My first credit card was meant to be used as over-draft protection on my checking account, but once I learned that I had a $4,000 credit limit, I thought, "Lets go crazy! I can pay it off later!". I splurged on elegant dresses I had no reason to wear, new clothes each week, taking my friends out to movies and usually being the first person to pick up a tab at dinner. I felt so adult. I could have anything I wanted. My friends loved going out with me and probably thought making lattes was really paying off. The reality: making lattes can support your casual fun lifestyle as a student, not your extravagant shopping habits or your whole group of friends.
The strap on my sandals broke one day when I was out and about. I figured, that's fine. I'll just get a new pair of shoes somewhere and charge it on my credit card. I walked into the nearest boutique and settled on some spunky red pumps. I handed the saleswoman my credit card and soon saw a big DECLINED flash on the computer screen. I couldn't get the spunky shoes. I felt sick to my stomach. I was really in over my head. How was my card declined? Did I really run up FOUR THOUSAND DOLLARS worth of charges?! I should have gone to the bank right away to ask some questions and maybe make a plan for fixing my big fat debt. Instead, I got on a bus and went home. The truth: I was scared to know that I had 4,000 dollars in debt and I was only 17. The whole bus ride home, I brainstormed a solution. "This is easy, I'll just start working overtime and have the credit card payed off in no time! And my parents won't even have to know!"
WRONG. This plan failed quickly. It was nearly impossible to keep up with all of my studying while working extra hours. The interest rate on my credit card grew to a whopping 18%!!! Even though I was making roughly $600 per paycheck, all of that money was being thrown away on interest and I was digging a deeper hole than the one I was in to begin with.
I kept revising my plan. I thought, "I can get another job, I can do weekend gigs, I can go back to babysitting on friday nights and I'll punish myself with absolutely NO FUN!" As a teenager, it's quite hard to refrain from fun. I'd never been grounded before. My parents were going to ground me until I was 25 because of this little stunt so I thought I'd start my sentence early.
The following week, I forgot all about my bill coming in the mail and went to the beach instead. I applied my sunscreen and plugged into my ipod and then saw "mom cell" flashing across my phone. A text message read:
"You better come home right now, we have some talking to do."
… A text message. She was probably so mad she couldn't even talk to me.
I got lucky with my mom. She may have not done the right thing at the time, but she helped me learn a very important lesson. We made a revised plan that worked. My mom and I took a trip to the bank and paid off my credit card in full. Don't worry, I didn't get off that easy. Instead of being in debt to the bank, I was in debt to mom without the heavy interest. We decided I would continue to work, only instead of working overtime, I would work no more than 20 hours a week so that I could still keep up on my studies. And just so I wouldn't spend my teen years as an indentured servant, we decided I would allow myself 40 dollars per month on fun.
It took me nearly two years to pay back my mom but I was incredibly proud of myself and swore I would never have another credit card.
Six years later, I've found that you can't completely avoid credit cards. As of last month, I have three: one for gas, one for emergencies and a mileage rewards card for travel adventures. Credit cards are not free money, they help you build your credit and when used right, they're not a bad thing to have.
You need to build credit to be independent financially. A credit check will be run anytime you apply for loans, lease a car, apply for apartments, start a cell phone plan, etc. When you ruin your credit early on, it's much harder to repair later. You could end up living in the walk-in closet of a house with five strangers and car-less because that's all the luxury your credit score will grant you access to. You can have nice things when you're older and successful. In the meantime, stick to working minimum wage and limiting your spending. If it's something you really need, it's better to work for it than to charge it on a credit card and work three times harder to pay for it later.
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(Marina Orievsky studied Communication at the University of Washington where she put her focus on journalism and social media. She has worked with Revolution Inc. and Papersalt since January 2012, contributing blog material about life lessons and about her personal experiences with transitioning from teenage years to adulthood.)