The beginning:
Like many of you, I remember my first credit card. I was leaving for college and my dad took me to our local bank and acquired my first credit card with a $500 balance. I don’t recall what the interest rate was, but I’m sure it was 16% or more. My dad was a wise man and, by the world’s standards, not a wealthy man, but as I’d be driving to college, he feared that I might get stranded. He was crystal clear about what constituted an emergency, and it was to be used only for emergencies and to NOT go into debt. He was truly a "live within your means" man!
Shocker!! This college kid’s first time was not an emergency.
Anyways, the responsibility was mine to pay it back when I received the first bill. The "nice" credit card company gave me this payment plan with a minimum payment. Wow, I could pay that. And there it started. (Side note: My next blog will talk about minimum payments and the math behind them. Watch for it on Wednesday.)
The worst of it:
As I’ve shared before, if you read about me, Terri and I had 4-5 credit cards at the worst of it, making minimum payments and doing the 0% interest game. You know this game; a new credit card comes in the mail with 0% for twelve months and a higher credit limit if you transfer your balance. We solved our problem with free money. Not! At one point, we went to a debit consolidation company, and they helped us reduce our interest and consolidate our payments into one easy payment. Right, the problem is solved! Not hardly.
The path out:
First, we learned the hard way—so please learn from us. Going to a consolidation company did NOT fix anything. It did not address the root problem. The root problem is that we had a behavior problem; we weren’t living within our means, and the credit cards enabled us to live life beyond our means. It wasn’t until we truly got sick and tired of having things that others had, that we learned to be content and stop using our credit cards.
I plead with you to learn before it’s too late and teach your kids before it's too late. If you are already caught in the game, have hope there is a way out. And if you need help, please connect with us. We’d love to help.
Final thoughts:
According to a report published on September 10, 2021, link, the average balance on credit cards in 2021 was $5,525 and the percentage of Americans who pay their credit card bills in full rose 1.5 percentage points to a record high of 33.7%.
You might be part of the 33.7% disciplined enough to use a credit card wisely, but studies show that credit card companies bank on the fact that at some point you will slip and fall, and the debt shackles will be attached.
As someone who was caught in credit card debt for nearly a decade before breaking free, I hate the fact that credit cards allow people to live beyond their means.