Helping a Friend get out of Credit Card Debt (Part 1)
Credit card debt is a serious problem in our society. It ruins lives, friendships, and relationships. It is really easy to get into credit card debt, but really hard to get yourself out.
I don’t claim to be a credit card expert, even though I do have 19 credit cards currently open (list) and have never paid a penny in interest, missed a payment, or paid late. Using credit cards, especially travel credit cards is a cat and mouse game with the credit card companies. My motto: there is always a winner and a loser; if you are not winning, you are losing.
In reality, the huge sign up bonuses, spending bonuses, targeted bonus offers from the credit card companies are not free. In the simplest form, those who pay interest to the credit card companies are subsidizing those of us who travel cheaply with the credit card miles and points. We should all thank our friends/family/strangers for letting us explore the world on their dime. Thank you everyone!
Anyways, let me get back on track…
I have a friend who had 2 credit cards, a store-branded credit card and a student credit card. He/she wanted to travel more and see the world (who wouldn’t?), so he/she asked me which credit cards I would recommend for a recent college grad that had good travel benefits and no foreign transaction fees. It was a simple question to answer. Get the Chase Freedom credit card (no annual fee, earn 5% cash back on rotating categories, and save your Ultimate Reward Points so when you get the Chase Sapphire Preferred, you can transfer those points to one of Chase’s travel partners). Then get the Bank of America Travel Rewards credit card (no annual fee, no foreign transaction fees, and a $100 sign up bonus).
Getting approved for both cards was easy and meeting the spending requirement on both credit card was no problem. Fast forward a few months, and he/she “asked” me to help review his/her finances. If you have credit card debt, or know someone who does, it can be difficult asking for help because you do not want to feel judged by the amount of debt you have. Credit card debt is an easy debt to let build up, because there is really no big penalty for not paying in full every time. When you have more pressing bills to pay every month like rent, car loans, car insurance, and student loans, it seems like your credit card bill gets whatever is left over after paying the previous bills.
I will continue this story after I get home from work. Stay tuned for my recommendations…
You are very kind and nice to help your friends out of her/his debt…..this world needs more nice people like you:)
Interesting story….would love to hear more…will check back later for update.
As you know, I am also new to credit card game, currently have 5 cards open (Freedom, two personal SW cards, AAdvantage, Barclay US Airways). I don’t have problem with my Freedom card as I always pay in full. But as I have been trying to meet the spending requirement on my two personal SW cards and AAdvantage card, I bought VR cards and load it with $500 each a lot of times, so my balances was huge….then I use another card to buy VR cards again and loaded them all into BB and paid the balance of the first card by BB, then do the same with 3rs card…and it has been going on and on in this loop. This has been continuing and I haven’t really pay the balance off with my bank checking account (I know I will, eventually)….is it a danger that I should be aware from this method?
I don’t like to see balances greater than $1,000 to $1,500 on my cards before paying them off. It’s a psychological thing, I think.
That’s very kind of you to not be judgmental on your friend, and to help him out. I hope he is able to get out of debt and raise his credit score.
Your view that people who go into debt help pay for our travel rewards is wrong. It’s a misconception that the banks exploit vulnerable people and get people into credit card debt. The banks don’t want people to go into debt. That’s why it’s hard to get approved for a credit card if you have inquiries in the last 90 days, or if you don’t have a good credit score. In reality, people who go into debt actually hurt our opportunities for earning travel rewards, because it makes the banks scared to approve people for credit cards. This is contrary to the way many people, especially non-frequent flyers, think.
I think it really depends what your strategy is with issuing credit cards. You could give low credit limits to people with bad credit, and take in money on interest and fees. On the otherwise, you can give cards with no/high credit limits to people with great credit and make money on swipe fees from the merchant.
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