Credit cards offer a risky combination of power and convenience. For better or worse, millions of people use credit cards every day, so much so the average household credit card debt hovered around $15,607 last September.
But what happens when you let that power go to your head? Merchants start declining your cards, debt collectors call you constantly and you’re left struggling to find ways to make ends meet. If this sounds like you, you’re not alone.
Nationally-recognized consumer credit expert Beverly Harzog chronicled her own journey from rock bottom to credit expert in her award-winning book, “Confessions of a Credit Junkie: Everything You Need to Know to Avoid the Mistakes I Made.”
In it, readers can learn from her missteps and learn valuable tricks to proactively using credit cards.
I spoke with Harzog to learn more about her journey and how everyday consumers can avoid drowning in credit card debt.
Going broke with a Rich’s card
Harzog’s story began where many credit card fiascoes do — right after college.
“I had one credit card for a department store named Rich’s (which is now Macy’s),” she said. “I started getting all these credit card offers … I thought, ‘Oh, this is great. This is like free money.’ Over time I slowly maxed them all out.”
What many readers might find surprising about her story is in the height of her debt accumulation, Harzog actually worked in finance as a CPA after graduating with a degree in accounting.
“I was fairly financially illiterate when it came to personal finance and credit,” she said. “Personal finance is a different animal. No one is born knowing this stuff. It’s not intuitive … You can be a plumber and have a great credit score. You could be a brain surgeon and have a terrible credit score. It doesn’t matter how many degrees you have or what kind of job you do.”
“Personal finance is a different animal. No one is born knowing this stuff. It’s not intuitive.”
Her overspending came to a head one afternoon when her card was declined while trying to buy a pair of Ralph Lauren jeans at Rich’s.
“The next day I called the credit card issuer and they said, ‘Ma’am, you’re not paying your bills on time. You bounced checks. We just had to cut you off,'” she said. “That was my rock bottom moment. I realized my life was a total disaster. It was like a slap in the face and a wake-up call. From that moment on, I vowed I would get myself back in financial shape.”
Harzog admits she never knew the full extent of her debt troubles. She estimates her total outstanding debt was in the ballpark of $20,000 to $30,000, but she never actually checked because, “Honestly, I was just terrified.” Constant late-night phone calls from debt collectors weren’t helping, either.
“You don’t even want to think about your debt,” she said. “I was in the land of denial for a long, long time. Once you acknowledge it and start accepting responsibility for it, then you can think a little more creatively and put energy toward getting yourself out of this mess.”
“Once you acknowledge it and start accepting responsibility for it, then you can think a little more creatively and put energy toward getting yourself out of this mess.”
She said she made significant sacrifices on her way to paying off her debts, including eating nothing but peanut butter and jelly sandwiches for weeks on end. However, young and single at the time, Harzog said she was lucky to not have a family to support while she dug herself out of her credit card hole.
“When someone’s in debt and has a family to support, it’s a lot more complicated than that,” she said.
Using credit cards for good
Credit cards still play a role in Harzog’s life today, albeit a much more positive one. In fact, several chapters of her book are dedicated entirely to teaching consumers how to financially gain from credit cards.
Her tips range anywhere from how to secure free plane tickets, saving at your favorite stores, using balance transfers to cut back on interest and even how to become a “power user.”
“Today I profit from my credit cards,” she said. “My focus with rewards is travel. I love travel in my personal life and have to travel for business. My husband and I went to Belize last year for our 25-year anniversary and much of it was paid with reward points.”
However, she warns her readers not to spend money with a credit card specifically to get rewards.
“When you’re purposefully spending [to get rewards], that’s when you get into trouble,” she said.
“When you’re purposefully spending [to get rewards], that’s when you get into trouble.”
If you’ve ever had any questions about credit cards, whether its about the rewards or the fine print, you’ll find the answers in “Confessions of a Credit Junkie.”
Photo credit: beverlyharzog.com
Editorial Note: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.