A friend of mine was emailed a job offer a month after earning a master's degree in physics, and though it meant relocating across the country, it took him less than a minute to type his response:
“California, HERE I COME!”
Terry Alexander and his new bride arrived in Los Angeles two months later and made a painful discovery almost immediately: Things cost a lot more in California.
Rent, gas, electricity, food –– especially at restaurants –– was anywhere from 10 to 30 percent higher than he was accustomed to paying. He never had enough cash in his pocket to afford the everyday essentials. That's when he discovered credit cards … and started a three-year spending spiral that left him more than $40,000 in debt.
The Proper Use of Credit Cards
As usual, credit cards were not the problem. There are an infinite number of good reasons for having a credit card and equally infinite number of good suggestions on proper use of them:
They are safer than carrying cash.
They're convenient and give you a record of all your purchases.
They help build your credit score.
Only use them in emergencies.
Pay off the balance at the end of every month.
We could go on and on because there really is no limit to the number of good things that can happen when you use a credit card, especially if you follow that last bit of advice about paying off the balance at the end of the month.
“Yeah, I remember a lot of people telling me that,” Alexander said.
And at first, he did, but only because his first credit card had a $500 limit.
When the card company raised the limit to $1,000, then $3,000, then $5,000, he spent it right up to the max, but his paycheck couldn't keep pace with his spending habits.
When he got embarrassed at a restaurant because his card was maxed out, he decided to get another card. He figured he was twice as safe in emergencies. Then his wife decided she needed one, too. Within a year, they had five credit cards going. When one got maxed out, they set it aside and started charging on another.
Next came the idea of opening a new credit card to pay off all the others. That happened three times. Problem there, as always, was that income never kept up with expenses.
So the hole got deeper … and deeper … and deeper.
Third-Grade Math
When it got to $40,000, the guy with the master's degree in physics suddenly realized third-grade addition is all you need to know about credit cards: “Do I have more in my checking account than I spent with my credit cards?” he asked. “The answer was no. So I eliminated them, took out some scissors and cut 'em all up.”
Alexander devoted one week's pay a month to his credit card balance. He paid the rest of his bills in cash.
“Smartest thing I ever did,” he said. “Taking money out of your pocket to pay for something makes you think twice about whether you really need it. Turns out, I didn't really need a lot of the things I was buying with my credit card.”
It took him five years to pay off the credit card debt. That was three years ago, and he still doesn't have a credit card, but he does have advice for anyone who does.
“Always have more in your checking account than you spend with your credit card,” he said. “And pay it ALL off at the end of every month.”
Bill Fay is a staff writer for Debt.org. Bill has a wide-ranging background in reporting and writing, including for daily newspapers and magazines and also for public officials.
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