Credit-cards-cut

MY LIFE WITHOUT A CREDIT CARD

When my first credit card arrived in the mail I felt euphoric.

I was 19. I tore the envelope open, activated it, signed my name and drove straight to the shops.

My plan was to buy myself a treat. I was a credit card customer now, after all.  I was a successful young woman with a full-time job and a credit card to prove it.

I bought myself some clothing, nothing too expensive. Then I wandered in the next shop and bough a top. On a roll now, I walked into the very next shop and bought some earrings (may as well buy an entire outfit).

I was up to my sixth shop in 30 minutes – slightly sweaty and dizzy with delight – when my credit card was declined. I was confused because I hadn’t spent anywhere near my limit but a phone call to the bank revealed that my card had been flagged for ‘an unusual level of use’. They thought it had been stolen and the thief was going on a shopping spree before I could cancel.

I had to confess that the person on the shopping spree was me.

I felt sick. It really jolted me out of my spending stupor, but it didn’t stop me from going on a shopping spree again and I remained in credit card debt for over a decade.

According to the Consumer Action Law Centre Report  (Banking on finding your weak spots by Deborah Gough in the Sun Herald), “revolvers” are the credit card users banks love most.

“Revolvers” always have an outstanding balance on their credit card that they never pay off, but they do pay something. These are the banks’ most lucrative credit card customers.

My life as a “revolver” came to an end when I entered a committed relationship. All my financial misdeeds were laid bare. We wanted to buy a home together and my credit card debt was as shocking to him as it was surprising to me. I’d never added it all up before.

I was $23,000 in debt.

Funnily enough, my credit card use made me an attractive customer to our bank when it came to applying for a mortgage because despite the fact that I had this debt, I made regular payments. I had “demonstrated an ability to service debt”.

Ten years later and I’ve grown up a lot. I now see credit cards for what they really are – redundant and expensive. With a credit card, my $60 handbag ended up costing me $74 dollars. A $20 cafe lunch ended up costing $34. It didn’t make any sense! Who can justify having a credit card when we now have the option of debit credit cards? All the ease of a credit facility but it uses your own money. A $60 handbag costs $60. It’s a no-brainer.

 

According to the report, banks target us when we are most vulnerable and most likely to agree to limit increases.

My first credit card had a $300 limit and easy to pay off entirely, making me a “transactor’. After less than a year I was offered an automatic increase to $1000 due to my excellent repayment record. All I had to do was NOT respond to the letter and the increase would go through. To reject the increase I would have to contact my bank.

It was almost Christmas and I knew I had extra shifts coming up at work. I upgraded everyone’s presents and maxed it out. For the first time, I couldn’t pay it off completely from one pay.

Welcome to the world of credit card debt, little girl.

It was hard to get out of credit card debt but I was sick of being held hostage by it. I worked out a strict budget which we stuck to religiously for two years and we paid them all off. We’ll never have a traditional credit card again.

While following our super-strict budget as we struggled to pay off our credit card debt I became obsessed with a TV show called Til Debt Do Us Part hosted by an energetic financial planner called Gail Vaz-Oxlade. She’d come into a couple’s life, discuss their irresponsible spending, destroy their cards in a blender or with a similar kitchen appliance and work with them to repay their debt.

The couples always struggled at first.

One couple were missing their credit cards so much that Gail organised a meeting with a few couples who had no debt outside of their mortgages. The couple in debt said one of their most recent purchases on credit was a new lounge. One of the debt-free couples asked why they didn’t just save for it. The couple in debt answered that the wanted it straight away and they were hopeless at saving. One of the husbands commented that it was easy to save for a lounge when you had to sit on the floor and they should try it.

Having no credit card debt feels like a huge weight has been lifted.

When a young family member proudly announced that he had just received his first credit card I felt sick. It was like he was following a formula. Finish school – check. Get a job – check. Take out a car loan – check. Apply for a credit card – check. Accumulate debt – check.

A young friend of mine has two credit cards. She makes ‘blind payments’. Too scared to open the statements she pays $200 on each card every time she is paid and continues to use them in complete ignorance of her financial position.

A credit card isn’t free money. A credit card isn’t worth the bonus points. A credit card is money you will owe. A credit card is money you don’t have. And banks will do anything to get you to accumulate credit card debt.

The Hoopla wants to know: What’s the largest credit card debt you’ve ever accumulated? How do you manage your plastic? 

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* Jo Abi is the author of the book How to Date a Dad and on top of raising three adorable children and volunteering at her children’s schools she is studying for her Masters in Creative Writing. Jo’s interests include childhood food allergies, education for all and how to be a modern woman, a modern mother and a modern wife. Jo current works at the Australian Traffic Network and you can read more about her at joabi.com.au

 

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16 Comments

  • Reply May 3, 2012

    The Huntress

    Oh thank god I wasn’t alone! I found myself in a similar situation (but due to a dodgy life situation trying to support a family of five and an alcoholic bum of a partner, whilst a full time student, I had a fair bit more debt) and it was terrifying. Then I left my bum of a partner, took my little son and moved back to the city to finish my study. Somehow, I met a man who actually wanted to marry me (huh?!?) and I never have been able to tell him how much debt I have (he knows it’s there, just not exactly how much). It wasn’t even a year when I cancelled all my credit cards (and I hadn’t used any of them for a year, just paid them), got a personal loan and cut them all up.

    At first I thought I would miss them, I wondered how I would cope, but in actual fact I haven’t missed them at all. Granted, I have no savings, but if I want something I pay for it with my own money after loan repayments, bills and all other expenses have been paid. I imagine it’s probably cut down on my impulse buying dramatically and I shop more thoughtfully. And because that silly, lovely man who married me is just such a wonderful human being, every so often he flicks me some surprise money in my bank so I can go and pick a treat when he notices I’ve been doing it tough for a while. It’s good to know that while it’s still a little way off I can rid myself of all the debt and then I can put all that extra money into my marriage, rather than continuing to pay off my exes alcohol abuse.

  • Reply May 3, 2012

    Susan

    Now girls I’m talking about BANKCARD……I found myself in a similar situation to the above when I realised I wanted to buy a house…..And guess what -I was refused a loan because I had an outstanding BANKCARD debt! So I did the same-paid it back + $1. They kept sending me statements for about three years telling me I had $1 credit. Every month for those three years I felt holier than thou and giggled as I totalled how much it was costing them instead… Sitting on the floor has never hurt anyone ….Then there is always Vinnies if your bum is too soft….

  • Reply May 3, 2012

    Jo

    I had $14000 on my credit card. Have now moved it to a .09% card for 12m and have hidden the new card/wont put it in my wallet. Im going to pay it off in the 12 months and will never let it get that high again. I want to travel overseas next year but have to pay this off first. Then will pay for the tickets etc with my debt card.. yeahh!! feel more in control of my finances.

    • Reply May 3, 2012

      julie

      Where on earth did you find a .9% card?

      • Reply May 3, 2012

        Jo

        Julie, its only .9% for the transfered balance for 12 months. Its a Vertigo Mastercard from St George.

  • Reply May 3, 2012

    Rosie

    I feel like a social pariah because I DON’T have a credit card. But I don’t have a credit card debt either.
    All my friends have got good jobs but no money as they are paying off huge sums on credit card debt they racked up on holidays and general living expenses.
    I saved my meagre wages and went on great holidays in Argentina and Italy and Egypt in my 20’s. I didn’t actually miss out on anything by not having a credit card!
    My husband has a credit card which I use for online purchases when I know I have the money to pay it back. And I do this right away.
    Of course the one problem is, I don’t have a credit rating so probably can’t get a mortgage until I incur some debt. Oh, the irony.
    The system is so wrong; that we should all prosper with debt over our heads while banks encourage this bad behaviour for their own greedy ends. Pooh to all that and call me a pariah!

  • Reply May 3, 2012

    Deb

    I guess I might be weird, but I’ve had a credit card since I was 20 (10 years – eep!), and I’ve paid it off in full every month. My points on spending earn me back my annual fee, and usually about $100 extra, not to mention earning interest on my money still in the bank during the interest free periods between payments. I guess I don’t spend what I don’t have. That has never seemed difficult or challenging at all – and I’m on a scholarship, servicing a mortgage. I do, however, always eat the entire block of chocolate in one sitting, so I guess we all have our weak spots…

    • Reply May 16, 2012

      Rhonda

      I have a credit card, I’ve always paid it off every month. WIthout fail.

      I sometimes wonder why I need it if I don’t ever owe anything. But I like having cash in my bank account for emergency purpose, for when credit card payments are not accepted.

  • Reply May 4, 2012

    Annabelle

    I love this story, and the responses so far! I, too, struggled with the credit card monster till 2000, when I managed to lower the limit, by writing to my bank, from $5000. to $4000. after paying it down to $4000. Then I chipped away till it was down to $3000 etc Then I cancelled it, forever!
    Eventually, I got a debit card, which I was using wisely! Now I have a debit card that is linked to my business account…. no fees but I am able to do internet transactions….sensibly of course!
    Why do I like this article and responses? Because women are getting savvy about money but are not afraid to learn from their life lessons and to share their stories!

  • Reply May 7, 2012

    Pusskin

    Here’s a number: $65,000. Yes, that’s with three zeroes at the end. And you know what, I had a great time fooling myself into thinking I could afford my ‘lifestyle’. It all came a head late last year when I was embarrassed abt being perpetually harassed by debt collectors at work, after returning from a holiday financed by the same credit card. After having no sleep for weeks, I realised I needed help and contacted MyBudget (this is not an ad, btw, I am actually just a really happy customer ) who managed to somehow, somehow, salvage the cents in a situation that made no sense at all.
    There are reasons why the debt spriralled out of control. I had to finance living expenses when my husband ‘s. business went broke, but mostly, it became a vicious cycle of using one card to pay off another. I do blame my vacuous consumerist behavior that couldn’t or wouldn’t stop. I think I somehow felt ‘entitled’ because I works so hard, paid my mortgage on time, kept the household together and did my best to help my husband.
    Ironically, I am classed as a ‘high income’ earner but had no financial sense whatsoever. Or emotional as it turns out.
    So, maxing out all six of my cards and no ability to pay it, I entered a debt agreement just with the idea of saving the house. The repayment sucks up all surplus funds for the next five years and I am finally, FINALLY able to see how the debt system works!
    Dumb huh?
    Oddly enough, after having a budget worked out for me, including repayments and necessary expenses, i am emotionally much better off. I no longer feel hollow after buying something I know deep inside I can’t afford and not spending has freed me up to do the stuff I do love, like reading and making more meaningful connections.
    At the moment, I am contemplating bankruptcy. I’ve done a great deal of research on this versus a debt agreement and think it offers me an opportunity to recover and have a second chance at life.
    Money is one of the last taboos of society. I’m not sure where I picked up the notion that credit cards equal success – maybe because I grew up in the 80s?
    If you are feeling really harassed by credit card debt collectors or feel you are not coping, do feel free to email me. Or even if you are feeling low because you are now faced with a debt agreement or bankrupcy and simply need a vent, please do reach out. I know how it feels.
    And debit cards rock! And knowing you can actually afford your holiday in real time! ;)

    • Reply May 10, 2012

      Jacob Joseph

      HI Pusskin. I’m a journalist and would love to be able to share your story with the readers of my blog. please contact me @ jacob.x.joseph@gmail.com to touch base if you’re keen. Thanks. Jacob.

    • Reply May 13, 2012

      Swanny

      Pusskin … I think you’ve hit the nail on the head – “vacuous consumerist behavior” combined with a sense of ‘entitlement’ is a deadly mix.

      Of concern is that people in your situation can be “contemplating bankruptcy”. I haven’t been in your situation, so I’m just curious really. Is there no sense of obligation on your part to repay the creditors who have provided you and your family with goods and services in good faith?

      Life is full of unfortunate experiences from which we can learn much, but surely an essential part of the learning process is to face our responsibilities squarely, to ‘own’ them and to deal with the consequences.

      Abrogating those responsibilities doesn’t bode well for dealing with other lessons Life may have in store for us all.

      Just asking …

  • Reply May 13, 2012

    Jess

    Argh! The hideous credit card! I applied for one when I started a new job that paid monthly – was given a $15000 limit, and for a long time I was a revolving user, but with only a small amount owing, it wasn’t so bad. Then I met my now-husband and because we lived 2000 km apart both our credit cards started to see the effect of all that travel.

    When we married we had $15000 in savings and $40000 worth of CC debt. Imagine trying to buy a house with that amount of debt! Still, we’ve managed to reduce our CC debt to a little over $16000, and we’ve even bought a house. Mainly because we made regular payments on the cards and the banks liked our combined income.

    I am looking forward to the day when we have no CC debt at all. I’m trying to halve this debt by the end of the year. It has been a massively difficult task to meet all our bills and make extra payments on the cards. But we are managing, and still saving money, too.

    One of the most successful things I did was insist that hubby remove the CC link from his regular savings card – invariably retailers would assume we were paying by credit and his card, with its massive 20% interest rate, was crippling. Hubby did this and stopped using the CC at all. Right, so that solved the first problem. He has learned to pay for things with cold hard cash/eftpos.

    Then I took over the CC payments. Hubby hates having less than $1000 in his savings account at any one time, but this is hard to manage and he would typically only make a CC payment when the bank rang him to let him know he’d missed a payment. I make regular payments and can live with only a small buffer in the bank account – we do have other savings, after all.

    We immediately paid off one of the cards with the $15000 savings. Felt a lot better. Unfortunately loving but silly hubby paid off the LOW interest rate card, not the high one. SIGH. So, we then transferred his high rate card to one with a low interest rate. Yay. Minimal interest for 6 months, and a chance to lower our total debt without the large interest component.

    The most challenging thing about paying off the cards is that it takes willpower to not spend money on fun stuff. We’ve saved up for furniture and necessary household items, but we need to fix the house and we can’t really do this until we have paid off the cards. In the meantime, let’s hope it doesn’t rain any more this year, so that our leaking roof won’t need repairing until spring. And pray that our 10 year old cars won’t fall apart as they threaten to do.

  • Reply December 20, 2012

    damian

    credit cart

    • Reply December 20, 2012

      damian

      cash

  • Reply January 16, 2013

    Mary

    Interesting. We have a credit card which we pay off every month using the line of credit from home equity. Just as deadly for we spend too much and are trying to rein in it now to prepare for retirement! Hubby works away five weeks on five weeks off and we spend up when he’s home and have become accustomed to it as our rightful reward – vacuous consumerism?

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