I got my first and only credit card when I was 18. Until that point, I had heard about credit cards, but didn’t really understand the whole concept behind them.
To give a brief background, I come from a country where at the time (2011), credit cards weren’t a thing (still not a thing). We use our debit cards, but no one really uses credit cards. We are mostly a cash society. However, I no longer live in my country, and I have not for almost 7 years now. Therefore, I had a murky knowledge of credit cards because I had never seen anyone use them.
When I turned 18, someone thought it was a good idea to give me a credit card. On that day, the conversation went something like this.
Bank Teller: “Do you want a credit card?”
Bank Teller: “We will be giving you a $x limit”
I didn’t think at the time I had ever had that much money – that I had access to – in my account, ever. In my mind, it was free money that my bank was doling out to its customers. Once I got my card in hand, I proceeded to spend, spend, spend. When I look back, I don’t even remember what I spent it all on.
Not long afterwards, I was over my limit. This confused me. I remember asking myself repeatedly, “Where did all the money go?” I thought at the end of the month, my bank would credit the ‘free’ money in to my account. When I look back, I’m not sure what my thought processes were.
After inquiring at the bank, the cashier let me know that I was supposed to make minimum payments each month, and/or pay off the full balance, if possible.
There and then, it dawned on me that I was in debt. Bear in mind that I had no idea that not paying your full balance meant there would always be an interest fee incurring. I thought by paying my minimum, I was doing great. As time went on, with me making minimum to no payments, it became second nature for me to ignore calls from my bank. And I’m pretty sure that at some point, my file was almost forwarded to the debt collectors.
Months after dodging every call from numbers I didn’t recognize, while barely making my minimum payments and continuously going over my limit, I began to get panic attacks and anxiety, just thinking about how much I owed.
It plagued me for months, and this drove me to let my parents know about it. They generously offered to pay it all off, with the promise that I would never spend that much again. I vowed to pay it off and close my credit card account. I recognize how incredibly lucky I am to have parents that can volunteer to do that. Nevertheless, it was still a difficult conversation to have.
Skip to three months later, my credit balance was over limit, and I was in debt again. I made the same stupid decisions – these were decisions, not mistakes – and got myself in the same mess. This time, I tried to make my minimum payments. But honestly, a few weeks after the due date, I would still not have made any payments.
Then, my bank started to transfer money from my checking account automatically – without my authorization. I’m still not sure why or how that happened, but I’m grateful someone decided this was the right thing to do. The thing is, I was a student, which translates to being broke. The little money I had, I wasn’t ready to use to make credit card payments. That was how I found myself back to where I was barely three months earlier.
Now to the present, since I started reading TFD and other financial blogs/websites, I have been more mindful of my spending and have been acutely aware of the debt I have incurred. After I got a new job, I made a payment plan for my credit card.
Every month, I pay a certain amount into the account. By July, I should have paid it all off. This has honestly been a painful process; it sucks to have your funds transferred to your credit card immediately you get them. But, this was my own doing, and it was time to face the consequences. I also tried to negotiate reduced rates, not necessarily on my interest rates, but a balance protection I was paying a premium fee for. I did inquire about reduced-interest rates, but that wasn’t happening with my history.
I have also not used my credit card for almost a year, because I do not have a physical card with me. (I moved addresses and never changed my credit card address, and it worked. Recently, though, I changed my address and should get a physical card soon. That is when the challenge begins all over again.)
I’m still a bit iffy about actually using the card at all, because I don’t really trust myself with it. So, I plan to hardly use it. This means putting it out of sight, and never seeing it enough to memorize the number (Trust me, this has happened.)
I am also giving myself a two-week rule. If I am thinking of using my card for any big purchases, I have two weeks to really think long and hard about it. Finally, when I do use my card, I plan to pay it back in full before the payment due date.
In a way, I am grateful I didn’t close my credit card account the first time I paid it off, because I don’t think I would have learned anything. It is also never really a good idea to close your longest standing credit card account. Going through this process a second time has taught me a lot about myself, and how I handle my finances.
With these tactics in place, I’m hoping I can live a life free of credit card debt. There is so much to learn, and I definitely have a long way to go.
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