Sometime last year, one of my co-workers purchased an iHome clock radio for his office. He kept raving about how perfect the playback was for an office setting. I agreed. The music played audibly, but not so loud as to disturb others. I sort of wanted one too, but to shell out $89 just to hear my iPod music without headphones at work seemed like a waste of money to me.

Then I started to have a change of heart when I realized exactly how annoying it is trying to do my job while wearing headphones. iPod alternatives didn’t work out either. The crappy speakers on my work computer played internet radio horribly. And besides, I associate internet radio with my unwinding time at home. When I leave work, I want it to stay there.

MoneySince I rely on music at work to take the edge off my detail-oriented, tedious job, I wanted to find a frugal medium that didn’t compromise producitivity and listening enjoyment. That darn iHome began to look more and more perfect, especially when Costco sent me a flyer in January for a $20 discount on the iHome.

There were a couple of catches though. 1) The coupon wouldn’t be effective until mid-March. 2) I could only buy the iHome with cash or debit since Costco accepts only Amex, which I don’t have nor want. I’m much more frugal when it comes spending to cash, which made me seriously question whether the iHome was a worthy buy anymore.

And that was the setup for Costco showing me how to articulate to myself and others exactly how to avoid spending frivilously with credit cards.

I really wondered, “How badly do I want the iHome? Eh, not that bad. I do want it, but I can wait until March to save $20.”

I know that in the grand scheme of things, a $20 savings isn’t a big deal. However, how the coupon influenced my perception of the $20 was a big deal. Back in my free-spending days, I would have planted an $89 +tax charge on my credit card without a second thought. But by being forced to pay cash, and by having to wait for a discount, I was given a rare oppurtunity to view a $20 savings as real money.

That’s where I think people get in trouble with credit cards. Credit cards warp the reality of money. A person’s credit line isn’t rightfully owned money. It’s borrowed money from a bank as soon as a purchase is made. Some people think that by giving a credit card to a cashier, getting a receipt for the purchase, and timely paying off part of the balance when the credit card bill comes, that’s the end of the story. Well, the story doesn’t end there for an unlucky bunch. More purchases are made under the guise of credit as real money; balances grow; interest accumulates; higher monthly payments need to be made; and then more purchases go on credit cards because more cash has to go towards paying higher credit cards bills. And of course, the cycle continues as credit lines increase.

Now that most of my money goes to paying off old credit card balances, I quickly saw how credit purchases reflect real money, if not more money when considering interest. The part I’ve had trouble with is changing how I view the purchasing power of a credit card. But thanks to Costco making me wait to buy the iHome, I realized that if I purchased it with the knowledge that the price would go down $20 at a later point, it would be no less strange than taking a $20 bill out of my wallet and flushing it down the toilet. And thanks to how Costco accepts payment, I had a clearer grasp that at whatever price I purchased the iHome, I’d have exactly that much less money to spend later, no matter whether I paid by cash or charge. Thus, my desire to be frugal should make no difference whether I choose to pay by cash or charge.

For the longest time I’ve been scratching to uncover the correct view of money in the age of credit cards, and alas the job was done for me by Costco. I guess the lessons they teach even come in bulk.

P.S. I did end up buying the iHome, along with several other money-saving purchases that were necessary. Luckily I didn’t fall into the Costco trap Nina pointed out a while ago. The total trip was a hefty chunk out of my checking account, and because of that, Zac and I spent almost all weekend at home, living happily and frugally ever after. The end.