My first experience with credit was during the Christmas season of my freshman year in college. I went to a local department store and bought some gifts for my mom, dad, and little brother. Though I was fully prepared to pay cash, I was offered an ‘in store” credit card on the spot. The clerk told me that I had a $100 limit and that my payments would be around $10. I remember thinking, “Are you kidding me? This is great!” I reasoned that $10 was nothing and by doing this, I would save some cash for going out to eat. Besides, it was cool to flip out the plastic. I continued along this path, dutifully paying my bill and even paying it off many times. Would you believe that the store continued to increase my limit every few months? I couldn’t. Didn’t they realize I was a broke college student? Little by little, I was being sucked into the credit trap because of my own ignorance.
Beginning my second year of college, I was forced to look into Pell grants and guaranteed student loans to finance my college education. The grants were never enough and the loans didn’t even have the first payment due until SIX MONTHS AFTER graduation. That was an eternity away, or so it seemed. During this time, I had managed to establish very good credit because I faithfully paid that store credit card bill. As a result, I was offered a Visa card through the mail. Again I thought, “Are you kidding me? A $2,500 limit for a broke college student with only a part time job? Are these people NUTS?” They weren’t nuts; they were geniuses in maximizing their own profits at the expense of my bank account.
I changed majors, ummm, let’s see, four times, and managed to use up all my grant eligibility as well as all my undergraduate student loan eligibility and that meant only one thing: time to suck it up and get a job cowboy. That’s what I did, and when I was employed full time, someone told the kind people at Discover Financial Services, GMAC, and several other credit card issuers. Wasn’t that nice?
I was married shortly thereafter and used credit cards just to make normal household purchases. I never went anywhere that at least $30 didn’t go on a credit card. Christmas, groceries, birthday gifts, side trips to the mountains, week long vacations to the beach, I was living the high life. I was able to keep making the payments, but the hole was getting deeper.
One beautiful March morning on a Saturday, my lovely wife came home with a ribbon tied around her waist. We were going to be parents! “Oh, cool. This is wonderful,” I thought. But what I didn’t calculate in that moment was that we would soon be down to one income, and I made less than my wife. We had always talked about her staying home with the kids and I felt personally very strong about it, so I was going to have to “man up” and become the sole breadwinner. Yikes.
Up to this point, I had only experienced one edge of the credit sword, the side that cuts through a lack of cash to give you what you want or need at the present moment. It had been fantastic because making payments had been pretty easy up until then.
We had managed to save a few thousand dollars and that helped us coast along, but I never made a conscious attempt to scale back our spending. THAT was my biggest mistake. We moved into a rented home that cost more per month. This home was farther from my job than previously and cost me more in fuel. I took a commissioned job to help cover my new little family with health insurance but this new job required me to use my own vehicle to make sales calls, creating a still greater cash drain.
When our beautiful little daughter was just three months old, guess what? My wife got pregnant again. This time our insurance coverage was poor and so were we. Our second child needed home health care that wasn’t even covered. By this time, our multiple credit cards were maxed out, our savings were depleted, the commissioned job wasn’t paying very well (less than minimum wage), so I changed jobs. I had friends and family recommending that we go on food stamps or consider bankruptcy. My student loans were way past due, and my wife was wearing herself out talking to creditor after creditor on the phone every day. Then, she required an uninsured surgery to remove her gall bladder and it couldn’t wait until our new insurance kicked in one, yes, that’s right, ONE day later.
My world was crashing, badly. Very badly. I felt like a total failure as a man and as a provider. That was a deep, dark time in my life. My sweet wife stood by me and was always there to comfort and encourage me. Without her support I would not be the man I am today.
Credit issuers don’t care about your personal financial situation, or the desperation you might feel because of your mistakes. I don’t blame them for what happened to me. It was all my fault so don’t be fooled, credit issuers ARE NOT out to get you … they’re out to get your money.
I progressed very well in my new job and was quickly promoted (I was motivated). I still remember bringing home my first significant “bonus” check, and although I was peeved at the amount of taxes that were taken out, I was thrilled to have an extra $500. My sweet wife cried as she ran into the house and began paying bills. Finally, we were experiencing some relief.
Those bonus checks as well as some nice payroll increases helped us get into a little better financial situation, but my credit was shot. At one point, I was in a training seminar 13 hours driving time from my home and needed some cash to buy gas to get back. I had none. Again, my wife came to the rescue and sold some of her jewelry so I could buy the gasoline to get home. I never was able to go back to that pawn shop and recover her things and I still regret that to this day.
Credit cuts through our unwillingness to delay gratification. That down stroke of its razor sharp blade lays open what appears to be a bounty of good things: cars, boats, nights on the town, clothes, vacations, fun, and more fun. But do not be fooled, the blade comes back up and this stroke usually catches us right between the eyes. Only the most experienced, the most perceptive, the most wise are able to avoid that “up stroke.”
As we made tiny steps of progress, I was fortunate to go hear Dave Ramsey speak on getting out of debt. This was quite a long time ago and well before he was nationally syndicated. What he said made sense, but I was still so deep in the hole that it felt like a grave. That’s when my wife suggested we go to Consumer Credit Counseling Services. Her idea shifted our debt reduction into high gear. They had a plan and we were willing to work their plan without question.
Within about a year and a half, we were strongly back on our financial feet and were able to buy our first home. Here, credit again came to our rescue since I could never have produced the huge sum of money to buy our home outright. Credit helped again, but I always knew that it had the capacity to cut me.
This story started 28 years ago and we bought the house I just mentioned about 15 years ago. Since that time, I’ve learned a great deal about how credit works and I’ve learned a lot about myself. I’ve learned that it’s always better to save or to pay cash for something if at all possible. Obviously coming up with mortgage level savings isn’t always feasible. I’ve also learned the incredible power of a loving, patient, and encouraging wife. She has truly been by my side through thick and thin, for better and for worse just like our vows stated. We’ve had enough of the worse and thankfully, things are continually getting better. The last ten years has seen a significant improvement in every aspect of my life.
If I had one thing I wanted people to remember about reading this blog article it would be this: Don’t ever let yourself be backed into a position where you need the credit more than the credit issuer needs you. They DO need you more than you need them. You can save up for anything you want, but they need your annual fees, your interest, and the discount spread in order to make money.