Credit Cards: An American’s Enemy?
Most Americans should not use credit cards, for the sake of their finances, their relationships, and their quality of life – perhaps even for the sake of their sanity. Most Americans think of shopping as a way to relax. Shopping is known to be a form of effective stress management for many Americans, but shopping with a credit card may end up doing more harm than good, especially in the long run. The elements that go along with shopping [with a credit card] – such as factoring in the APR (Annual Percentage Rate), which can change periodically if it is a variable APR – can be far from relaxing. How many Americans consider their credit score when they are swiping their cards at the cash register or ordering something on-line? Credit scores are an important part of one’s life and financial future; it can make or break choices in your life.
Are credit cards really worth all the headaches they can cause? Sure credit cards can make purchases simple; it’s quick to just swipe the card and go, and can be used for all types of purchases – large and small. What happens when the bill comes in and you see how many small amounts you have accumulated alongside those larger, or even necessary, purchases? You find out you cannot afford to make your credit card payment, which will result in added fees, an even higher bill the second month even if you do not make any new purchases. Now what happens if you have several credit cards that you have not been able to pay for? All unpaid bills will point you in the direction of bad credit.
College students are more likely to have credit card debt than they are student loan debts. Researchers from Smith College completed a study (2005) in August that shows college students are using credit cards to pay their student loans, and to pay for academic expenses including tuition, textbooks, and other school-related necessities. The study also indicates that the college student’s debt increases continue on through the end of their college journey. Another study, by Warwick and Mansfield (2000), indicated that 71 percent of students in their study did not know their rate of interest. Most college students underestimate the difficulty of paying off debt, and most rely on their beliefs of earning more money in the future.
You may tell yourself, “I’ll pay it off with my income tax refund.” What if your tax refund is not enough to cover the balance? You also may tell yourself, “I’ll make more money in the future when I get a better paying job” or “I’ll get a second job,” but a better job is not a guarantee, neither is a second job. In fact, in today’s economy we are lucky if we even have one decent-paying job. The lack of a job may make it hard for us to save money, not to mention how do you expect to pay for a credit card if you do not, and cannot, get a job? Everyone should make it a rule to not allow your outgoing funds to exceed your incoming funds. Bankrate.com allows you to organize your spending and see how much you have left over each month. If your remaining funds are not enough to cover that new TV, do not purchase that new TV.
Consider safer options for purchasing that new TV, such as saving the money in your checking account or in a jar until you have enough to cover the full retail price of it. Your jar is least likely to charge you hidden fees, which means you will not be spending what you are saving. Sacrifice the morning coffees by putting the coffee money into the jar; you would be surprised how much money you will have accumulated by the end of the month. Understanding how to effectively save and improve your spending will help you in the long run because you may notice which purchases you can continue to do without. From personal experience and conversations, individuals are impressed by persons who have a handle on their finances and can control their spending. Knowing your money may put you in better standing of finding that special someone, or someone of better quality. Finances, though, are not usually the first topic two individuals discuss – and while you may be inclined to purchase your new mate something special when they ask, it is rarely a good idea for either of you.
What happens if you get married and your significant other finds out about your credit card debt? Their own credit may be in jeopardy; they may spend years trying to pay off your debts. It’s a stressful time trying to buy and sell a home, but imagine trying to do this only to find out a lender won’t do business with you. Your new spouse may not like being held back because of your mistakes. Most likely you would end up in a smaller space, arguing a lot. Money issues are one of the leading factors in every relationship’s quarrels.
It is well known that money and finances are a big stressor in a marriage. Half of all marriages end in divorce, and money is usually the culprit. It is common for someone to want to rid themselves of someone who brings them down, whether emotionally or financially, and to say “Your debt is causing problems in my life; I want a divorce” may be easy, or may sound simple enough. However, divorce doesn’t make debt go away. If you and your spouse had a joint account, and you (or your spouse) ran up some debt, you are both responsible for that debt. Justin Harelik, a credit consultant on bankrate.com, admits that creditors do not care if you divorce or not. Suddenly marrying someone who promises to pay off your debts doesn’t’ sound so promising does it?
Arguments don’t allow for a good relationship. Even if you do not choose to get a divorce, even if you choose to stick together and work through your problems, you most likely will continue to argue until you have figured out a successful way to improve your finances and your credit. Sometimes bankruptcy is the only way to get out of debt; though choosing to file for bankruptcy limits your ability to buy a new home, or to qualify for loans – for at least seven years. Choosing to file for bankruptcy means handing over money you may not have to an attorney. That may not be an option for you. What would life be like if you had to stay in the same small, possibly run-down place for an extended period of time? What happens when you have children, planned or not, and you need more room?
We should ask ourselves what we are willing to give up. Are we willing to risk our relationships, our futures, and possibly even our children’s futures? Are we willing to put our loved one’s credit in jeopardy as well as our own? It is easy to assume you can handle debt if it ever happens to you, but debt is not something that is easy to handle. I once heard someone say “when debt finds you, it becomes a part of you.” When you realize the problems that arise when debt appears, it is a given that stress also will appear. How fun can a life be when there is so much stress involved? Are those morning coffees going to make debt worth it? Is that new DVD that you watch one time with your spouse going to be enough of a memory to keep him/her in your life when you hit rock bottom? Are you, fellow American, going to let credit cards become your enemy?
Bradley, G. (2005). Credit Card Debt Exceeds Student Debt. Academe, 91(6), 7-8. Retrieved from Professional Development Collection database.
Warwick, J., & Mansfield, P. (2000). Credit card consumers: College students’ knowledge and attitudes. Journal of Consumer Marketing, 17, 617-626.