I am not a financial adviser, I can’t tell you what to do, but I can tell you what not to do.
From the first day that I got my first credit card, I thought of it as free money. I knew that I had to pay it back, but with a $10 minimum payment, I knew that I’d have plenty of time to worry about it.
When I was issued a new credit card, it felt like I was just gifted an inheritance. That blank credit card felt like an adventure that was waiting to begin. The $3,000, $5,000, or more available to me was waiting to be used for something extraordinary.
Each time my credit limit was raised, I was able to breathe for a few more months. I could “afford” to put gas in my car, buy groceries, etc., without having to worry about where the money was going to be coming from.
I was utterly clueless about the harm these actions were going to cause me later on.
Looking back on it now, I don’t understand how I could have been that ignorant.
What was I thinking?
Looking back now, I find my actions completely ridiculous. I can not believe that I didn’t think about the future. I could not believe that it never occurred to me that I shouldn’t buy things if I didn’t have money in my checking account.
I’m not alone in thinking this way.
I’ve talked to several people who have done something similar. I watched a friend go through this when she refinanced her home. She took rolled the equity back into the loan and took the cash. The money was not invested or put into a savings account. It was not reinvested in her home either.
The equity in her home went to pay off credit card debt and a vacation. The credit cards were later charged back up. She took a wise investment (her home) and turned it into a liability by owing 100% of its value. She also had a great deal of credit card debt and no savings account.
For the most part, I’m in the same position as she was, but I’ve never owned a home.
The Lesson
Credit cards are not free money! They are a loan from a bank that hopes you will take years to pay it back.
Credit cards are not a means to an end unless the end you seek involves massive debt.
I made enough mistakes with credit to last a lifetime. I hope you will remember this and any other stories I share when you are talking to others about finances.
My goal has always been for others to see all the mistakes I’ve made and remember them, so they avoid making them. I do not want young adults to go out without a firm grasp on using money effectively.
This is one of our hugest mistakes, imagining credit is money. It is really the idea of future money, and using it is a risky bet. I lost, big time. Credit is a risky bet.
This is one of the worst finance mistakes you can make.
I can’t believe there are people who do still think of credit as free money but sadly there are.
So sad that I did it too. The whole buy now, worry later. In my mind, it really was free money.
Technically speaking, all money is debt.
When I was in college, I also started to use my credit card. First it was gas here and groceries there, but they all added up to the point that I was using my card more often. It took a while to dig out of, and now I despise credit cards. Never again!
Thank you for sharing this article with me. I also mistook credit for free cash in my early twenties and it took me years to correct those mistakes. It’s crucial for credit card users, especially young adults, to understand that every swipe is a loan that needs to be repaid.
Unquestionably believe that which you said. This is such an important lesson for everyone, especially those just starting to use credit. I think one of the key takeaways from your story is to live within our means. Maybe budgeting classes should be a mandatory part of high school education? Thanks
Many thanks for this article. This is a reminder of how credit misuse can spiral into significant financial trouble.