One of the biggest financial mistakes I ever made was not getting the credit card – (because you need one to establish your credit history to improve your FICO) – but my mistake was using the card incorrectly!

 

Our society thinks it’s a privilege to be able to get a card with $10,000 limit and then go spend it all.  Do they have $10,000 to spend – no – so why are they spending it?  Because the credit card company allows them to  – but at such a high cost it’s not worth it.  On a smaller scale say you spent the month happily charging away, $200 here, $50 there, $100 over there…..by the end of the month you end up with $2000 and you can’t even believe it!  But say you can only afford to pay $100 a month for it….even if you cut up your credit card right then and there, here’s what will happen to you.  A $2000 credit card balance at 18.9% will cost you $421 in interest and 25 months to pay it off.  That’s over two years, and at the end of that time you won’t even remember what you were paying for!

Back to my mistake.  During my first week of college, I was all bright eyed and overjoyed to be away at school.  Unsuspectingly I walked into the courtyard and saw people giving away big bags of M&M’s!  I should have run, don’t I know better than to take candy from a stranger? 

Well they were offering credit cards to poor – unsuspecting college kids.  Why do credit card companies prey on college kids?  Because it’s easy – most students have little to no money, and love the idea of the freedom of a credit card.  The credit card company knows that many parents will help their kid out if they are having trouble paying the bill.  But FREEDOM is the last thing credit debt gives you.

So I happily filled out the paperwork and snatched up a 1 pound bag of Free M&M’s.  That was the most expensive bags of M&M’s I’ve ever bought!  A fast week later the card shows up in the mail.  At first it just sat in my wallet – untouched.

Then a friend came to me who was having car trouble and asked if I would use my new card to pay the mechanic and they would “pay me right back”.  My answer should have been “NO – why don’t you get your own card, or ask your parents” – anything other than yes!  So not only did they NOT pay me back right away, I had to chase them down for almost a year begging for my money.  Of course over the year the interest was piling up.  But the worst thing was when they finally did give me the money I made another mistake – I took the cash and spent it – when I should have paid off the bill!

So then I had debt, and it was easy to start adding more to it.  Clothes, shoes, plane tickets etc…and before you know it I had several thousand in credit card debt and as a young college student I had trouble just paying the minimum.

For almost 10 years I carried that debt around.  Always paying the minimum, but never getting rid of it, it followed me around like a bad rat.  Well, I thank God for my husband who was anti credit-card, so when we got married we made a budget to pay it off and when it was paid off  – then the Freedom came.  There is no freedom when you have credit debt looming over your head.  Do we have credit cards now – YES – it’s a must to maintain a good FICO score.  But we use them completely different. 

I use them to earn “points” and the credit cards get paid in FULL every month.  Every month.  So if we don’t have the money to pay it in full – we DON”T BUY it – we save for it.

Yes, it can be hard to be strict with yourself, but it’s worth the freedom.  Plus over time I realized all these “things” I had to buy never made me any happier.  I am much happier in a credit debt free life!

My favorite financial guru is Suze Orman and her book “Women & Money”.  I watch her weekly Saturday night program (actually DVR it and watch it while I do laundry) and follow the steps in her book.   A side note to the credit card debt – of course if you are in an emergency situation, credit cards can be a useful tool – as long as you use them wisely. 

-Helping you achieve your Domestic Success!

This entry was posted on Thursday, December 17th, 2009 at 4:06 am and is filed under $ Purse Strings. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.