Long before the start of this protracted recession, and prior to the stock market thud of late 2008, I became acquainted with the collapse of an economy at the micro-level. In the late 1990s, as I wrapped up my high school career and entered college as a freshman, my family’s fiscal health imploded alongside the tenacity of my parent’s marriage. My father’s prolonged unemployment begat depression, which led to more fighting than usual, then separation.
As if the family unrest were not enough, my mother’s departure from the family home, where she had long been the sole breadwinner, led to foreclosure and problems with the IRS. Instead of working together as a team to figure a way out of the mess, my mother, who is no longer a part of my life, chose identity fraud as her personal salvation. Whilst I was away completing my degree, she took my very early stage credit rating to the cleaners – to the tune of over $17,000.
As a 22 year-old graduate in 2000, I had neither the means nor the mental capacity to deal with this level of duplicity and ruin. Ultimately, I chose to file for bankruptcy, oddly enough one of the smartest moves I ever made. It gave me a fresh start and the closure I needed to put the last five years of sleepless nights behind me. I am proud to say this bankruptcy finally rolled off my credit report this past March. For a long time, I felt the irony of being one of the most anal, responsible people in existence, but unable to rent an apartment without a co-signer.
But this anecdote is not the point of my post today. Though years of adulthood have helped me put this saga in the past where it belongs, it still very much affects the way I do business today – much to the chagrin of my husband. Call me old fashioned (like REALLY old fashioned), but I do not trust credit, electronic money or other slippery currencies. Once (or thrice) bitten, always and forever shy I suppose. Though I am far more solvent than I once was, I refuse to have my name on a piece of plastic, don’t buy things unless I have the cash in the bank to pay for them, and if I owe the smallest debt to an acquaintance, I pay it off before I have the opportunity to break out into a sweat. Am I scarred or just sensible? You decide.
Anyway, my husband Eddie bought a new sport coat yesterday. I am receiving an award from the Illinois Woman’s Press Association this Saturday, and as part of the deal, we get to attend a fancy luncheon at Chicago's Union League Club. The sport coat was necessary, so as he trotted off to Macy’s, I felt relatively calm. However, that evening, when he informed me he had charged the $200 bucks spent to his American Express (note: HIS, I have refused to have my name added to the account), I lost it for reasons even I cannot fully understand.
As I tried to work it out, I clumsily explained that once the credit floodgates are open, they are tempting and hard to close. Look no further than the national debt for proof. I somewhat hysterically relayed to Eddie that I know well where that road leads and I’d just rather not risk it. We had the cash, so why didn’t he use it? Answer? Credit card points.
Another schadenfreude designed by predatory card issuers. Yes, we will let you “earn” a free iPod while we hammer away at your debt ratio, making it impossible for you to ever be free of our clutches.
Readers, am I overreacting? Possibly. But the combination of having fiscally irresponsible mentors, and bearing witness to America’s move in the wrong direction, farther away from financial independence each day, only renders me more set in my ways.
I will be back to read your thoughts after I finish stuffing my last paycheck into the mattress.
As if the family unrest were not enough, my mother’s departure from the family home, where she had long been the sole breadwinner, led to foreclosure and problems with the IRS. Instead of working together as a team to figure a way out of the mess, my mother, who is no longer a part of my life, chose identity fraud as her personal salvation. Whilst I was away completing my degree, she took my very early stage credit rating to the cleaners – to the tune of over $17,000.
As a 22 year-old graduate in 2000, I had neither the means nor the mental capacity to deal with this level of duplicity and ruin. Ultimately, I chose to file for bankruptcy, oddly enough one of the smartest moves I ever made. It gave me a fresh start and the closure I needed to put the last five years of sleepless nights behind me. I am proud to say this bankruptcy finally rolled off my credit report this past March. For a long time, I felt the irony of being one of the most anal, responsible people in existence, but unable to rent an apartment without a co-signer.
But this anecdote is not the point of my post today. Though years of adulthood have helped me put this saga in the past where it belongs, it still very much affects the way I do business today – much to the chagrin of my husband. Call me old fashioned (like REALLY old fashioned), but I do not trust credit, electronic money or other slippery currencies. Once (or thrice) bitten, always and forever shy I suppose. Though I am far more solvent than I once was, I refuse to have my name on a piece of plastic, don’t buy things unless I have the cash in the bank to pay for them, and if I owe the smallest debt to an acquaintance, I pay it off before I have the opportunity to break out into a sweat. Am I scarred or just sensible? You decide.
Anyway, my husband Eddie bought a new sport coat yesterday. I am receiving an award from the Illinois Woman’s Press Association this Saturday, and as part of the deal, we get to attend a fancy luncheon at Chicago's Union League Club. The sport coat was necessary, so as he trotted off to Macy’s, I felt relatively calm. However, that evening, when he informed me he had charged the $200 bucks spent to his American Express (note: HIS, I have refused to have my name added to the account), I lost it for reasons even I cannot fully understand.
As I tried to work it out, I clumsily explained that once the credit floodgates are open, they are tempting and hard to close. Look no further than the national debt for proof. I somewhat hysterically relayed to Eddie that I know well where that road leads and I’d just rather not risk it. We had the cash, so why didn’t he use it? Answer? Credit card points.
Another schadenfreude designed by predatory card issuers. Yes, we will let you “earn” a free iPod while we hammer away at your debt ratio, making it impossible for you to ever be free of our clutches.
Readers, am I overreacting? Possibly. But the combination of having fiscally irresponsible mentors, and bearing witness to America’s move in the wrong direction, farther away from financial independence each day, only renders me more set in my ways.
I will be back to read your thoughts after I finish stuffing my last paycheck into the mattress.
Posts
Sorry, but I'm going to take Eddie's side on this and say that you are overreacting.
ReplyDeleteUsing credit cards to get things you can't afford is a problem, but using them as a convenient cash substitute is not particularly harmful. For sure, a lot of people don't know how to use credit cards properly, and the credit card companies are happy to profit from that ignorance. And easy credit arguably served to mask real wage stagnation by allowing people to spend more than their stagnant wages could afford.
But if you pay off your balance each month, credit cards are basically harmless and a convenient way to pay for things, and a way to actually save money. By shopping online, you can avoid the Stroger sales tax. You can shave a few percentage points off of regular purchases like food and gas. Using credit cards saves the hassle of carrying around large wads of cash when traveling. And credit cards are safer than cash - if someone steals my cash, I'm out the cash, but if they steal my cards, I can call and have the cards canceled.
I can sort of understand how your experience may have made you leery, though I probably would understand your reaction more if you had simply gone through a phase in your youth where you got one of the credit cards that college students sign up for to get the t-shirt and then got in over your head using it. You were a victim of fraud, perpetrated through, but not by, the credit companies, at least based on the information you've given.
And this is going to sound harsher than I mean it, but if you think you are somehow preventing history from repeating by forswearing the modern economy, you're not. Anyone could do the same thing today. The difference is that if you have cards in your name, you're more likely to get a call from the issuers security department asking if you really made a charge of X dollars at Y date at Z store. If you're completely off the credit grid, you're more likely to remain ignorant of your victimization until it's too late.
First of all, congratulations on finally having a clean credit report. As you know, I was aware of your story and think it's great that you have fully restored your credit. I can't imagine having to go through what you did and I commend you for coming out on the other side in the position you are now.
ReplyDeleteThat said, I side with Eddie and Sanjiv as far as credit cards go. I don't really have much more to add to what Sanjiv has stated above as he has hit all the positive points of using credit to your advantage. You certainly don't seem like the type that would abuse your credit cards so if you continue to apply the same discipline and determination with credit that you have obviously practiced without, you can save yourself time, money, and worry, while earning the points of your choice and further strengthening your credit rating.
I can't argue with much that you've said, and on my other blog, numerous commentators have informed me of ways they actually MAKE money off the credit cards, instead of vice versa - i.e. cash back and earning points while paying off balances every month. Yes, I was definitely a victim of fraud and paid for it (in every sense) for a long time. I suppose I need to find a way to shake myself out of the fear and join the modern world. Admittedly, I kind of skate by with the excuse that if I ever need to charge anything, Eddie can get it for me.
ReplyDeleteI certainly can't blame you for feeling this way as I saw first hand how bad it was for you. But now that time has passed and its officially off your record, its time perhaps to work on changing your point of view. Having credit lines will help you in the future, especially if you don't carry the debt. Good credit scores are necessary for just about anything these days.
ReplyDeleteIn case you're wondering, the second comment was from me :)
ReplyDelete-Mr. A
Nothing makes me happier then to read that you've finally passed the blemish of the Bankruptcy off your record.
ReplyDeleteI'll be the sole dissenter here and side with your desire to banish credit cards from your life. It is a fallacy to think that credit cards are necessary for a good credit score. We would do just fine if we all had a zero for our credit score...that would mean we are all paying cash for everything and living below our means. What would happen if you did need a loan for something (and my personal opinion is that a 15-year mortgage is the only acceptable loan one should have) is that the financing bank would do a manual, rather than automated, underwriting process. That means an actual human being would look at your assets, debt (which would be zero) and your income and make decision based on that rather than the number of your FICO score that a computer spits out. We should all have the goal of not having or using credit cards. I don't use them either. In fact, like you, I don't even have any. If I ever need "plastic" (i.e. shopping online) I just use my debit card.
ReplyDeleteAnd those rewards points aren't usually worth it...people usually end up spending far more than they would or should to get "free" money. The reason CC's can give rewards points/cash back is that they charge merchants to accept CC's...so the more you use the card (in other words, the more you SPEND), the CC companies "give" you a tiny fraction of what they charged the merchant. You would be better served to not use credit cards, spend less, and put your money in a high-yield savings account.
And finally, if you want to protect your identity, having a credit card won't prevent it. Your best option would be to call the credit bureaus and have them freeze your SSN. If anyone attempts to open any kind of loan account in your name, the lending institution would not be able to open any kind of account in your name or SSN without contacting you and (I believe) you would need to give them a PIN or code word that you would create when you placed the freeze on your identity.
Credit card companies have done an amazing job at convincing the American public that credit cards are a necessity. Don't give in!! It takes an extraordinary amount of discipline to live credit-free, and you should be proud. And congrats on being 100% bankruptcy-free!
Yes, Mr. A, I knew commenter #2 was you. I would like to point ou that I am AM in the process of paying off my student loans for my Master's degree, and I had a corporate credit card issued in my name for awhile at IRI which was used and paid off. This has to count for something right? But still, I'd rather be off the grid, logical as you all are.
ReplyDeleteMB - thank you.