What? Have I developed a severe case of multiple personality syndrome? Didn’t I just say that you should get a credit card and start establishing a credit history? Yes, yes I did.
But,
And yes, this is a big “but,” credit cards can get you into trouble. They certain got me into trouble a few years ago, and it took me more than two years to pay the debt off. Now, I’m a shining example of what the credit card companies call a “deadbeat:” someone who pays her bill completely, in full, every month. (They call me a deadbeat because they can’t charge me interest anymore – boohoo for them!)
So, back to the “but.” If you start to get into trouble with your credit card, cut it up. Don’t try to justify it like I did, saying things like “Oh, but I have to buy textbooks and art supplies for school! And feed my film crew. And buy these pants.” If you start carrying a balance, you’re in trouble.
- Recognize that you’re in trouble. Even if you’re paying for “necessary things.” Actually, especially if you’re paying for necessary things.
- Cut up the card. By having the card, you’ve done your part to start to establish a credit history. Cutting it up won’t end that (but canceling it will – so just cut it up and don’t use it!)
- Pay off the balance. Do whatever it takes. You probably won’t have to take as drastic of actions as I did (i.e. dropping out of school), so don’t feel bad. Just work to pay it off. (Here’s 5 tricks I used to pay off my credit card debt.)
- Maybe, when you’re done, order a new one. Once the balance is paid off, if you think you can handle your card again, call up your credit card company and tell them that your card was damaged, and you’d like a new one. (You can leave out the part where you damaged it yourself with a pair of scissors.) But, if you do order a new one, be careful with it.
And really, don’t feel bad if you “can’t handle a credit card.” There’s some evidence that credit cards can cause some people to spend more. They just affect your brain in a different way than cash does. And that’s okay… as long as you’re aware of it.
The most important thing is to know yourself, not to try and do everything perfectly as suggested by a personal finance book or some crazy girl on the internet… but to do the things that really work for you.
I agree, credit cards are often unnecessary and dangerous. In fact, I wrote a post earlier today called “Weighing the Pros and Cons of Credit Cards”. You can read it at http://debtfreecollege.blogspot.com/2009/02/weighing-pros-and-cons-of-credit-cards.html.
Be careful just cutting up a credit card and not using it anymore after you pay off your balance. I’ve heard some credit card companies will shut down your account if you don’t use it for a certain amount of time. This will do the same damage to your credit as if you had canceled the account.
Congrats on becoming a credit card “deadbeat” (in the good sense of the word)! That leads to some great satisfaction, I can imagine. Credit card companies prey on people when they are in college because they have some insurance that people tend to think VERY short-term when in that stage of life, and it’s really tempting to get everything NOW. They aren’t dumb, that’s for sure. It’s like tobacco companies trying to get kids to start when they are young.
Jerry
Very good tip. I think far too few people realize they have a problem. I know I did not realize I did because I was living at home, had few bills and was new to the whole credit card scene so I just kept swiping.
I like your tip to order a new card when you feel in control again. Another thing is to freeze the card in a block of ice so it takes some real effort to get to it. Then if there is a real emergency, you still have the card. This takes far more control than the old chop chop though.
Great article
@Regina
Legally the company has to contact you to close the card but your exactly right. many of them now are doing the act now, ask questions later and canceling cards at “consumers request” when the consumer did not request it. Then one has to call and reopen it within a certain amount of time before it is reported to the credit bureau.
Two of my accounts were “closed by consumer request” without my authorization.
haha, oh yeah gotta love them cards! i fall into the “use your c/c for everything you possibly can” groups to rack up cash back rewards and budget easier π
but as you say, it’s def. not for everyone! but it sure is hot if you can master it.
Credit card can be considered a “friend” who will help you when you need it. In case of cash shortage, you can just charge your expenses to your account. On the other hand, it has a drawback when you don’t know how to use it correctly and properly.