Debt Free Living: But I travel for my job! Edition

One common point of resistance to getting rid of credit cards is the old “I need one to travel for my job.”

Well, that’s a load of crap. It can be done, and I have been doing it for years.

The best way to go about this is to have a company card that you are not liable for, and that you don’t pay the charges on. The bill goes directly to your company’s accounting department and they pay it after you send them your expense report. Yes, these type of cards exist. No, you’re probably not going to get a say in whether or not your company chooses this type of card.

For two years I had a card like this. Every other week I flew from Nashville to St. Louis, rented a car, and got a hotel room. I paid for everything with my company card and never once saw a bill or wrote a check. It was all very nice. I’m sure that if I ever did something stupid like buy an HDTV using that card I would at a minimum get a stern talking to, possibly all the way up to criminal charges (buying a TV for yourself with company money would be embezzlement or fraud, I’m sure).

But then! TRAGEDY! My company was bought by a very large mega corporation that you’ve probably never heard of. They had a policy of reimbursing employee expenses. Basically, employees became this multi-billion dollar company’s payday lender (without the interest). I was expected to make the charges, file my expense report, and then wait for them to reimburse me. Most people would just go get an AmEx card and hope the reimbursement check came before the bill came due. In fact, the new company had a “preferred” card for you to use (so not only were they making interest by not paying expenses directly, they were also making money in referral fees to the credit card company).

The last time I used a credit card was in 2004. I will never do it again. So, what to do?

I had two years’ worth of data telling me how much I spent for a week in St. Louis. The maximum amount of weekly charges in that period was somewhere in the $1200 range, with a touch over $1000 being the average. Luckily, these policy changes weren’t going to take affect for a couple of months so I had some time to make accommodations.

I opened up a checking account at ING Direct, and also added a money market savings account. ING gives you a MasterCard debit card for the checking account (which pays a tiny bit of interest) and allows you to instantaneously transfer money from your savings account (which pays quite a bit more interest) into your checking account. Since I was traveling every other week, I put two weeks’ worth of expenses into the savings account, plus a little extra. I could go up to five weeks waiting for reimbursement and still be okay.

Now, my coworkers all went and got the credit cards. We were told that reimbursements would be “nearly instantaneous.” That’s an exact quote. What does nearly instantaneous mean? Apparently 3-4 weeks.

So four weeks after our first trips on the new policy, my coworkers were complaining about not being reimbursed. I remember distinctly one proclaiming that he wasn’t going to pay the bill he’d just gotten in the mail.

You know, the bill for this new personal card that doesn’t affect anyone but himself.

Yeah, that’ll teach your employer!

So what were my coworkers’ choices? One possibility would have been to make a minimum payment and start accruing interest on the balance while waiting for reimbursement.

The other choice was to take money out of savings and pay the bill. That, of course, assumes they had several thousand dollars available and that they were willing to part with it not knowing when they would get paid. This choice sounds remarkably like what I did, only in reverse. I chose to part with my money first and forego the possibility of paying interest or making a late payment.

I realize that it may be difficult to suddenly switch from using a credit card to using a debit card. If you decide to go this route, just set a goal date of, say, three months from now to make the switch. Use that time to set up the new account, start putting money in it (I would actually put this at the top of your debt snowball), and switch your reimbursement account with your payroll department to this account.

It might sound scary to go this route, but if you know what your average expenses are and your reimbursement timeline, there is absolutely nothing to fear.

8 comments to Debt Free Living: But I travel for my job! Edition

  • Jake

    I just wanted to say thanks for posting up the Debt Free Living series. As a college student it really has made me think about planning out my financial future and how to handle the debt I’m going to take on with graduate school.

  • wizardpc

    Jake,

    I say this as a guy who has a Master’s degree: Don’t go in to debt for grad school.

    At my college, you could get an assistantship and that would basically pay for school. Your eligibility for an assistantship was based on your GMAT/GRE score, and the threshold was so low that I discovered people who didn’t qualify for the assistantships really shouldn’t have been in grad school in the first place.

    Both my wife and I have our graduate degrees, so I’m not anti-grad school. I’m just anti-go-in-to-debt-for-grad-school.

    (also, I think my time in graduate school would have been much more useful with two or three years of real world experience under my belt.)

  • Jake

    Well I misspoke by saying graduate school. I know it is possible to go to grad school without going into debt, hell my girlfriend is doing it now at Baylor.

    I guess my vagueness because this is the internet came back to bite me, I’m hopefully going to law school, and the scholarship/assistantship game for those is something that I’m not quiet knowledge about just yet.

  • My wife and I are debt free and we do the opposite.

    We put *everything* on the credit card. We only use cash for places that don’t take credit cards or have a minimum amount when we are making a small purchase.

    The only reason this works is we have the discipline to pay off the card in full every month. We have never paid interest on a card, and the only fee we ever got was for using the card in Canada once. (Now we use cash there).

    The advantage for us is that this way we can track every single thing we purchase. My wife goes through the statement every month and reconciles the receipts. She’s caught a couple fraud charges that way over the years. But, more importantly, we know where the money went and can adjust.

    For instance, our latest goal is to eat at home more, once we realized how much we were spending eating out. We’ve cut back a bit, and are working to do more but, like any habbit, it is hard to change. Without looking at the card receipts though, we never would have tried to make the change.

    This won’t work for everybody, but it works for us. Right now the only debt we have is our mortage, and their’s just no getting around that.

  • wizardpc

    Why can’t you use a debit card to do exactly the same thing?

    Next week’s post addresses all this.

  • “Why can’t you use a debit card to do exactly the same thing”

    We REFUSE to have a debit card. I won’t even have an ATM card because it can be used as a debit card.

    With a credit card our liability is limited to $50 in the event of fraud, and in most cases the card companies will write it off and not stick you with it even then. (The two times we had fraudelant charges we didn’t have to pay anything).

    With a debit card, if your info is hacked, they can drain your account and you are much more likely to NOT get that money back. There is no “$50 max loss guarantee” and it’s harder to get a bank to put money back into your account than it is for a credit card company to decide not to charge you for a fraudulant charge.

    I did some reading on credit cards vs. debit cards a few years ago and I would NEVER had a debit card after doing that research.

    I can’t understand the popularity of debit cards myself, when compared to the very real risks.

    • wizardpc

      “There is no “$50 max loss guarantee” and it’s harder to get a bank to put money back into your account than it is for a credit card company to decide not to charge you for a fraudulant charge.”

      I have great news for you! About 10 years ago, Visa and Mastercard changed this. Now their debit cards (and credit cards) have zero liability. I had a Visa debit card stolen in 2002 and my money (all of it) was restored very quickly.

  • Heather

    If you’re using the credit card responsibly, as Rob Reed explains and as my family does, what’s really the difference between using a credit card and a debit card? Credit cards aren’t inherently bad, even though many people use them poorly.

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