First Credit Card

In retrospect this is where my financial meltdown began all those many years ago, but as they say, hindsight is 20/20…

When I was young it seemed that having a credit card was sort of a “rite of passage” to adulthood.  My parents had credit cards.  All of the other adults I knew had credit cards.  None of the kids I new had credit cards.  So part of being an adult must be having a credit card, right?

Right…

When I turned 18 I announced to my Mom that I was going to get a credit card.  She laughed.  Then she noticed I was serious.  We had a long conversation about money and to her credit (pun intended) she urged me to rethink my position.  I was told in no uncertain terms that if I got a credit card, especially at my young age, there was a good possibility it would lead to financial problems down the road.

Of course I knew better – after all, I was an adult.  So I formulated a plan to obtain a credit card of my very own.

This wasn’t during the heyday of credit cards when they were being issued to anyone who could sign the application.  You actually had to have a job and show a certain amount of income to obtain one.  I know, because I applied for a credit card and was quickly denied due to having not enough income.  Then I applied for another one and was denied.

Part of the problem was that I had no credit history.  It was sort of a catch-22 at the time – I needed to have a credit history to get a credit card, but I needed the credit card to start my credit history.  I was stymied!

At the time I worked at a mall part-time.  One of the department stores had a table at the front of the store with some water bottles and t-shirts on it and a huge sign offering free stuff if you applied for their store credit card.  In my book free stuff is good, and as a college student on a budget free clothes are even better so apply I did!

Two weeks later I nearly fainted when I opened the mail and there was a shiny new store credit card with my name on it!  It had raised numbers and everything!  And a $200 credit limit or something ridiculous.  But hey, it was a credit card and it was mine – I had arrived!

I also had $200 to spend – so off to the mall.  At that time $200 was a fortune for me.  I think I was making something like $5 an hour minimum wage or whatever it was at the time.  Wasn’t much.  So $200 represented well over 2 weeks of working at my part time job once you accounted for taxes, social security and whatever else they withheld from my checks.  But I didn’t think of it that way at the time.

I wandered around the store looking at all of the stuff I could buy.  Up to this point I had to pay cash for everything I wanted.  It was simple really – no cash, no stuff.  I was used to saving up for things.  I was used to not being able to go out and just buy anything.  Using cash helped me to manage my finances effectively because it forced me to think before I made a purchase.

That is such a good nugget let me say that again.  Paying cash helped me manage my finances well without me even knowing it because I was forced to think before buying something.

But I had arrived, remember?  I was no longer stuck in that all-cash world.  I had graduated to the world of credit!

Eventually that day I purchased something.  Maybe a pair of jeans, to be honest I’m not really sure.  I do remember that it was a relatively small purchase.  I also remember having to show my ID when I paid because the card was new.

Whatever I purchased that day was bagged up and I signed the receipt and walked right out of that store.  It felt really strange to me – almost like I was stealing.  I mean, here I had a bag with the stuff in it and my wallet had just as much cash in it as when I walked in!  Credit cards rocked!

Over the next couple weeks I went back to that store and made a couple more smallish purchases.  I know I needed clothes to wear to work and school at that point so I’m sure that is what I was buying.  I didn’t get too extravagant.

One day I opened the mailbox and there it was – my first bill!  I opened it up and WHAM – reality set in.  Instantly.  “Balance = $109.”  $109?  How in the heck did I spend $109?  The stuff I bought was on sale.  How in the heck do I end up owing $109?!?  I don’t have $109 to spare – I’m a poor college student.

So, yeah, I should have learned then.

Of course that didn’t happen.  I looked at the bill closer and I noticed another line: “Minimum Due = $5.”  I was saved!  $5 was easy!  I had $5.  I could afford $5 easily!  If all they want is $5 no problem!  Besides, if I make a payment I establish a credit history, don’t I?

I dutifully made out a check for $5 and sent it off.  And I kept shopping.  Because walking out of a store with stuff you haven’t “paid for” is kind of fun, isn’t it?

You can guess what happened when the next bill arrived.  Not only was the balance closer to $200, but there was a new line on the bill called “Finance Charge.”  To me finance charge meant I paid MORE for the stuff.  Who pays MORE for stuff?  Why would I want to pay MORE for stuff?

Whatever the amount, and it couldn’t have been much considering the balance, I think it was on that day that I developed my deep hatred for paying interest.  But that is another story for another day.

I stopped using the card that day.  In fact, I never used that credit card again and a few years later I sent them a letter asking them to close the account.  It took me 3 months to pay off the balance.  Every penny of interest I paid made me see red.

Even worse, Mom was right.  At that age, when you think you know it all, it is tough to admit that your parents actually know what they are talking about.  At least it was for me.  She was right.  I was wrong.  I learned a valuable lesson.

For a while…