When I turned 18, I got my first credit card. I asked my father "good idea?" and he said yea, good to build up credit. Ok then. A week later, my new card with a whopping limit of $750. Never having experienced not paying with cash I had, it gave me an odd thrill and I went out to eat with my friends and joked "It's like free money!" And despite knowing better, it certainly felt like free money because the numbers didn't change in my bank account. Sure I knew I'd have to pay it off, but whatever, I'd do that later.
Now, like all good citizens, I spent the first couple years always paying off the balance I owed. Nor was it long before credit card offers came to me and I said "hey good to build up credit" and signed up for them. My next big one had something like $1500 limit and I was 19. Soon enough, I was doing great -- my credit was high & debt low -- looks good for credit.
Well, soon enough I was in Boston going to college and working part-time. One day at work, I got another one of these offers and thought "why not?" This time was special though because it asked me what is your household income -- not my income. Well.. my parents didn't make much but we weren't poor either, so I added together the incomes and said my household income was $150k. I felt a bit mischevious putting it down -- was it the truth? What was going to happen? Would they check to see if I made that much?
No, instead, they were more to happy to oblige and gave me (a 20 y/o) a new credit card with $12,500 limit. Holy shit! I thought to myself, I have a LOT of free money! Over the course of the next 4 years in college, I would eat out whenever I pleased and generally kept my credit under control, but slowly & surely my credit usage was rising. Fast forward a few years after that, and I have a total credit line of about 30k -- all maxed out. Was I being outright financially foolish ordering $100 bottles of Chardonnay at the club? Not at all. Was I being financially negligent ordering whatever small thing came my way that I wanted? Yes -- because I could.
So then you find yourself in deep debt, and what do you do? You start paying the minimum off and then re-using that credit. Do you care so much about paying it off? No that seems like an eternity away, paying the minimum is easier. Do you know it's wrong? Of course. Do you care? Not as much as you should.
This my friends is how you lose at the credit card game and end up just paying fees to bank execs. It can be fun, but I do not recommend.