Credit Addicts Anonymous?
By [email protected]
October 18, 2000
Hi. My name is Kelly. I had a credit card problem.
It started small (it always does, doesn't it?) with the Citibank MasterCard I applied for after I graduated from college. I paid off the balance every month for six months, was "rewarded" with a higher credit limit, and then slowly but surely, the train of debt began. At first, I carried just $100 or $200 of my balance over to the next month. But then, I moved to Washington, D.C. and started working for peanuts, as is the case with most recent college grads in this fine city, and in a very short time, something very ugly happened: I discovered individual store credit cards.
What began as a harmless little MasterCard with a relatively low monthly balance, turned into an Express Card, a Macy's card, a Sears card, a Victoria's Secret Card, a Limited Card, and, of course, a Target card. Oh, and that's not all. In the meantime I also applied for, and received, a Visa, a Discover card and another MasterCard. I'll do the math for you to save you the time: ten lines of credit in all. Most of them, naturally, maxed out. And all in the space of two short years. Let's say it together: OUT OF CONTROL.
The Fool saved me from sure ruin. In December of last year I found myself sitting in traffic staring at the rear end of a bus. I had realized by this point that I was in some serious credit card trouble, and if I didn't do something soon I would spend the next ten years banging my head against a brick wall. And then, an apparition appeared before me -- a court jester, and a rather attractive one I might add. Well, actually, it wasn't an apparition, it was an ad on the back of the smelly bus I was stuck behind, but it may as well have been an angel. Fool.com. Intriguing, I thought -- certainly can't hurt to check it out.
Thanks to the Fool (and an ex-boyfriend with an economics degree and a good job who was especially dedicated to the get-Kelly-out-of-debt program) I now have only two credit cards, both with interest rates of only 12%, and I'm well on my way to a debt-free existence.
How, you ask? It just required a little Foolishness. It quickly became obvious after a perusal of the Fool.com website that it had not been very Foolish to carry around a $100 balance on a Target card with a 23% interest rate. So, first I paid off the small balances on the cards with the most onerous interest rates. It was a painfully slow process, since it meant I was still paying exorbitantly high minimum monthly payments on some cards in order to pay off entire balances on others. But it was probably the most important step toward getting out of debt. And what was best about it was the feeling that, month by month, I was actually making some progress in paying down my debt.
In the meantime, I applied for a Visa through my credit union, which offered a far lower monthly interest rate than the obnoxious rates on my Discover card and MasterCard. And then, it was time for balance transfers! The limit on my Visa was high enough to transfer almost all my remaining balances from other cards.
But there was still a problem I had not addressed: I love to shop.
While I had rid myself of most of the plastic, the high-credit-limit and low-interest-rate cards that remained quickly and "mysteriously" were maxed out. For four months I carried thousands of dollars of balances on my three major credit cards (and a Macy's card that I just couldn't bring myself to give up) because once they were maxed out, I couldn't figure out a way pay them off. There was simply no way for me to afford it. I lived every day in the clutches of my creditors.
Enter, again, the ex-boyfriend with the econ degree. He put me on a budget and convinced me to take out a personal loan that has an interest rate equivalent to that of my two lowest, and already maxed out, cards. The monthly payment on the loan is less than the combined monthly payments on the credit cards, and I was able to pay off two entire balances, and part of the balances on the others. He's keeping those cards while I continue to pay them off -- just in case. And I am finally learning to live on the money I actually make, instead of squandering years of my future salary.
I think I'm a Fool!