Only a fool tests the depth of water with two feet – African Proverb
The Royal Credit Card Club
My journey with a credit card began in 2003, while I was pursuing my first degree and held my first job. Before acquiring the card, a friend of mine and fellow seminarian advised me against it but I would not listen. After all, with a relatively good salary, no children and no rent to pay, this is something I could easily manage. Looking back, I’m not quite sure why I felt I needed a credit card and it certainly was not to pay my educational expenses. I believe something in the sales pitch from the NCB salesperson must have appealed me. In fact, when I signed up I did not even have an account with NCB at the time but like a drug addict getting their first fix/taste, I became hooked. Since then NCB has become my bank of choice with multiple accounts and I possess a MasterCard with a small business worthy limit in US Dollars. That first credit card was the perfect bait to become a royal member of the Credit Card Debt Club to this very day!
Nevertheless, my eyes have been opened and it’s time to get out! Getting out however is not as easy as I thought, just like it is not easy for an addict to give up his addiction. Moreover, it appears credit card debt addiction is something many in our society have entertained with almost reckless abandon. In the United States, for example, people do their utmost to have a perfect credit score and it is almost an anomaly to find people buying anything without using debt. The situation is such that credit card debt is one of the leading causes of bankruptcy, and just as in my case, many credit card companies tend to get college students hooked on debt from early.
As with other addictions, credit card debt comes with serious consequences and serious responsibilities. In some cases, it not only causes bankruptcy but result in suicide fatalities because of inability repay the debt, and all the shame and guilt that comes from this situation. You see, it’s easy to get in but very hard to get out!!!
Now, am I advocating like Dave Ramsey for the complete non-use of credit cards? Not exactly but I would like over these three short blogs to warn you of the dangers of credit card usage and to highlight some of the “hidden” fees that are not presented to you at first. I admonish you to think carefully before getting one. It comes with great responsibilities and can become like one of your monthly utility bills which has heftier penalties if not paid on time. I will begin by sharing some shocking discoveries about the fines in this article and share my painful experiences. In Part II, I will continue those shocking discoveries and break down the fines in depth. In Part III, I share some tips and tricks to manage the card better and eventually how to get rid of it and find alternate ways of doing business online. With that said, let’s get to my shocking discoveries and my confessions of insanity to help you become wiser as it relates to credit card usage.
Note well, the fact that Ramsey Solutions does not use credit cards and has some 400 employees and have online businesses. This means that you can do business online and offline without a credit card. Ramsey Solutions is anti-debt and for twenty-five (25) years has been helping millions of people to come out of debt, create wealth and better manage their personal finances. One day, I truly wish to follow in Ramsey’s footsteps. I can’t wait to do my debt free scream!
SHOCKING DISCOVERY 1: A Credit Card is A Debt/Loan – A Recurring Debt/Loan
For some reason, for about 10 years, I did not realize that by using a credit card I was carrying a recurring debt. I never saw it as actual debt/loan! Even when I considered overall debts and debt repayment, many times my credit card never made the list! All I considered, for a long time, was just the avoidance of penalties. I never considered that this should be treated as if I would have been borrowing money from a friend month after month for more than 10 years. You see once you use the funds, you need to pay it back and stop borrowing it. But I would pay back and borrow it again. In doing this, I was enriching the credit card company without realizing it. Instead of seeking to earn more and spend cash, I would often max out my card, then use my salary to replace it, and because I did not have extra funds, I had no choice but to reuse the credit card to pay monthly expenses.
Has this been happening to you?
Well friends, please realize it is a debt if you use the credit card and a loan that is available to you whether you use the card or not. It’s time to treat it like a loan from a real person. How would you feel if every month, you are borrowing from the same person and you do this for years? Now, that’s outrageous insanity! And why would that friend keep lending you money if there were not some big benefit in it for them? It simply means, it’s a business and they love the interest (money) they are gaining from you, and it does them good in keeping YOU their most loyal client! The question is: Who is benefiting more – you or the credit card company?
A simple analysis will show that they are benefiting way more than you in this arrangement. In fact, when you see how much more they get out of the deal and the possibilities for them, you will be in outrage!
SHOCKING DISCOVERY #2: 15 Possible Fees/Penalties!
In 2016, having committed to a debt free journey, something I confess that God had been talking to me about from 2010, but I did not listen, I began educating myself about credit cards. Lo and behold, when I examined an information brochure sent to me by NCB, there were possibly 15 penalties, that is, 15 different ways that the company could get money from me with a credit card. I was discombobulated! The sad thing is that when I signed up originally I was only aware of two penalties and each year I became aware of more penalties.
Now the first seven (7) years I had my credit cards, all was well. I would repay my card in full and reuse the money. Thus, I only had to pay the annual fee. By 2010, I had gotten a MasterCard with a small limit of US$500, in addition to my Key Card. In fact, my job at times required me to send funds overseas and as such I used my credit card and was able to control it quite well. But that was about to change…
SHOCKING DISCOVERY #3: Raising Your Limit is a Trap/Bait to Fleece You
With a credit card firmly under my control, what the bank did next was genius on their part! Having seen how well I was managing, they without my consent raised my limit three times and I swallowed the bait hook line and sinker. Banks know that 70% of credit card users never pay the card in full and they are counting on that so that they can profit from you! They don’t just want an annual fee. They want to fleece you! They were NOT profiting enough from me so they raised the stakes and eventually I was trapped due to my stupidity and impatience with a new project.
Let me repeat, they raised my limit three times! For a while it was manageable until there was a dip in my income. Then guess what happened? They got me! I could only make the minimum payments and that’s when they got me real good! In fact, for at least three months, I could not pay them and I paid a hefty fine [late fees, over the limit fees, interest payments]. When you are late or unable to pay, the loan amount increases as a percentage in penalty is added to your loan. The total fine was US$1000 to get it back under control. By this I mean, to get it back within the limit. This US$1000 did not affect the principal. It was all penalties. Now that’s outrageous but it’s my fault!
More Shocking Discoveries in Part II
OK, let me stop here for today! Stay tuned to Part 2 of Credit card insanity. If you find this article insightful, share it with your friends and especially young people, so they can avoid this credit card trap and escape the ditches I have fallen into. My aim is to help you win at life despite the odds. Go forth and win gold in the race of life!