Back when I started college I was pretty good at saving money. I lived at home and worked part time. I also had both a savings and checking account. If there was a luxury item I wanted I saved up for it and bought with my money. Then one day things changed: I passed by a table giving out free Koosh balls!
They were free but not without a condition: I had to sign up for a credit card.
Up until that point I didn’t have any credit cards. I pretty much did fine without them. Like I said, if I wanted something I used cash. I was pretty good with my money and didn’t really need a credit card. But I figured a credit card could be pretty useful if I wanted something like concert tickets over the phone and I would probably get one eventually anyway. And it was a nice spring day on campus and having a Koosh to throw around could be fun!
I received my credit card in the mail. I felt like such an adult now. This bank trusted me enough to extend credit to me! The limit on the first card was only $500 but at the time it felt like a lot of money. I remember my Dad telling me to be careful with the card and to not go overboard. That was wise advice from my old man!
At first I only bought small items like a music CD here and there. I always paid my bill in full. One day I walked into A&S (remember that store) and I find some clothes I wanted. I noticed I could get a discount if I signed up for their credit card. Hey, why not? Who doesn’t like a discount? So I signed up and was approved and made my first purchase that day. I think I might have saved a few dollars on that purchase. That card might have had something like a $300 limit. A couple of months later I was in Macy’s and guess what? They too offered a discount when you signed up for their card. Another application, another approval, and another few dollars off a purchase. I now had three credit cards.
Through all this I was pretty responsible with my cards and paid off the balances every month.
My next big adult moment came along – I moved out to live on my own! Man, was that feeling of freedom so awesome!! But I quickly realized that when you live on your own things get expensive fast! Not only was I paying rent and utilities but I needed basic household items like plates, a broom, groceries, all things I took for granted living with my folks. I started charging more on my credit card. I also started to not pay the entire balance every month. Hey, I didn’t have the extra cash like I used to and I knew I would pay it off later! The interest charges seemed real small so I didn’t really think it was a big deal.
One day I got a letter in the mail from my credit card company. They wrote to tell me that they were increasing my credit limit. I must be doing something right if they trust me enough to increase my limit! And it came just in time too as my charges were starting to add up.
I realized it was starting to get cold out one day and realized I needed a winter jacket. Off to the department store! I found a really great leather jacket that I quickly fell in love with. Only thing was it was real expensive. Good thing my credit limit was raised. I bought the jacket and felt like a million bucks!
Perhaps that jacket paid off because not long after I bought it I met a woman who I thought “was it.” It was a whirlwind relationship. We went out to eat, we went to concerts, we went on vacation, we moved in together, all in the space of six months. Life was good. But my credit cards paid for a lot of it. My debt was growing fast. I would charge a small item with the rationale that I would pay it off next bill. Bigger purchase went on the card because I simply couldn’t afford to pay cash. My first card had a limit of $500 and now my debt was growing into the thousands.
The relationship didn’t work out but I would have a debt relationship with my credit cards for years to come! Other cards added to the collection and more expenses added as well. Eventually I was able to reign in my purchases and slow down the growth of my debt. I even got savvy enough to call up my cards and ask for lower rates as well as switch balances to cards with 0% interest. After many years and thousands in debt I was starting to slowly catch up.
Freedom came to an end. I was living in an apartment that wasn’t quite up to code and had to move out. I didn’t want to start charging on my card again so I sucked in ego and moved back in with my parents. Back to square one. Ouch, did that hurt! But you know what? I was able to pay off all of my credit card debt! I vowed to never get into debt like that and I’ve been able to maintain that vow. My credit cards still get used but they are used responsibly and are paid off entirely every month. It was a long road that starting with me living with my folks and ended with me living with my folks.
Are there lessons here? They should be obvious but to list a few out:
- Don’t fall for credit card sign-up gimmicks.
- Charge only what you can afford to pay off when you get the bill.
- Don’t spend to impress someone.
- Debt will stay with you for years and will grow when you aren’t looking.
- Freedom means not being in debt.
I wonder where that Koosh ball ended up? That was one expensive little toy!
The following was a guest post from Free From Broke.