Well, after a long journey of about 2.5 years after the start of this resolution, I have finally succeeded in killing off a huge monster which many people are familiar with, called Credit Card Debt.

Like an always-rolling Katamari, the debt gradually builds up over the years while staying relatively small and inconsequential...  until suddenly it's a massive heap which is eating up everything and has suddenly become too big to ignore, threatening to absorb your very life.  [Huge Boss Approaching!]

Drastic measures and many monthly cutbacks had to be taken, and while it was hard at first to slow the momentum, it actually became easier to reverse the damage as time went on.  [Strategic Relocation, Reduce Item Inventory, Cast HP Drain on Enemy, Cast Haste on Self, etc..]

The final victory last month was surprisingly anti-climactic, not so much of a triumphant "defeating the final stage boss" type of feeling which I anticipated from the start, but more of a "That's it? The battle is over?" feeling after systematically wearing it down to a crawl and simply outpacing it with my own strides.

And to continue keeping the momentum on my side, I've been contributing to my 401(k) Retirement account (pretax!) which my employer also chips in 4% on, so that I'm building some savings and growing my own interest, which is a damn good feeling.  [Level Up!] [Hero's HP Increased!]

Wow, well done. That's no easy task.

I own a credit card but I only used it once to just get my credit up.  Right now I'm living at home milking the free rent while I pay off my car payment and 2 student loans for as long as I can.  Plus I started my 401k when I started my job and I put 75$ a week into it (and I'll increase it based on how much I'm making) which adds up to lots of money after a while.  Hopefully I get to retire early and buy an island.

Between paying two student loans off and paying my car payment (on time or always early... I don't think I have a payment due for any of my loans for at least 8 months) I should have pretty solid credit... if I ever need it.

~jb

JB:  Yes, the earlier people start putting money into their 401k the better, even with their first job ever or their early 20s, since they'll be way better off being their money has extra time to multiply.   

I feel like such a "late start" since I'm just beginning now at 29, and those earlier 10 years could have made a huge difference in how much bank will be there at retirement.  Mine's at 7% contribution right now, since I need to build up a liquid cash-savings buffer as well, but even ANY contribution is still better than nothing!

Jay: Thanks!  Although one mountain was conquered, there's still another one to climb, heh!

My remaining college student loans are almost twice the amount my credit debt was, so this was just the warm up, unfortunately.  I'll try and strike a balance between slightly increasing my payments to those, while trying to start savings on the cash front too.

*addition*  Oh yeah, JB and everyone else should be checking their own Credit Report each year as well.  You need to KNOW what your credit rating is, rather than guessing what it is.

My FICO number rating has been steadily improving, and there hasn't been any erroneous information on my reports.  Supposedly quite a few reports get misinformation added from data entry mishaps which belong on other people's reports, so it's best to keep an eye on it!

Are there any places I can check (for free?)

And I think I started my 401 at 23 (a year ago?) which was when I started "real work", not just supporting myself through college.  It's probably at ~10% of my paycheck per pay period which isn't bad.  I wanted some extra money to play with (basically: order cds again) because I never had a lot of money in college.  It's good, for now.

The job I just started has a 401k, which I put money into the first time about 3 months ago.  I don't have a credit card, no loans, so no credit good OR bad.  I suppose I can worry about that when I get to that point.  I am paying my way through college right now, living at home.  I own my car and have no debt to speak of.  If I can go without ever using a credit card, I sure will try damned hard to do so.  It's too big of a trap.

JB:  www.annualcreditreport.com

That's the main site which was set up by the 3 credit agencies to give people their yearly freebie report, as is required by law.  I've also used www.myfico.com and found that to be very detailed.   

Check your report every time your birthday comes around, then you'll know it's been a year since last time, heh.

Raynebc: Congrats on starting your savings!

Although as a warning, Having little or no credit is almost as bad as having bad credit, unfortunately...

Even though that's a bit unfair, that's how the banks and lenders look at it.
Later down the road a lack of history could make for big headaches when trying to buy a house, for example.

Since a home is the single biggest purchase most people will make, being able to get the lowest percentage possible on your mortgage loan is very important, and without much credit history it could prove quite difficult to get approved, or get approved at a good rate...

A big factor in your score is how long or short your history is, where even 10 years is deemed "short term", so having 1 credit card and never using it is fine, as long as you keep that account open for many years to give you that length-of-time history.

When I was younger, I vowed that I would be the one person in America who would go through life without a credit card.  After all, why would I try to buy something that I didn't have the money to pay for?

As a joke, I filled out a credit card application when I was in grad school, insisting that I had an income of $0 per year, and no job (which was essentially true).  And somehow, that was good enough to land me a platinum card with a $5,000 credit limit.  I thought I would never use it...but that changed when I took a road trip to Vegas with some friends, and no one had any cash to pay for gas.

Now, I use my credit card to pay for almost everything because I appreciate the records that the credit card company maintains.  I can easily go online and see what I've been spending money on, without having to dig through a bunch of receipts.  As long as you can pay off the balance in full every month, credit cards can be useful tools; they make shopping online much easier, and they are essential for dealing with the occasional monetary emergency.  You just want to avoid leaving a balance on your card.  If that sounds like you, you might want to check out this site, where they discuss which cards offer the best rewards:

http://www.creditcardgoodies.com/

Carl:  Congratulations!  I remember the feeling I got when I was debt-free for the first time (I think that was 2002 or 2003, when I paid off the last of my student loans).  It was tremendously liberating.  I've been debt-free since then, and don't see why I shouldn't continue that way.  The only thing that might change that is if I decide to get a house someday, but hopefully I can save up enough money to pay cash for it (although I might have to wait until I'm 55 to do so).

jb:  The three main credit agencies in America are required by law to provide you with a free copy of your credit report once a year.  Go here, and walk through the steps:

https://www.annualcreditreport.com/cra/index.jsp

Personally, I space them out every four months (I get my TransUnion report in March, Experian in July, and Equifax in November), but you may choose to get them all at once.  If you see any inaccuracies on one credit report, it might be a good idea to get the others to see if they have the same problem, and get them all corrected at the same time.  Your FICO score, though, is not free, and the credit scores that the credit bureaus try to sell you with your free credit report are not the true FICO scores that a lender would see.  The only way to see your actual FICO score is to buy it from Fair Isaac (http://www.fairisaac.com/fairisaac). 

All:  If your employer offers 401(k) or 403(b) matching, make sure you at least put in enough money to get the maximum employer match.  After all, why should you turn down free money?  After that, your money would probably be better placed in a Roth IRA.  You put in post-tax dollars, but that money is NEVER TAXED AGAIN.  In most cases, that ends up being a better deal.  You can read more about Roth IRAs here:

http://fairmark.com/rothira/index.htm

For my case, my employer matches the first 6% of my 401(k) contribution, dollar-for-dollar, so I put 6% into my 401(k).  I put in my contributory maximum into my Roth IRA.  I haven't been putting any more money into my retirement accounts for two reasons:  (1) the US tax brackets are at historical lows, so it's very possible that my retirement tax bracket might be higher than my current tax bracket; and (2) I am seriously thinking about leaving the country for other opportunities in the next few years, and I don't know how the tax codes (both US and foreign) would handle money in a US retirement account.  GoldfishX?

Yeah, that's me. 26 and I've never owned a credit card. Of course, there's always college debt to make up for it.

Yeah, that whole thing where no credit screws you over is going to come up quickly to bite me in the ass, I think.  I've always only ever used a debit card and have never really seen the point in using an actual credit card, but the thought of coming back to the states and needing to get both a place to live and a vehicle makes me a little nervous, having no credit rating...

(unless, of course, it's possible to obtain one from having a Visa/Mastercard debit card or a Japanese credit card which works just like a debit card despite not being called such)

Same here, dude. Debit card, of course, but no credit card.

Although, I did apply for a Best Buy credit card when Harmony of Dissonance came out for GBA and I had no cash or my debit card on me. They turned me down because I had no credit, ironically. And that's all I needed to know about people that shouldn't have credit cards in the first place.

I don't know if I could live without a credit card. I've used once for years. I love it.

But also fear it. The potential for horrendous debt is very real. Very early on, I put my credit card on direct debit every month - meaning I simply can't spend more than I can afford to pay. Kind of defeats the purpose of having a credit card in ways but I got into importing games, soundtracks, various stuff and just had to get one. In fact, now that I think about it - how do you guys all buy your VGM without a credit card?

Once in debt though, getting out of it is a tough task and a mammoth achievement. Hope you get your college debt paid off without having to live in squalor, Carl! You've done well to wipe out the credit card so I hope that means it gets easier from here.

Unfortunately, credit is one of those catch-22 things: need credit for certain things, but can't get things if you have no credit. If you don't have a credit history at all, large financed transactions like mortgages are going to be very difficult to obtain.  Some of you may not be thinking about this now, but it's something to consider, unless you never plan on getting any large-scale loan in your life (car loan, mortgage, etc.)

There is such a thing as a secured credit card, where you put money into the account as a deposit.  You get a credit line equal to that deposit.  It's a way to build up a credit history without blowing away the card's credit line (since it's tied to real money).

Congrats Carl for getting out of credit debt hell.  Now, your credit report can start to heal.

I'm not going to make a big deal about this since I already ranted about this extensively the last time we had this discussion some years ago, but I continue to completely fail to understand how people can have such little discipline as to spend money they don't have.  I know how much I make.  I know how much my bills are.  I know what my savings goals are.  The difference is my disposable income.  I simply don't spend more than that.  It's really not that hard.  I love having a credit card.  It's so convenient and I make 99% of my purchases with it.

Debit card, yo?

Although I should probably get a credit card one of these days. Then again, I'd never use it. I plan out EXACTLY how much I have to spend a month and go from there.

Well, the reality is that millions of Americans are in deep debt because of credit cards.  Sometimes it's because people are dumb and simply don't keep track of how much they're spending, but othertimes it's because of unforseen events.  Someone might lose a job, or have large medical bills (even with insurance), or who knows what.  And these people need money for legitimate and good reasons, and credit cards offer all these incentives so you can pay with them and get a low APR for a year or so, and it hooks many people. I'm guessing you're single, but most Americans are not, and they have to try and support their family. Life isn't easy for everyone.

-avatar!

Whoa there, slow down.  I'm not rich, and I'd like to see a statistic on married vs. single people in the population and I mean people, not households (big difference).  Anyway, I'm just disciplined.  Crash is the rich one. ;-)   The reason most of these families go into debt is that they don't know how to make sacrifices.  They try to support their families' needs as well as their wants.  If you're a low income consumer, you can't have it both ways.  You have to learn to sacrifice and have discipline, two things our society doesn't seem to be particularly good with.

I'll just offer up some congratulations without any judgements or insights into my own personal spending habits.

Way to go, Carl!

XLord, there's a chance that's a very simplistic and needlessly judgemental viewpoint. Given the number of Americans living below the poverty line, I'd say there are a massive chunk of people whose needs outweigh their means and a number equally as large whose means and needs are so tight that one bad year (or even bad month) can start a spiral of debt they'll never get out of.

Yes, there are plenty of people whose needs outweigh their means.  But  Americans in general are very bad about saving money to pay for future expenses.  I read an article last year that stated that Americans had a negative savings rate, meaning that on average, people were spending more money than they were taking in.  If people would set aside a little money every month (say, 10% of their income) to cover future catastrophes, they would be in much better financial straits.  Meanwhile, in Japan, people sock away money at an extraordinary rate (what is it, like 50% of their income gets saved?).

There are people who work hard, but based on their circumstances are constantly living paycheck-to-paycheck.  However, there are many more people in America whose lifestyles exceed their means.  Someone may have a $75,000 a year job, but feel he has to drive the newest SUV and live in a $400,000 house in the suburbs and attend a ritzy country club.  He could have found a cheaper house that wasn't as nice, or bought a reliable used car for far less money, or golfed at the public courses, but he chooses not to.  With the monthly expenses he has to pay to support his lifestyle, he's barely able to save anything, so he's vulnerable to the slightest financial surprise.

My girlfriend's father is one of those people.  He makes somewhere around $150K-200K per year in salary, plus a hefty annual bonus (which can be as high as his annual paycheck).  But the man spends money like he has three months to live.  He has fifteen pairs of tennis shoes, many of them identical, but in different colors.  He buys thousand-dollar pieces of gold jewelry on a whim.  He has gone to a strip club, taken out a cash advance on his credit card for a thousand dollars, and spent it all at that club that day.  When his company moved him to New Jersey, he bought a four-bedroom house, to house himself, his wife, and his nineteen-year-old son.  His company gave him a $700 per month car allowance, so he chose a car that, with insurance, exceeded that $700 allowance.  He also insisted that his wife not work, despite her desire to do so.  He could very easily trim a few things here and there and live a very comfortable life, but he chooses not to do so.

Eventually, he had over $200,000 in credit card debt (his finance charges were around $4000 per month), and had to declare bankruptcy.  Oh, and he also owes the government $35,000 in back taxes from when he cashed out his 401(k) prematurely during the six months he was unemployed (he had no personal savings, so he had to dip into his retirement fund).  So what's the first thing he does after he declares bankruptcy?  He tries to get another credit card.  His most recent expenditure is a brand new car for his brand new Brazilian bride.

Hopefully, your girlfriend does not share her father's spendthrift ways.  Children of parents who spend recklessly have a greater chance of following that same exact lifestyle.

The book, "The Millionaire Mind," talks about how some people feel that they need to show off their earnings.

Bama: Thanks!

Crash: and you want the idiot for a father-in-law?  His daughter is bound to have some of his DNA wrapped up in there somewhere... 

XLord:  You've managed to do great and be disciplined in the finance department, but there's bound to be some other type of basic pitfall you'll find yourself stumbling into at some time or another, so a helping hand is thoughtful when others fall to some rather obvious shortcomings.

Jay:  Yeah, for people on the lower end of things, credit is at least an Option, when they might not have (m)any other options available to them at that particular moment.

That's one of the most correct things I've ever read.

Stephen and Carl:  No, I've managed to instill some fiscal sense into her.  When I met her, though, she had about $7,000 in credit card debt at obscene rates (I think $1,500 of it was on a store credit line that had an APR over 25%).  I loaned her the money to pay off all of it, and she was able to pay it all back to me within a year.  Since then, she has destroyed all of her credit cards except for two, and has paid those off in full every month.  She has done a very good job of maintaining a budget and limiting her spending to what she can afford (although sometimes this causes me to spend more money).

She actually doesn't speak to her father anymore, and his gross self-indulgence is the main reason for that.

Uh, how many did she have to begin with? I'd think one is enough (I personally have none)?

Companies throw in plenty of gimmicks to coax people into getting just one more credit card.  And it works on way too many people.

First, let me point out that despite my well-known position on getting into credit card debt in the first place, I have a lot of respect for your ability to make the necessary sacrifices to finally pay it off.  So, though I didn't say it earlier, I will say it now: congratulations.

Anyway, back to my argument:

Let me see if I can put this another way.  Have you noticed how when people talk about credit cards they always blame the credit card or the issuing bank?  The credit card debt "monster", those "evil" credit cards, and so on and so forth.  How come you never hear anyone say, "I used credit irresponsibly and because of my poor judgment I now have more debt than I can handle?"  People say, "I don't use credit cards because I'm afraid of what they'll do to me."  They should say, "I don't use credit cards because I'm afraid I don't have the discipline to use them responsibly."  See the difference?  All I'm asking is for people to take a little responsibility.  Is that so much to ask?

See post below (sorry, somehow I double posted)!

I agree, many people use poor judgement and don't have the discipline to stop when needed. If you think about it, this is akin to acohol abuse, or gambling addiction. Credit cards are not necessarily evil, however they nevertheless do take advantage of people, especially those that are most vulnerable.

In an issue of the University of Illinois Law Review, Adam Goldstein wrote that several features of credit cards make them different from traditional forms of lending and encourage high levels of consumer debt by taking advantage of "consumers' cognitive and behavioral vulnerabilities". (Goldstein is a former editor at the review who now works for a Chicago law firm.) I won't go into everything Goldstein wrote, but I do want to note that he further noted that the marketing techniques and incentive programs used by credit-card companies induce consumers to overspend and amass debt. A 2002 medical paper described in the article links credit-card debt to various health and social problems, including insomnia, anxiety, marital breakdowns and depression.

These are very serious issues. Although you can't simply blame credit card companies, they do share a large part of the responsibility in my opinion. Such self-destructive behavior eventually affects everyone, including those of us who don't have credit card debt. Tough situation, I really think it's important that people have compassion for those in debt and try to help them get out of it!

cheers,

-avatar!

edit: fixed typo

Credit card companies are not known as predatorial businesses for nothing.  It may be useful for some people, and a vice of others, but the companies are the ones reaping the benefits.

Slightly off topic, but I had a dream last night that Carl was at my local karaoke bar with me, Miker, and some of my friends, and he was singing some song about Lord of the Rings and credit card debt. I am not even joking.

That sounds like a bad Youtube video just waiting to happen...

...or a high ranking Saturday Night Live sketch.  (shrug)

...

*backs away slowly*

-Mike

Well, Carl, we've already discussed this in email, but what really happened is you conquered your mind. It does feel as if the credit card company has been defeated, but to do that in actuality would require a Fight Club membership. For the record, I "defeated" my credit card in Sept. 2006. But all I really did was start to get some intelligence. I don't have much, but it's been enough so far to keep me out of trouble.

Yes, a little self control goes a long way.

Have a laugh at this!  If a society really wanted to end this cycle of predatory lending for good, and be rid of the credit card companies all together, it would actually be very easy.

Ironically, the card issuers are TOTALLY dependant on the notion that the borrowers will uphold their end of the deal and keep attempting to slowly repay the loan. 

The fact that the borrowers actually ARE being Responsible enough to keep sending in their montly payments is what enables their operations, since the companies would be screwed if everyone just blew them off.

Their success hinges on the duality of people being stupid enough to agree to pay the high interest rates, yet still being sensible/responsible enough to keep sending the payments.

If everyone were to just default on their loans en-mass, the devastating loss of all that income would criple the lenders completely, and they wouldn't want to offer credit to anyone, since nobody would even intend on repaying them anymore.