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Living With Credit Card Debt

Updated on September 13, 2012
The result of flashing his card one too many times?
The result of flashing his card one too many times? | Source

The concept of credit has been around since the invention of money, probably even before that. But it was less than a hundred years ago that the first credit cards were invented. And since that time, life has never been the same. For some, it is a godsend, giving convenience and flexibility. For others, who allowed their debt to build or spent beyond their means, it becomes a deathtrap, from which escape is almost impossible.

The following narrative tells the story of Alex, an average Joe with an average education working at an average job. He had just been approved for his first credit card and was feeling at the top of the world. He felt that he had arrived as anybody who is anybody has a piece of plastic to flash around, and now he had his own piece of plastic. He had been cautioned by his friends about the potential pitfalls and the high interest rates, and felt that he could take it in his stride.


Spend But Repaid In Full

Alex knew that a credit card is a double-edged sword. He had heard stories of financial giants brought to their knees because of credit card debt. So, as he started his journey into the world of credit, he was determined to be the master of the card, and not its slave.

He used his card when he did not have enough cash with him, to take advantage of the credit offered, and to accumulate points to redeem for merchandise and cash vouchers. And, at the end of each month, he would pay the outstanding balance in full, knowing the high interest he would be charged if he was to rollover the balance to the next month.


Spend And Missed Some Payments

There was that big screen LCD TV that he had his eye on for a few months. He didn’t have enough saved but Christmas was just around the corner so he thought he would use his credit just that once. He could rollover the balance in January and February and have the outstanding balance completely paid by the end of February. As Alex reasoned it out to himself, what’s the use of credit if you can’t use it once in a while, and he will only be paying about $100 worth of interest to the bank?

That was how it started. He managed to pay back the balance in full by the end of Febuary as planned. But in May, he used his credit again to pay for some emergency repairs to his car. In the next few months, it was a ring for his beloved, a vacation and a computer. By the end of the year, he was only paying what he can each month and letting the balance rollover and incurring the high bank interest.


The Increasing Credit Card Debt

That went on for another year, and it was a bad year for Alex. He felt that he was stumbling from one financial disaster to another, through no fault of his own. And due to the interest he was paying on his debt, he wasn’t saving any money at all each month. Every time an unforeseen expense came up, he would be forced to further rely on his credit card, adding to his credit card debt and ending up paying even more interest each month.

Alex knew that he was becoming one of the stories that he read about when he got his credit card but didn’t know of what action he could take. He saved as much as he could each month so that he could pay off more of the principle every month. He would make a tiny dent on his debt, but something or other would come up and he would find himself even deeper in debt.


The Endgame

It had been 3 years since Alex received his credit card. His credit card debt had been mounting with no prospect of a successful resolution in the foreseeable future. It was now all that he could do to pay the minimum sum each month, and there were months in which he struggled to pay even that.

And then in the summer of the fourth year, Alex lost his job.

The following months were a nightmare. His credit was cut off as he wasn’t even repaying the minimum sum each month. He was asked to repay the full amount or face legal action. Alex was at the end of his rope. He borrowed from friends, he sold off his car, and also sold every thing of value that he had, but he still came up way too short.

It was then that a well-to-do friend approached Alex and asked him what was happening. And Alex spilt his guts. To cut a long story short, the friend helped Alex negotiate for a lesser balance in return for repayment in full. The friend loaned Alex the money, and Alex will start repaying his friend once he gets a job.


Conclusion

Credit cards serve a very important and useful function in modern day life. But too often, the users get too reliant on credit, and get into trouble when they experience a drop in income, or when an expected pay increase does not materialize. Or, some users are financially illiterate, and do not realize that credit card interest is very high, and that it will add up very fast.

Alex was lucky in that he has a friend to bail him out. Other users who are not so lucky may lose their house and everything they have, and might even be declared bankrupt. It is sad that some banks promote their credit to people who could ill afford it, knowing that many will allow the credit card debt to increase and ultimately, default on their loan. But when all is said and done, it is up to the card holders to educate themselves financially, and avoid the potential problems that credit and credit cards can bring.

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    • wandererh profile imageAUTHOR

      David Lim 

      7 years ago from Singapore

      triosol - Thanks! :)

      DREAM ON - I know. It is so tempting to buy a $2000 gadget - which you can't afford - and just pay $100 per month to pay it off. The extra interest won't kill you. But when you buy a second gadget, and a third, somewhere along the way, the line gets crossed. :(

    • DREAM ON profile image

      DREAM ON 

      7 years ago

      There is that fine line that gets blurred when debt starts to get overwheling.Sometimes it is better to stop using all cards for three months to see if you can still live without.Think of the things you could of bought with the money you paid on interest.Sometimes we have to wait to buy no matter how much we want it.As long as it is not a neccessity.Great hub.

    • triosol profile image

      triosol 

      7 years ago

      very informative hub. Voted up.

    • wandererh profile imageAUTHOR

      David Lim 

      7 years ago from Singapore

      That sounds great, quicksand. Maybe it's about time I look for some new cards. :)

    • quicksand profile image

      quicksand 

      7 years ago

      Well some credit cards offer reward points that could be used at most leading retail outlets. My cards do. At the end of the year I find that I can buy the latest computer by paying half of its value with my reward points.

      Cheers! :)

    • wandererh profile imageAUTHOR

      David Lim 

      7 years ago from Singapore

      Thank you Hello, hello,. :)

    • Hello, hello, profile image

      Hello, hello, 

      7 years ago from London, UK

      You have raised a very important subject and wrote a hub with very good advice.

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