The Dark-Side of Credit

Life, Money and Gratitude #11 The Dark-Side of Credit

Give them credit

The Nightmare That Will Haunt You

Once you get a credit card and start to use it, you’ll start incurring a balance.

A balance is simply the amount of money that you owe.

It’s the amount you spend to buy something plus the interest that is added by the bank or credit card company each month.

This is your balance.

As long as you pay the minimum payment on your credit card each month, the bank, and credit rating agencies will all be happy.

Woe unto you if you don’t.

At first the credit card company will be nice, they will be polite and ask for payment. Shortly after nonpayment, you will be introduced to the Credit Collection Department.

This is a relentless group of people who will hunt you down for the money you owe. They will email you, call you, write letters to you, badger you and do everything they legally can to get their money.

You want a nightmare? No?

Pay your bills.

Don’t borrow money if you can’t pay it back. The collection people will haunt you until you pay.

This is generally not mentioned when you're applying for any kind of credit. If you don’t pay them, they will come after you.

Your Credit Score, which is determined by how much you borrow and how quickly you pay it back, will be affected. This will follow you around.

Early on it doesn’t really matter but when you go to buy larger items like a car or house, it will matter.

More about credit scores in a later newsletter.

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Road Trip

Let’s go back to 1991, I've been invited on a road trip, I don’t have the money to go.

I do have my brand new never been used credit card. I whip it out.

Gas for the car, charge it. Restaurant for dinner, charge it. My share of the hotel room, charge it. Ski lift tickets, charge it.

You get the picture, I charged it all.

I was having a good time!

The end of the month came and my credit card bill showed up (it always does).

Ahhhh!

My little road trip cost me $700, which at the time was a hell of a lot of money for me.

I scraped up the minimum payment for that month and spent the next year and a half paying off that trip.

Was it fun? Yes. Was it worth it? NO!

I was lucky, a friend of mine told me her credit card nightmare story. It was bad. I’ll tell you her story in next week's newsletter.

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5 Dangers of using credit cards

Mika Bhati over at creditkarma.com has written a nice article, 5 dangers of using credit cards - and how to avoid them, if you want to see some of the dark sides of credit.

The link is below.

5 Dangers of using credit cards

Until next time, God Bless and be well.

M. Joseph Benric is the author of Graduation Gift ,A Step-By-Step Guide to Financial Literacy for Young Adults