When I went away to college, all I had was a checking account and a savings account at the local bank. In fact, I just opened my checking account about two years earlier. When I arrived at college, I was not overwhelmed with credit card offers, but did receive a few. That fall, I opened my first credit card. I was granted a credit limit of $500.
Around the same time, my roommate also opened his first credit card and he had a $1,000 limit. As the year progresses, I used my credit card sparingly. I mainly used it to buy CD’s. (Yes, I went to college before the downloading music era began. This was also a time when you really couldn’t use your ATM card for online purchases – at least my ATM didn’t allow it.)
I will never forget the day during the spring semester when I walked in on my roommate on the phone with his credit card company. The conversation revolved around finance charges. It appeared that he didn’t pay his bill in full and was charged interest. He was questioning the “finance charges” because he didn’t place those charges. I assume that the customer service representative walked him through the understanding of what happens when you don’t pay your bill in full.
Credit Card Troubles
I finished off my freshmen year with no credit card debt and was rewarded with a higher credit line. I worked hard that summer and in the fall of my sophomore year, I met a girl. Unfortunately, I didn’t have very high self-esteem at the time and ended up needing to show her my love through buying her things. She would have been fine without me doing this as she was from a modest upbringing. I don’t remember what my balance was at the end of the school year, but all of the dining out and gifts caused me to basically use my earnings from the upcoming summer (between my sophomore and junior years) to pay off the debt.
This is when the spiral began. Over previous summers, I worked to have money for the upcoming year. There would be times when money would be tight, but I could manage to get by. But now, all of my summer earnings went to pay off old debt, meaning I had nothing for the upcoming year. Text books went onto my credit card along with buying dinners and gifts for the girlfriend. What was a small problem during my sophomore year, quickly exploded to a big problem by the end of my junior year.
Graduation and Lessons Learned
When it was all said and done, I graduated with close to $4,000 of credit card debt. This might not seem like a lot, but to a broke recent grad, knowing that student loans were going to be paid back, this was a big deal. Eventually, I was able to get out of credit card debt, but not for a while. Here are some things I learned along the way:
- First, having a credit card isn’t a bad thing. I initially used it responsibly and built up a good credit history. Don’t be frightened by a credit card. Get one and use it sparingly and pay it off in full.
- Don’t buy love. Whether it is the other person convincing you they are worth it, or yourself trying to prove it, love doesn’t work that way. At least healthy love doesn’t. Be confident in who you are and what you have to offer.
- This may be a little controversial, but if you do find yourself in credit card debt in college, don’t do what I did and use your summer earnings to pay off your credit card. Between my junior and senior years, I used some of my income to pay down my credit cards, but I saved the majority of the money for the upcoming year. Yes, I ended up paying interest charges. But it was a lot less than had I paid my credit card balance down and then had to charge everything all school year because I didn’t have any money. This is why many experts recommend having an emergency fund even if you are in credit card debt. Saving most of my summer income acted as my emergency fund.
- Talk to people about it. I was embarrassed to tell others about my debt. But looking back, I feel that if I had told people, somewhere along the way, I would have realized what I was doing and could have stopped much sooner than I did.
I hope that you can use the hardship I went through in taking on credit card debt in college as a wakeup call or even a call to action to not do what I did. Even if you are in the same shoes I was in then, know that you can overcome it. I was able to get out of credit card debt, pay off my student loans and build up a healthy amount of savings. Of course I could be much farther ahead had I not gotten into debt, but it was a lesson I had to learn. Learn the lesson and avoid repeating your (and my) mistakes.