Don't Do Debt.com

18 & up: This is for you

$10,000 Debt is a lot of debt to repay no matter how much money you make...

Everytime I turn around, I hear people say, "I wish someone had taught me about money when I was a freshman in college, or even back in high school. I'm still paying for credit cards from college or shortly after."

I write this to tell you that there are so many demands on your money. And money, when you first start out, is fairly hard to come by. Actually, money is always fairly hard to come by. You'll find forever that it's much easier to spend money than to make money.

It's difficult to play catch up if you enter the real world in debt.

Credit Cards & Co-Branding Campaigns

Imagine the college of your child's choice making a profit from your child's debt-load. Can't imagine it? When a person opens a credit card in conjunction with an academic institution, their favorite retailer or otherwise, everyone profits except the cardholder.

An article in the Sunday, 10.19.03 edition of The Charlotte Observer asks, "What's Next? Krispy Creme Credit cards?" Co-branding was all the rage from 1992-99 but proved unprofitable to the banks creating these partnerships/campaigns. The co-branding/partnership is, however, back in style.

Credit Cards vs The Lottery

A short visit with friends two states away led me down 85-South through the Carolinas and into Georgia. SC and GA are both lottery states. As a visitor, I found it impossible to avoid lottery advertising dominating billboards and any available space in convenience stores. The subsequent temptation to buy a ticket was irresistable, seductive almost.

I admit, I felt the unrealistic hope that maybe, just maybe, I'd be the "you never know" person: the one that doesn't get struck by lightening eleven times but manages to beat the 1-160 million odds and win the lottery. I gave into temptation and bought one ticket, couldn't resist. My rationalization? I have a greater chance of winning the $160 million lottery with a ticket in hand than without.

My point. Credit card companies make gobs of money from interest and penalty fees. The lottery makes gobs of money from lottery ticket sales. With all the controversy over the lottery, I couldn't help but wonder why there is very little controversy over credit cards. Consider these earnings for each:

The Lottery: $2.6 BILLION / FY '03.
Credit Cards: $12 BILLION / FY '03 based on the 2nd quarter earnings (source: cardweb.com).

Credit card cos rake in almost six times more than the lottery.

Debt Over Lunch

Today's lunch with a dear friend led to conversation about everything under the sun and eventually wound around to my favorite subject: money. She recently switched jobs and and now earns substantially more money than her last job. In spite of the increase in salary, she says she and her fiance can't seem to save money. "Money just seems to go and we still live paycheck to paycheck with nothing saved," she confessed.

Their situation is not unusaul and many people identify with this very struggle. She's at a prescious crossroad: she can either take control of her money now and start planning how to get ahead or she can continue along the same broken path.

Spending Craving Cure: Garage Sales

Streets of Decatur, GA are lined with garage sales galore. Gotta admit, I'm ready to shop and spend some money. Bring some cash and you can have anything you want for less than what you'd pay retail. "Powell," my friends scream with child-like enthusiasm, "You can get a Mexican blanket just like the one you wrapped up in on the way down". (They won't give up the blanket, it officially belongs to the dogs). I address the garage sale topic for this reason: We all need and want (okay, sometimes crave) certain things. Spending money can sometimes be it's own romance- it's seductive and feels good and you get to take something home with you.

WDAV & Debt

The end of the week came to a conclusion with a visit to WDAV.org studios in Davidson, NC and a chance to sit down with national award winning host Rachel Jeffreys. The conversation spanned a handful of thought-provoking topics such as: How can someone earning six-figures, on top of the world, end up in debt, close to bankruptcy? Why don't parents take a proactive approach to their child's financial education? Are credit cards the leading cause of bankruptcy? Of course, you can hear our conversation on "In Person" on WDAV.org, slated to air Saturday, 8 November 03 at 6:30pm. In the meantime, stay here for in-depth thoughts on some of these issues that address what's causing a crisis in our country: credit cards, debt, bankrupty, instant gratification and our society.

Credit Score Ingredients: Mix of Success

If you your credit was pulled today, do you know how you'd stand? Good credit? Bad credit? How's your debt to income ratio? Do you know what's bringing your credit down or pushing it up? A report recently across my radar suggests that a FICO score is comprised of the following:

10% Type of credit in use
10% New Credit
15% Length of Credit History
30% Amounts Owed
35% Payment History

Payment history is highest in the mix: Late payments erode your credit score. Period.

Bankruptcy rising in Carolinas

Bankruptcy filings in the Western district of NC, including here in Charlotte, are in line with national bankruptcy stats. An article in The Charlotte Business Journal ("Area bankruptcies increase 10%", 15 Aug 03 edition) reports personal bankruptcy filings have risen 10% during the past 12 mos, with 10,235 cases filed from July 02-June '03. Fees for Chapter 13 filings? $1,600 per filing as set by the local bankruptcy court. Chapter 7 fees are not set by the court but range from $1,000 to $1,600, according to the article.

Bankruptcy rising

Startling stat I stumbled upon: Cardweb.com reports bankruptcy filings for the 12-month period ending 6/30/03 hit an all-time high of 1.65 million, a 10% increase over the same period in '02. Leading reasons for personal bankruptcy filings? Reportedly: Unemployment, Illness or Injury, Divorce or Separation, Business Failure, Poor Planning.

Credit Cards & the Big Picture

Here's how credit card debt depletes a paycheck and prevents someone from saving money:

Junior opens a credit card with a 0% introductory rate. He charges $300 to this new credit card and only has to pay $15. He thinks, "Wow, I paid $15 to spend $300. This is easy. A few more credit cards won't hurt." What typically turns out to be a short-lived moment in time, Junior believes he can pay a little extra every month (minimum payments) to buy and do what he otherwise couldn't (by charging it). The real interest rates kick in on his handful of cards.