My life without a credit card – published on The Hoopla 3/5/12

7 May

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.

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