The Credit Card Trap

This thread has been inspired by a discussion in another; since there's many younger members here @ AF, it might be a good idea to get the word out about credit cards. Please take the time to read....

It's seductive, you get an envelope saying you've been extended a credit line of $500(or more) and a shiny new card with some logo on it. You flash it a couple times, impress your friends, get some gas, buy a round of drinks, dinner, some clothes, or maybe some accessories for your car. After a couple months of good payment history, viola! You get another offer in the mail, fill it out, and send it in. Now you have 2 cards to use/buy/spend with. No problem, the payments are only $30 a month each, you can handle it. (Payments? More to think of; how about only half of your money is going to paying off the loan, the rest of it is the interest you're paying. So you're paying $30 a month to the bank -- for nothing.) Oh yeah, spring break; what about that vacation? Yeah, they take credit for plane tickets, too, and it's only $400, so my payment will go up, what, $15? I can swing THAT.

Then one month you're a little short of cash, so you think "I'll just buy groceries and put my electric bill on the card, just this once." Yep, sure, just this once. A few months or years later, you'll have to get another credit card to transfer the balance from your old one, so you'll save money on interest each month. Now you have several credit cards, and the total payments are over $500 a month, and you owe a bunch more than that original $500 limit. In parts of this country, $500 is a house payment, and now your credit cards are stopping you from buying a house, car, or anything else that requires a loan, because the bank does their calculations and tells you you've got a "bad debt ratio" and all of your debt is unsecured. You've turned yourself from a debt free person into someone who owes more than their annual salary to credit card companies. Was all the fun worth it? nope.


OK so I painted a bad picture, maybe worst case. But it's easy to slip into that situation, as some of the older folks (like me) around here might be able to tell you. Awareness of a problem is usually all it takes to start solving a problem. So be aware.

It's shocking how indebted some people in the UK get. I watched a 'self-help' program on TV the other day which featured a woman in her late 20's that had racked up £30,000 in credit card debts. Shocking. And i hear it's even worse in the US.

Use credit wisely, people.

shit, I got about $1500...

shit, I got about $1500...

Credit, or payment on credit?

Please...if you don't have any credit cards yet...think about this before getting one. I'm not saying you shouldn't get one but just use it responsibly.

My story started out when I drove my truck to Niagara Falls, the alternator started going out and I barely made it home. My thinking was if it had broke down, I would have been stranded 500 miles from home, at 3:00 AM, in a foriegn country. So I decided I would get a credit card and use it for emergency's only. Then I blew out my speakers in my truck...so I needed new speakers...right? The story keeps going like that. Thankfully I was able to get two more cards before I maxed out the first one. Yeah...I finally got the last one paid of last year (did I mention that this was all in '99).

I would look at something and think "hey, my minimium payment will only go up $7...hell...I'll take two...put it on the Visa"

Two weeks ago, I was finally able to refinance my car. When I bought it two years ago the only way I could get it was to accept an outrageous interest rate.

I never thought that I could have got myself into a jam like that, just be careful and think twice.

All of the above mentioned is tru, but when used responsibly a credit card is a very helpful thing. You should never rely on a credit card to buy something unsess it's an emergency. I used to buy things that i already had the money for on my credit card then put the cash away until i got my statement then pay it off in full.
It is very easy to get in a bad situation with a credit card, like my friends who have a couple thousand dollars in credit card debt and now have no job. However, without the credit i built from my credit cards I would not have been able to buy my house at the age of 22. The most important thing is to never miss a payment, and always focus on paying down the debt you already have before looking for more things to buy.

BTW.. I think that you make a very good point in this thread, too many people just think of credit cards as free money, or a way to get everyting you want but don't have the money for. I used to work in a call center for Capital one and I have seen many people that ruined their credit at a very young age, and when the got older and got very good jobs their credit is the only thing keeping them from living a better lifestyle.

Credit cards can be a huge danger. I actually just got doen shopping around for one with a low interest rate and no annual fee. I feel pretty good about what I ended up with. I'm just going to try and use it to help build me credit.

meh, i keep gettin offers all the time for them, but i know better and will just only use my debit card. If i don't have the $$$ i don't get what i want.

I'm 18, and just recently got a card with a $1500 limit. I usually fill it up very close to full (about $1200 on it right now), and pay it off each month in full. The things I buy with it are for my work, and get reimbursed for it in full. For things that I use, I pay for them with my debit card.

I'm 18, and just recently got a card with a $1500 limit. I usually fill it up very close to full (about $1200 on it right now), and pay it off each month in full. The things I buy with it are for my work, and get reimbursed for it in full. For things that I use, I pay for them with my debit card.

This is the way to do it... having work pay for it in full will BOOST your credit rating.
Otherwise for everyone else... only use them for small things, pay them off!
Tips, from a loan manager:
Never ever pay the minimum, always pay more. When creditors look at your credit rating it shows all your debts, and you payment history. It also shows your max credit avail, how much you currently owe, what was the max you ever owed and your minimum payment ever made.

Lower your limits! Believe it or not, more credit is not good. When looking to buy a car or house we assume that if you were to max out all your cards, would you be able to pay for what you want. If the answer is no... you get either no loan, or a higher rate. Credit companies raise your limits all the time if you are a good customer (carry a balance and pay interest). Have them lower them. Example: you have a CC with a 17k line, if you don't need that much money, lower it to 5k or 10k.

Just some fun tips for Wednesday!

I got my first card in 1986, and had made some minor errors when I was young. I learned a lot in those years, and what I'd like to pass on to the younger generation is take care of your FICO or credit score. Nowadays, more and more people are relying on this to determine not only the loan rate you receive, but how much your insurance will cost, and if you get that job you want,or even an apartment. The credit score is supposed to be a determining factor of your character, and many of these businesses use it to gauge you on whether or not you are a "good risk." I have seen the use of credit explode over the last 15 years. Back then there wasn't much talk of the problems people had with credit, and it wasn't as widely available as it is now. The credit card issuers are now targeting college students like never before, setting them up early for a life of credit problems if they aren't careful. I have an excellent FICO score and get at least 1 or 2 offers EVERY DAY. I would recommend everybody get a copy of their credit report,( this will be free across the country by the end of '05) and their credit score. Learn how to read the report as it can be confusing, ( most cities have a consumer counseling center which can help you for free or a small cost.) Check for errors and get them fixed, because it may not seem important now, but down the road when you want to buy a house, insure your car, get a better job, etc. and you can't because of a poor credit history, you will realize how important it was. Most negative items stay on your report for 7 years or more, bankruptcies can appear over 10 years. Credit reporting agencies are sometimes slow to remove nrgative items from reports long after they were set to come off, sometimes you have to notify them. I hope I didn't scare anybody about credit, but it's so important that what you do to it now, can affect your quality of life in the future .

3100 for me, lucky i invested 6500, or id be fuc-d!

I got myself into trouble with credit card a few years back. I was just buying shit up with my credit cards. And i'm finally getting them all paid off. I only have one credit card now and use it only in emergencys. Every now and then I will buy something cheap on it and pay it all in about 2-3 months time just to keep me credit active. But i learned the hard way and won't ever go crazy with credit cards again.

what are the best credit cards to go with?

Gotti your in Toronto right? I live in B.C. but I'm with MBNA Canada (Mastercard), which I think is based in Toronto (I pay my bills online). I suggest them because they don't seem to have any problems offering cards to young people without credit history. I have a $1000 limit, which is good because it's just about right for a month of spending and the contract is actually really good considering I have no prior credit history. They also offer air miles (they call them "Worldpoints") and good theft coverage. Look into them.

MBNA Canada webite
http://www.mbna.com/canada/index.html

This is the card I have
https://wwwn.applyonlinenow.com/CANapp/Ctl/redirect?CV_sourceCode=BDTT&CV_language=en

what are the best credit cards to go with?
That can be a hard question to answer sometimes. It actually depends on what you want to use the card for. To put it into simple terms, the best cards have no annual fee, a low rate,and a decent grace period to payoff a balance without getting socked with finance charges, also their other fees that they charge, (over the limit, late payment, convenience check charges, cash advance fees,etc, will also be lower.) It also really depends on your credit history as they tend to have different offers for consumers. My friend and I receive offers in the mail from the same banks, and although they may look alike, upon further inspection, vary greatly. His credit history isn't as good as mine, so his APR is higher, and the initial offer of the credit line is usually lower. If you don't need all the extras that these cards offer, you usually can get a better deal on the terms of the card, as the card issuer has to make up for what they offer. Cards with airline miles attached to it, extra insurance/product coverage, rewards points all cost these issuers extra to offer, so they tend to pass on the extra costs in higher fees and APRs to the consumer. Also be wary of teaser rates which tout low APRs to begin with that usually are good for 6 mos. to a year, then the rate increases. BUT if you miss a payment or are late by one day, the rate can increase dramatically, and often immediately. Also be wary of "fixed rates" which can be good, but can quickly become variable with just a few days notice by the issuer. The best thing to do is collect a bunch of offers and lay them out and see which ones have the lower rates/fees, and offer the things you are looking for in a card, and don't have things you don't need and or want.

I got a discover card about 6 years ago with a 1500 limmit. I maxed it out on bs. To this day it is still maxed out. I hid my card from myself a year and a half ago. I pay almost double an the min. payment. I hate cards, they are nothing but trouble. I got 1 payed off and I cut it up and threw it away.