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Credit Cards; My Advice… Don’t Do It!

Burning Dollar

2 1/2 years ago, we were debt free and between my wife and I, we were earning a comfortable living and things were great. Then, we had a banking issue, i.e. Coventry Healthcare of Kansas double billed us for our medical insurance, nearly $700 was taken instead of the usual premium of $330, which in turn bounced our rent check, we were just $2 short of the check clearing, even after the double billing error.

I visited my local branch of Meritrust CU to discuss this situation and they suggested that I take out a credit card with them to cover these sort of circumstances in future. I’d be able to transfer funds from the credit card into our checking account to make up the shortfall for a small cash advance fee, which would have been much less than the $32 charged for insufficient funds to cover the bounced check.

I decided to take out a VISA credit card with a limit of $2,500 as we earned more than that amount and could pay off any balance within 30 days. A couple months after that, my wife lost her job and medical insurance which meant we were paying for her medication out of pocket, which came to close to $1,000 per month. To cut a long story short, I ended up with two more credit cards, a Discover and an AMEX

My wife found another job and things were OK for a while, we were paying down the credit card debt before another job loss for my wife, and the credit card balances increased again. Those balances amounted to $24,000 by October of 2016, at which time I took out a personal loan in an attempt to get control of the debt as my wife had been back in, what seemed like stable employment for six months.

Finances appeared to become more stable and I felt like we were once again making forward progress, but, of course that was not to last. In February 2017, my wife once again was made redundant, the community manager was transferred to another property and the incoming manager wanted to “bring in her own people”, leaving my wife out in the cold once again and us in dire financial straits.

Our saving grace was that we had received a $5,500 tax refund, which got us through the next five months of loan and credit card payments; which had growing balances due to having only one income, which is not enough to support a family of four. We had also leaned on credit cards heavily to get my wife certified as a real estate agent, in an attempt to launch a real estate career as being an employee wasn’t working.

12 months later, she hasn’t managed to become a buyer or sellers agent, so we have spent over $3,000 on certification and fees, including $600+ today for the latest batch of fees, which will nearly max out our VISA credit card. She has been applying for dozens of jobs every week without success and her unemployment benefits have been patchy due to bureaucracy because she attends university part-time.

After tomorrow, the tax refund runs out when I pay the $498 loan payment, however, my mother-in-law offered to give us $2,000 to help us out, I refused to take the money, instead stipulating that it be a loan rather than a gift. This loan from my mother-in-law will keep us afloat for another 6 – 8 weeks, when I hope to receive my inheritance from my father passing, which is tied up in probate in the UK right now.

In total, between the wife and I, we have over $50,000 in debt which includes a personal loan, car loan, four credit cards and four store cards, all of which are carrying a balance, the store cards combined equal about $3,500 in balances. I do expect to receive around $100,000 from my inheritance after paying lawyer fees. This will sound extremely harsh, but my father dying is the best thing he could have done for us.

I never had a good relationship with my father, but I will not speak ill of the dead. He had a lot of money he could have used to bring my family and I to the UK and set us up to have his only family around him, but he elected to not do that for some reason I cannot fathom. But, him passing will help us in other ways like helping us get out of debt and secure our financial future, so I guess I should thank him for that.

Of course, credit cards and loans charge interest, which is 14 – 17%, that comes to about $600 each month, roughly 60% of what we pay for the minimum payments. It goes without saying, we can’t afford to hemorrhage $600 a month in fees, but what option do we have other than to default on our loans and credit cards, I’ve looked at declaring bankruptcy and it’s a no go, we’d end up with absolutely nothing.

Bottom line here, if you can possibly avoid credit cards, do it. I had turned down credit card offer after credit card offer for the first 37 years of my life and wish that I had done so again given the dire situation we find ourselves in currently. It’s best to live within your means, if you can’t afford something, it’s better to do without than end up financially ruined should you have to default on cards and loans.

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