Today, we are pleased to present this guest post from our friend Kevin Yu. He is an accomplished blogger and businessman, and we are excited he shared his story with us. If you are interested in submitting a guest post, please see our guest posting guidelines. Enjoy!
I’ll be the first one to admit that I’ve been buried in debt. It happens to the best of us and it’s nothing to be ashamed of. I remember I got my first credit card in college when credit card companies used to solicit college students to sign up for a credit card, and in return, we would get a free t-shirt.
When I first got my credit card, I didn’t think too much of it. I activated the card and kept it in the wallet. I started making small purchases and would pay off the balance in full each month. No big deal so far. Then it came to the point where I realized how much credit limit I had available, and I was sucked into the small minimum monthly payments. As time went on, I found it harder to crawl myself out of debt. When I graduated college, it finally hit me that I was in trouble.
The Dangers of Credit Cards
The next few years were an eye opening experience for me and this is where I really learned about the dangers of credit cards. I found my first temporary relief by doing a quick balance transfer between three credit cards. I thought it was a good idea since my “teaser” APR would be 0% for 6 months, but what I failed to realize was my new APR after the promotional period ended. This was my first very mistake. I like to think of balance transfers as a temporary band-aid to the solution. It’s not a permanent fix to the problem unless you can pay off your balance within the promotional period.
A State of Panic
Soon after I realized that my balance transfer did nothing to help me, I started looking at other credit cards where my APR would be lower. I started to apply for different credit cards, and kept getting rejected since my balance was near my credit limit. I had a rough idea that applying for credit would ding my credit, but I had hopes that I would luckily get approved. When you apply for new credit, it will show up on as an inquiry on your credit report. Your creditors will know whether you were approved by seeing if there’s a corresponding open tradeline.
After I realized that I wouldn’t get approved for a lower interest rate credit card, I turned to my credit card companies for help. I kindly asked to see if they could lower my APR since I’ve been a great customer without making any late payments. When they asked for why I wanted a lower interest rate, I told them that I could barely keep up with the minimum payments. This immediately raised a red flag in their system and it seems that I was flagged as a high risk borrower. About a few months later, my credit limit dropped substantially and I was nearly maxed out.
If I had could pass on one key take away from my experience, it would simply be to spend less than what you earn. This is the magic formula to staying debt free and getting out of debt. We can all agree that carrying credit cards aren’t necessarily evil, but using them wisely is most of the battle.
If you’ve been in credit card debt, what was your biggest lesson learned and how did you overcome it?