What Credit Crunch?

28 02 2008

I got my first credit card when I was 19. It was a Citi American AAdvantage card. As I got older I slowly accumulated more credit cards, and by the time I graduated college I had 5, all with Citi, all with rates between 15 and 20%.

Shortly after graduation, I financed our cross-country move, and had over $10,000 in credit card debt. I was paying more than the minimum monthly payment on all of my cards. It finally got to a point where I was sick of having this debt hanging over my head, so I took what I consider to be a drastic measure. I cashed out of AAPL and paid off all my and all of Mary’s credit card debt.

Now that our only debt is a car (that we overpay on, and put a huge down payment on), we no longer have high interest debt hanging over our heads. We have diligently been using only two credit cards that we pay off every month and it is amazing!

With the “credit crunch” going on, I have heard stories of people’s interest rate on their credit cards going up, and people not qualifying for loans. I’ve heard that it’s much harder to get financing and even harder to get credit cards. But I have to say that I have felt the opposite of this. It’s not because I’m searching for loans (we locked in a mortgage before the mortgage crisis), or because I’m borrowing tons of money; it’s because credit card companies are sharks!

I completely understand why it is so hard for some people to stay out of debt once they get out. Not a month has gone by since we got out of credit card debt that I have not received at least two credit card incentives in the mail. (I understand that this is partially my fault for not closing the accounts, but by leaving them open it can help my credit score for when we close on the house.) The wording of the incentives I receive is along the lines of “use these low interest rate checks to pay bills, pay off debt, or just to deposit in your account!”

I know that these incentives are usual for credit card companies to send out, I got them when I was in debt, and I expected to continue receiving them. However, now that I don’t have the debt, the volume of these incentives has increased. When I was in debt I would receive one per month for one account in particular. Now that I’m out of debt with them I am receiving them for all of my accounts.

I have to admit, I’ve been tempted by these checks. “0% for 6 months! I can pay it all back by then,” I say to myself, but then I think about it, tear it up and feel much better.

I encourage all of you to do the same. If you have or have had problems with credit card debt, there are many ways to approach it, but remember, never use any of these incentives that are solicited to you. If you absolutely need it, you should call and get it on your own. The most effective way, however, is to cut up your credit cards, and close the accounts once they are paid off.