Visa Looooves YOU!
Welcome to your first day on campus. And look…there’s a nice-looking gal handing out free t-shirts. How fun! And all you have to do is feel out an application for their credit card. How easy! What could go wrong?
Let’s flash forward a few years. Even though you swore to leave the shiny new Visa card in your wallet except for emergencies, you soon discovered that everything is an emergency when you have no money. So what do we do when we have no money and need something crucial, like a pair of shoes or dinner? Why, we whip out good ol’ Visa! Our savior.
HOW MUCH do I owe the Piper?
So now you’re looking at a Visa statement and a $5,000 debt. And you haven’t even started sending out job applications yet. Oh, and let’s not forget the $50,000 in student loans you racked up. We’ll talk about that another time. For now, let’s talk about the ultimate necessities of life in American: food, water, shelter, and credit cards.
Well, of course credit cards are a necessity…I mean, it’s darn near unpatriotic not to have one, isn’t it?
Fact: the first credit cards didn’t appear until the late 1950s. By the 1970s, they were still not in 75% of U.S. households. By 1990, it was closer to 90%.
So what happened between the 1970s and 1990s that made my Visa card an essential part of living?
Marketing happened. Banks have some of the most ingenious marketing departments on the planet. They are so good that they’ve convinced you that you can’t get through life without credit cards. Why, you need them if you want to rent a car, get a hotel room, fly in a plane. You simply need credit cards to survive.
Red, White, and Blue Lies
All of that is a lie. Was that too strong? This is one of those moments where I desperately want to break my own rules and drop a few f-bombs. We have been lied to so many times about credit that we start repeating the lies. I mean, come on, even Barbie has a credit card! Economists tell us what amount of debt is appropriate for an average household.
I’m sorry…appropriate amount of debt? Perhaps the same economists, along with Mattel and Chase Bank, can tell me what would be an appropriate amount of cyanide in my morning coffee. Listen to me. They’re (insert f-bomb) morons.
Here are some more facts for you:
The average U.S. credit card debt is around $15,000. And that’s not including the mortgage, care loans, student loans, home equity, etc.
The average interest rate on that debt is 18%…doin’ the math? $2,250 per year.
The #1 cause of divorce in America is debt problems and money.
A debit card, which is the same as a checking account, will rent you a car, get you a hotel room, and put you on a plane.
Dirty little secret: there is nothing, not one thing, that you can do with a credit card that you cannot do with another form of currency.
Oh, sorry, I lied, too. There is one thing that only a credit card will allow you to do: get into debt so far over your head that you lose your house, your marriage, your car, and probably any chance you had for a comfortable retirement.
The New Slave Trade
So here’s the truth: if you start using credit cards, you will get deeper into debt. Yes…you will. When was the last time you saw anyone go Christmas shopping with a pile of cash? Yeah, Christmas is the holiday that stays with us all year long. You will go deeper into debt, then you start working one day out of five just to make the minimum payments. Do you know what it’s called when you work for nothing? Slavery.
Credit cards, car loans, student loans, you name it, are the 21st century version of slavery in America. They see you coming the moment you graduate high school. They bombard you with ads (what’s in your wallet?), they tempt you with “cash back” and bonus points, they bait the hook, they toss the hook, they set the hook. Hard.
Surviving the Zombie credit apocalypse
So here’s what you’re going to do on that first day on campus. See the cutie handing out t-shirts and holding a clipboard? He or she is your worst enemy. They want to eat you. Just assume they’re zombies and they want your brain..because you pretty much have to forfeit that to get sucked into these scams. So your mission is to run the other way. Screaming if you have to. Take as many as will listen with you. This is your life they’re after.
You have a choice here, people. You can be rich or you can be broke. You get rich by investing a small percentage of your income every month and staying out of debt.
Don’t be a sucker. Don’t give away your freedom. Don’t be lunch for the banks. Run from credit cards as if your life depended on it.
Believe me. It does.
I encourage you to visit Dave Ramsey’s website and learn all you can about credit and why it should be avoided. I don’t get a penny for sending you there. My only goal is to save as many of you as I can from the same tragic mistakes my generation has made regarding money. Just look at 2008. ’nuff said?
Good post. Do I wish I knew this stuff when I was 18-22? Yes. Do I dwell on it? No. I’ve corrected my credit card mistakes and I’m moving forward. I hope many young people heed your advice, Ron.
Well, there are two things you can do with a CC that you can’t do with cash/check/etc. 1. Establish a credit history, which will come in handy when you try to finance a car or house. 2. Get cash back on all your purchases – I get about $300 a year back for my CC activity. And if you pay your balance monthly and on time, you won’t pay any interest or late fees.
Credit cards aren’t evil. They are tool. Learn to use the tool correctly and you won’t get hurt.
And where is your back up for “the average CC debt is $50k”??
Andrea, here’s an address to CNN Money http://money.cnn.com/magazines/moneymag/money101/lesson9/index.htm which states the average American household, with at least one credit card, has $15,950 in credit card debt. More cards = more debt. My family uses VISA debit cards and it allows us to get cash back. We can also run it through like a credit, which gives us a reward point system (albeit a small reward) that builds up.
Jeanette – $15,950 is a lot less than $50,000 which was originally proposed. I see Ron corrected it.
I did. I’ll always make an attempt to correct my mistakes, which is one of the nice things about blogs! By the way, I’d like to hear what you guys would be interested in seeing posted. You get the general theme here. It’s not all financial. I write like I’m writing it for my kids, who are 17 and 19. If you could tell your almost 20 year old one thing that you’d do differently, what would it be?
You’re right, Jeanette. I was using a number for total non-mortgage debt. So $15k it is (I checked CNN Money as well). Okay, then. Still a bad number. Onto the credit rating. Before 1957, people bought houses. How? They had no credit cards with which to establish a rating. This is how badly we’ve been hooked into this idea that debt is necessary to do anything in America. It should really be called a “debt” rating. Understood that we will not turn around this unfair rating practice anytime soon, so what are better options than paying for the privledge of having a credit rating?
The easiest is to have a secured credit card. You simply put $5k in the bank and ask for a secured card. This will establish a rating without getting you into debt.
But even better. Let’s try the big purchase. The house. Aside from the fact that it’s ludicrous that I cannot get a mortgage if I’ve never been in debt and make $100k per year, can we just save for it? If I can handle a $1000 house payment on a 30 year loan for a $170,000 home, which would mean I paid $356,000 for that house (5.75% interest), why can’t I save $1000 for 14 years and just buy it? This is not unheard of. But let’s get realistic. If I walk into my local bank with 30% down, I’m guessing I can get a loan, regardless of my lack of plastic.
Again, though, the big question is: how did we allow this to happen to us? Why are we being denied loans based on lack of debt when, up until the 1970s, that wasn’t the case? In fact, based on the recent crash, I’d the guidelines for getting a loan were rather backwards. A debt free 45 year-old can’t get a loan, but a twenty-something loaded with credit card debt can? Do you see why I get angry?
No, credit cards, like money, are not evil. They are amoral. What is evil is our behavior. When we “need” something before we can pay for it, we have a problem. I understand there are those who control it, but obviously there are many more who cannot.
Hard as I try, I cannot come up with a single positive aspect of having debt. And it should make anyone mad as hell when it gets marketing to kids via their Barbie dolls and board games, to college students to moment they step on campus, and even by a system that punishes anyone who dares to remain out of debt and buy only what he can afford.
Thanks for the comments, by the way. It’s good to know someone is out there!
That’s a brave, but interesting, statement comparing credit card companies to slave owners. Very interesting thought, indeed.
Craig Grella recently posted…You Broke the Social Media Policy – You’re Fired!
I do try to provoke thought, Craig. I wouldn’t compare the companies so much to slave owners as compare the credit card holder to a voluntary slave. Companies will do what is necessary to make profit, as they should. But when we abandon logic and buy into what they’re selling on the basis of some social norm, putting almost no real thought into it, then we are guilty of mass insanity. If one really considers the nature of debt, we cannot tolerate it in any form. Yet we almost insist on being in debt. We’ve enslaved ourselves.
There are some caveats with ‘secured’ credit cards – they aren’t always ‘free’ and may have fees/charges incurred with their use or set up. I don’t think it’s wise to give them a sweeping thumbs up – a secured credit card user might not run up debt but they may incurr some pretty expensive fees.
I also think that someone who has the ability to save up $5,000 and can leave it in an account – untouched (to secure a credit card) probably has enough financial skills/disipline/knowledge to have an actual credit card – use it and pay it in full every month. Using a CC can be ‘free’ (I’ve used one monthly for over a decade and never paid a fee or interest), provide some ‘rewards’, and provide a way to manage one’s expenses (all the items are listed in one convenient place – the monthly statement, and provide just one ‘bill’ to pay. Credit cards are tools they aren’t evil mind sucking entities out to get you.
Oh how I long to be able to change my life. The choices I made at 20-30-40 were wrong!!!
It makes me angry that I was so duped into the have it all right now culture.
Now, I’ve made the chage and so have my adult kids.
Diana
Diana Lesire Brandmeyer recently posted…Valentine’s Day Gift for 2 Women
I’ve had a credit card since I was 19 (I’m now 33) and never racked up one cent of debt, nor have a I ever paid one cent in interest or late fees. Instead, I established a credit score of over 800 that helped me land the lowest interest rate possible on my first car loan. That long-established credit score also helped me get a very low interest rate when I decided to return to school for a second degree. Oh, and guess how I managed to make early payments on that loan while still in school? I charged as much of my student loan on my credit card as possible and paid it off as soon as my student loan disbursed. With all the points I had earned by charging a significant amount of my tuition, I had earned $500 toward my student loan – $500 I didn’t have to earn! Since I charge everything from my cell phone bill to my even my cup of tea, I earn points nonstop and then cash them out to help pay off my student loan.
Before returning to school, though, I used all those wonderful points I earned for plane tickets or good old fashioned cash. Who says you can’t beat the credit card companies at their own games? All it takes is a sense of responsibility and the discipline to not purchase what you can’t afford. The earlier good financial habits are established, the better off we can be financially as adults.
By the way, I’m supposed to hear tomorrow about my pre-approval for a mortgage and expect that my long-established stellar credit history will ensure me a very low interest rate.
Thanks for the feedback, Katie. I’m glad you’re doing well. What I find disturbing, though, is that we have come to accept a system that rewards us for having a credit history, but punishes us for never using credit. This is a recent development and one we never seem to question.
Most of the respondents to this post are those who have not abused credit. I would argue that the majority of Americans do tend to abuse it. Otherwise, everything from airlines to bookstores wouldn’t work so hard and spend so much in advertising to get us to sign up for their card. It is a huge business. And it’s only profitable when we get into debt and rack up interest.
By the way, I was an idiot at 19. I bought my first TV with a credit card when I could have just as easily saved up for a couple of months and bought it with cash. It is to those types I am addressing. I think you’d agree that we have a debt problem in this country. The number of bankruptcies filed should be evidence enough.
I hope you’ll stick around and offer up some of the lessons you’ve learned. What would you tell your twenty-something? It doesn’t have to be finance related, by the way. We’ve all got our list of things we’d do differently.