😉 That handling fee busts the whole idea. I’ve occasionally considered referring some of these ads to the ASA, but they usually find in favour of the advertiser. He who pays the piper gets to call the tune…


  7. I paid off the last of my mortgage with a windfall several years ago. Best thing I’ve ever done. It still feels great to know I don’t owe anyone anything.


  8. Nice feeling, isn’t it? Knowing not one penny is owed to someone else. I too took the chance to pay off my mortgage when I could rather than ‘invest’ the money I had available elswhere. I was looking more at balance of probablilities: on the one hand keeping the mortgage means a guaranteed drain of interest payments, on the other the uncertainty that I may not be as wise an investor as I imagined. In the end I decided for the certainty of no debt/no interest. Sure, there was an opportunity cost of the investment I couldn’t make as a consequence, but that opportunity could have gone up or down. Then of course, there would have been the thought of having made a good investment just to see all the profits going straight to the bank as mortgage interest. Nah, not in accordance with my values.


  9. @Dave, Macs – yes, it’s not quite rational, and indeed I carried this interest-free debt in case some particularly good opportunity happened for my ISA while I was still saving a large part of my salary. For all that, it has significantly enhanced my quality of life to out it. I’m with you there, it just feels better 😉


  10. With interest rates so low I have not paid our mortgage off, and that’s even by using the dreaded cash instead of “investing”. As there were so many signals and indeed outright statements from bankers that interest rates are staying at current low levels for 5 years (this was about three years ago) I dumped a full £160k into two 2 year fixes at 4% in my wife’s name. As a basic rate tax payer she therefore gets 3.2% on this, as opposed to the 0.99% we pay on our mortgage.

    That’s a big difference – nearly £3.5k a year of free money.

    We even managed to roll over the fix into two new 4% fixes just before they all became 3 year fixes a few months back.

    Other than this, I would most certainly have paid off the mortgage – got to be worth the feeling.


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