I just got a spammy e-mail with the headline, "Relax Now, Pay Later with a Credit Card." It showed a picture of a woman, usually at a spa, with a green mask on her face and cucumber slices on her eyes. It was obviously a credit card ad, and I quickly deleted it. From my perspective there is nothing relaxing about credit cards; in fact, I feel just the opposite of relaxation when I think of getting and using new credit cards – I feel intense stress.
I'm not a moron, ok? I would generally categorize myself as financially prudent. I try not to spend more than I make, and I make decent money. However, a few years ago I quit my full-time job to pursue internet licenses. I thought I had everything lined up for success, but it quickly got away from me. Before I knew it, I was already applying for a $ 50k loan to keep the business going, and getting credit cards to put my monthly operating expenses on.
I absolutely made some mistakes along the way, like dropping $ 20k for a print ad in a national magazine. I've learned from those experiences and consider the time at the "school of hard knocks" well spent. The problem is, I also spent a lot of money for tuition at that school. I will be paying for that well well into the future, and there's no low-interest government loans available to cover it.
You may have gotten into credit card debt in a similar, or a very different way. There are people who have other unexpected financial issues like lingering diseases, the death of the primary breadwinner, loss of a home or business, etc. These stories are not happy and put families into a position where they feel their options are limited, and life as a whole is dark and hopeless. I know, I've felt that myself.
Credit cards are not something you want to mess with. It started so innocently … I collected cards as they came in the mail. Times were good at first and I did not need to activate them. I was getting good rates because I had good credit. I had one United Airlines Visa that wave me frequent flyer miles. I did not mind the higher interest rate, because I was paying off my full balance of around $ 3k every month with profits from my business. Once I had to start using profits to pay my living expenses, the downward spiral began.
I had no idea how quickly or savagely the credit card companies would raise my interest rates. Even although I was constantly paying (for the most part) every month, and even paying extra, I started getting notices that my rates were going up on many of my cards. The excuse for that was things like one late payment, using close to my credit limit, etc. When I would make a big sale, and have some extra money, I would send a large chunk of change in to the card company. You would think they might repay me by lowering my interest rate or something, but then they would decrease my available balance!
The reasoning on their part was that after checking my credit report, I was no longer as "worth" as I had once been. I was in a situation where I was using too much of the credit available and it was hurting my credit. When that happened, I stopped getting new offers to transfer to lower interest rate cards, stopped getting notification about consolidation loans, and borrowing against my house was no longer an option.
Add to that the recent increase in the minimum payments required by card companies and it all adds up to a world of hurt. I have cards that hover right below 30% interest rates. Even not using the cards seems like a small help. I get a bill with a minimum payment of $ 300 and see that I was charged $ 295 in interest. It's frustrating and discouraging.
I started tracking each of my card accounts last year, figuring that if I did not at least try to understand the magnitude of the problem, I would never get control of it. I watched my total balance slowly decrease, until something would happen and I'd go back up some. I've been able to transfer some of my balances to a single lower-interest card, which has helped. I also was finally able to qualify for a consolidation loan. That helps the monthly payments, but increased my total balance by around $ 2k. After a year of doing this, my total balance has not changed significantly.
I need relief and I need it fast. I would have liked to wait until my problems were over before writing this article, because everyone likes a happy ending. I'm not there yet, but I feel fortunate to have come across a way to improve my credit score just recently. The thing is, even though I was trying to keep my business and personal expenses separate, some of the cards I got early on were based on my personal credit.
The "dings" now appear as negatives on my personal credit report. I am confident that if I can improve my credit rating, I can qualify for financial products and services that will help me dig myself out of this hole. I'm not expecting an easy ride. I've done what I can to stop the bleeding and now I need to recover. I'm counting on a better credit score to help me do that and to get me and my family back on the right financial track.