Changing Positions on Credit Cards: Bethany’s Story

We’ve all heard the expression, “If I only knew then what I know now.”

I remember it like it was yesterday. Well , I’m only 25 so it practically was yesterday. I was 18 years old with a credit card pre-approval from Capital One in my hand, having bought into the myth that I needed to get a credit card in order to establish and build credit. So I called and accepted it. As I heard the thick Indian accent on the other end of the phone tell me that my new card’s credit limit was $208 (what a weird figure) I thought “good, it’s low. I’ll be able to use it and then pay it off.”

Raising the Debt Limit

Well, sure. But my limit didn’t stay at $208. After having the card a short time, they raised it to $1,000. Then to $1,500. Before I knew it, I had a credit limit of $3,000. To be honest, I was pretty flattered! Again I thought “cool. I could never actually use that much, but it must mean I’m taking good care of the account!”

Oh, little child. How quickly you can run up $3,000 in credit! And how difficult it is to pay off when you work part-time for minimum wage at CVS/pharmacy when you’re 19.

Soon after I started working for the Credit Union I work at now, I decided to do a balance transfer to our credit card because the interest rate was WAY lower (and still is). I could get it paid off sooner because most of my Capital One payments were going toward to 18% interest and I felt like I was taking one step forward and 12 steps back every month. I advise you to do that if you can, because it really does work when most cards are charging you 17%-25%.

I was jazzed to see my payment drop about $50 per month, meaning I could keep paying my regular payment and knock that baby out! Right? Well, yes, if I had closed that Capital One account when it was paid off. But, naively, I left it open. The reasoning behind this was that I didn’t want to close an established trade line and hurt my credit . . . which is true, if you’re into that sort of thing.

Here’s a bit of truth: limited credit will hurt your score and your chances of being extended credit in the future. Capacity is one of the C’s of credit, and it plays a big part in your credit score. It shows lenders the credit you have available to you and how you’re managing it. A bunch of maxed out credit cards or limited/new credit hurts you. However, if you’re a follower of teachings such as Dave Ramsey’s, then your goal is to never need credit again anyway!

The Emergency Credit Card

So, long story short, I ended up charging back up my original account with “emergencies” and then had more than twice the debt I started with.

Oops.

I am now paying off debt from two credit cards. Now, if I told you how much I have to pay off I’m sure that many of you would laugh because it’s merely a drop in the bucket compared to the tens of thousands you may have. And in a way I’m very blessed because that’s the only real debt I have. My car is paid for, and I don’t have a mortgage at this point. But it’s still a very discouraging place to be.

Changing Positions

See, my problem is that I have a bad habit of telling myself “oh, it’s only $20” and charging it on my card. But let’s do the math here: if I do that five times, then it’s $100. If I do it ten times, it’s $200. You math majors get the picture. Pretty soon it’s in the thousands. So, I made a bold move: I took Baby Step #2 a few months ago and cut up my credit cards!

And I went to town on those things; I didn’t just cut, I annihilated! I was fueled by sheer desire to be rid of them, and it was a blast! Then I sat there, looking at the pile of tiny plastic bits I had just created, and thought “what the heck did I just do?!” Even though I had money in savings, it still scared me! But guess what: it has forced me to only buy what I can afford, which led me to the realization that if I make some budget cuts, I can afford stuff! Who knew! And let me tell you, when I had to get my car fixed and was able to pay out of pocket I felt a sense of pride and accomplishment for not having to charge it. Don’t get me wrong, it hurt to dip into the emergency fund but that’s what it’s there for and I was grateful for it.

A lot of our writings here are tips and how-to articles, but I felt the need to just share some encouragement today. If you’ve never gotten in over your head with credit cards, then good for you! But you are rare, my friend. If you’re reading this with a looming number over your head that you feel you’ll never be free of, you’re not alone. It takes time and dedicated persistence, which is not always fun, but you can be free of it. You don’t have to resign to a lifetime of debt.

One of my favorite quotes is from Dave Ramsey, and I’m encouraged by it frequently when I feel like throwing in the towel:

Children do what feels good. Adults devise a plan and follow it.

Sit down, make a plan, and follow it. There are much better things to spend money on than high interest rates, so I hope you will join me in the journey of destroying debt. We can do it! I’ll keep you updated, and I would love to hear your story, too.

Editor’s Note: If you’re keeping your credit cards because of the perks, try PerkStreet Financial instead. You’ll get cash back for using your debit card!

Meet us in the comments! Tell us your story about credit cards . . . are you trying to pay them off or do you think they’re a good thing to have? We’d love to hear your thoughts below!

Image by Andres Rueda