Like many people in their early 20s, Beverly Harzog easily got into debt after graduating from college. Harzog, however, didn’t become an indebted credit card junkie with the excuse that many young people have — a low income.
She graduated with an accounting degree and was making good money in her first job, but she was just as quickly spending it, partly in an effort to impress her co-workers with expensive clothes.
A credit card junkie
She started with a department store credit card and soon had seven credit cards, becoming a credit card junkie and maxing out the cards in about six years with $21,000 in debt. It took her two years to pay it off.
“I just kind of went a little bit crazy,” says Harzog, a self-described credit card junkie and now long out of debt and author of the new book “Confessions of a Credit Junkie: Everything You Need to Know to Avoid the Mistakes I Made.”
[pull_quote align=”left”]Harzog didn’t realize she had a problem until a Macy’s clerk didn’t allow her to make a purchase with her Macy’s card because her credit limit was reached and she hadn’t paid her bill.[/pull_quote]She didn’t realize she had a problem until a Macy’s clerk didn’t allow her to make a purchase with her Macy’s card because her credit limit was reached and she hadn’t paid her bill.
“I could buy anything I wanted and I didn’t feel like I was really spending money,” Harzog says of her spending habits before her Macy’s card was pulled.
Harzog’s book has a lot of great advice on credit cards, but one of the best parts is the first chapter, where she details 10 mistakes she made as a credit card junkie that she hopes others won’t have to. Here they are, in a nutshell:
1. Applying for every credit card offer
The credit card offers kept coming in the mail after Harzog graduated from college, and she couldn’t stop herself from applying for them.
She didn’t know that applying for a lot of credit cards in a short amount of time would lower her credit score. She didn’t even know what a credit score was.
2. Not reading the fine print
She didn’t read the fine print in the credit card contracts, missing the interest rate she’d be charged every month for missing a payment, which didn’t give her much motivation to watch her spending. She also didn’t learn about penalty rates and compound interest while becoming a credit card junkie.
3. Buying stuff I didn’t need
Without a budget, Harzog bought designer clothes she couldn’t afford and went into debt. She bounced 12 checks in one month.
“If I’d had a budget, I would’ve known I was going into the red that month, and hopefully, stopped myself,” she writes in the book. “I think budgets don’t get enough attention these days. They just seem kind of dull, right? Well, that’s a thing of the past. There are so many great options out there. And many of them are free.”
4. Not knowing how much I spent or where I spent it
This comes from not having a budget, and also from not tracking spending. She now uses an online program to set categories for spending limits, and knows exactly where her money is going. She’s no longer a credit card junkie.
5. Carrying a balance on my credit cards
Having a low credit card balance can boost a credit score. Harzog didn’t know this when she got her first credit card bill, figuring she would pay off the balance the next month. She didn’t, and her descent into credit card debt and life as a credit card junkie began.
“Once you start carrying a balance, something happens in your mind and this becomes normal for you,” she says of being a credit card junkie.
6. Maxing out my credit cards
If balances on each credit card are low, a credit score won’t be affected much, Harzog says. Spending up to and beyond the card’s limit, however, increases the credit utilization ratio and can hurt a credit score.
7. Not paying my bills on time
If you stop paying a credit card bill, the account can be turned over to a debt collection agency. Harzog didn’t answer such phone calls, and the debt only got worse.
A late payment would trigger a penalty rate as high as 29.99%. For a payment more than 60 days due, the rate would apply to the entire outstanding balance.
8. Ignoring debt and hoping it would magically go away
Even with a good salary, Harzog couldn’t keep up with the minimum payments on seven maxed out credit cards. Her solution? Stop going to the mailbox. After finally collecting her mail one day, she still didn’t stop using her credit cards.
Her next solution was to earn more money by studying for a CPA exam and getting a second job. This is about the time when her first credit card was denied, creating a turning point when she realized she had to get out of debt.
9. Believing I had to keep my debt a secret
She didn’t tell her parents or future husband about her debt and being a credit card junkie, figuring she didn’t want to worry them. She now realizes that anyone can get into credit card debt and that unexpected events can lead to it.
10. Not having any financial goals
Thinking about the future can be difficult when you’re in your 20s, and planning for retirement or a rainy day can be the furthest thing from your mind. This mindset only increased Harzog’s credit card debt, using credit cards for impulse purchases and vacations. Without a financial plan, you won’t get there.
Now, years after being a credit card junkie and getting out of debt, Harzog has no memory of how much interest she paid on the original seven credit cards she had. That’s probably a good thing to forget. For many people, many such memories from their 20s can be better left in the past.
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