How a free pizza can ruin your financial life!

The Free Pizza that cost me over $20,000.

I still remember that day.  It was my first year at college, walking to the dining commons I see this table with a big Pizza banner hanging behind it.  It said “fill out an application and get a free pizza.”  What college kid can resist that?  Money is tight and a large pizza would be a welcome change from the on campus stuff.  Speaking of money, the application was for a credit card.  How great would that be, right?  My first taste of freedom from home, with buying power!  Yet, I didn’t hold my breath waiting for the card.  Who would give credit to someone who is a full-time student, no history and no job?

Flash forward a week later there it was! Hold on a second, that holding my breath thing, it happened.  Well I didn’t turn blue in the face.  I did think about what it would be like to be able to buy what I want when I wanted to.  Not having to call home and ask my dad for money.  Not having to explain every dollar I spent and get lectured when I was foolish.  And… we’re back to the flash forward.  I don’t think I even waited to get back to my dorm room before I opened it.  After ripping open the envelope I could smell something.  We all know the smell of money, this was that ten-fold with a hint of plastic power.  Holding the card in my hand, a rush went through my body.  What could I buy? When should I buy it?  The answers, everything and now!  Wait, I should probably read the instructions first.  Oh there they are, right on the card.  Call this 800 number to activate.  That was it, (besides the wasted ink on the back of the paper known as fine print.)  Within seconds of the call, “your card is not activated and ready for use.”  Wow, awesome, how simple!  $1,000 of buying power!

I bet you can’t guess where this went.  Over the next few months I used up that $1,000 in no time.  My shiny new “welcome to the adult world” card was now broken.  I made my payments, so what’s going on?  Around this same time I got another envelope.  This was similar to the first, yet it felt heavier.  I opened it up with a little more desperation.  Another card with a love note.  “Transfer your other balances for low-interest”  Ok, sounds good.  I call the number, give all the needed information and POW!  $1,000 balance transferred to the new card that has a $3,500 credit limit!  That’s triple the amount I had before with the original card still in my pocket!  I’m back in business.

640px-Credit-cards

Enough with the play by play:

In my early 20’s I had 3 major credit cards and 4 store cards totaling $12,000 in available credit.  Well, the available credit was probably closer to $40.  They were maxed out.  Not to mention the $25,000 auto loan I had.  That $37,000 in debt for someone who was making less than $35,000 per year.  At today’s rate that would cost me $8,000 over 12 years of payments to pay the cards off.  Well, that didn’t happen.  With a job change, all payments fell behind.  This led to more fees.  Eventually bankruptcy.

So what?  Everyone has credit debt.

Very true.  Most of us have or had credit cards at one time in our life.  I would imagine the majority that are living paycheck to paycheck have them mostly maxed out as I did.  Instead of helping us they add to the problem we faced to begin with.  There are those out there that use credit as a temporary spending tool, then pay it off at the end of the month.  They also may use them for an emergency purpose or a needed larger purpose.  I (like I’m sure many more have done) used them for dinners, going out on the town, new TV’s, clothes and so on…   Not thinking about the fact that the $500 TV would cost an extra $134 over a 3 year payment schedule.  I’ve had items that I was still paying for that I no longer owned.

Wow, that sucks.  You learned your lesson, right?

Sure I learned my lesson.  I’ve tried later in life to get credit for stuff.  Most of the time I was declined.  The times I was approved, interest rates were just plain stupid!  I have learned to only spend what I have, mostly because I didn’t have another choice.  I’ve adopted to a life where I know where the money from my next paycheck is going.  (The next step is to save a bit from what’s left.)  However last year I did one of the DUMBEST things I could’ve done.  Needing money for an upcoming camping trip I searched for answers.  The trip was just before a payday so I needed money now.  Not having much left in hidden treasures to sell I turned to the internet.  With the power of Google I found it. Dialabank Payday loans.  How simple, how easy!  I filled out the form (in my gut it felt like a bad idea) and within a day $1,400 in my back account.  Not exactly sure what happened next.  I was on my trip most of the money gone due to bills and fun.  Using my smart phone I filled out another form (or two) and just as easy, more money.  I used the new money to pay off the first loan, then the first loan offered to renew that loan.  You get the picture.  The last year was spent paying off these loans.  Interest rates were something like 400%.  Also received multiple badgering calls from people who I didn’t even take the loans out from.  Scams trying to scare me to pay them or they would “take me downtown.”

Sad story, but you did it to yourself!

Yup, I don’t blame anybody for what I went through.  I filled out the applications.  I spent the money.  I was foolish.  I was…. addicted…to spending?  Probably however I think it was just the ease of access and the desire to do and buy stuff.  I do think I didn’t know what I was getting myself into.  I was taught about drugs, sex, smoking, drinking, distracted driving, gambling and all the other bad things that life had to offer.  I also remember being taught about math, music, science, cooking, athletics, history and tons of other subjects in school.  I even learned about common sense from day-to-day lessons.  So why did I not know about credit?  Why did I continue on that path once I learned what I was doing.

I think teachers, parents, friends and credit card companies should do more to educate the young adults entering the “real world” about credit.  It can be a useful and needed tool.  It can also ruin your financial life if not respected.

So what do you think?  Are we doing enough to pass along this message?  Am I just a minority of the foolish spenders? Let me know in the comments below.  Also, check out my last post and answer a few survey questions about credit.

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