Avoiding the Pitfalls of Credit Card Debt

Sheila, 18, arrives on the university campus very excited about the next phase of her life. Innocent and wide-eyed, she explores the campus. She comes upon the cafeteria, where there are several credit card company displays set up. One company urges her to fill out an application for a credit card with a $2,000 limit.

Sheila thinks to herself, “Wow! Free money. Having a credit card would be great.” So she fills out the application and, a few days later, receives the card.

Soon, Sheila “maxes out” the credit card buying clothes and partying with her friends. She applies for more credit cards to help pay the balance of the maxed-out card and to continue the partying. By the end of her freshman year, Sheila has accumulated over $6,000 worth of debt. She is forced to drop out of school in order to get a job to support herself and pay off her debt. However, she is only able to make the minimum payments on the cards, and must defer her student loan. It takes Sheila 10 years to pay off all of her debts. And her credit is severely damaged.

Stories like Sheila’s are becoming more common. Preying on naïve teens and college students, credit card companies cunningly offer a variety of appealing gifts like mouse pads, t-shirts and CDs in order to get young people to sign up for their cards. And they do this knowing that students have no viable source of income. Why? Because these companies are counting on parents to come to the rescue of students who overcharge their credit cards, saving them from financial ruin.

Many colleges and universities encourage credit card solicitation on their campuses. Credit card companies pay hundreds of millions of dollars in order to advertise on college campuses across the United States. Institutions of higher learning are supposed to educate the youth of today about how to be responsible adults. However, by their example, they show the students how to be grossly irresponsible.

Understand. The odds are stacked against today’s youth. Credit card companies, banks and merchant companies are lurking in the bushes, waiting to pounce on you. Your only weapon is knowledge. You must fully grasp the threat that debt poses to your life, the reason why so many fall into that trap and how you can avoid it!

The Dangers of Debt

We live in a fast-paced and very hectic society. The workplace is incredibly stressful. Many people are dissatisfied with their jobs, but are unable to find anything else—and they cannot quit. Why? Because they are slaves to debt!

Many start out their lives in serious debt and, as a result, must work long hours in order to make ends meet. They would love to attend college in order to improve their situation, but they are financially unable. Always playing “catch up,” they are never able to come out ahead. Their mountain of debt continues to loom large over them, causing them much tension and frustration. The long, stressful days at work eventually take a toll on their health. They constantly worry about how to pay their bills, they don’t get adequate sleep, and are constantly harassed by bill collectors.

As a result of playing catch-up, and “stealing from Peter to pay Paul,” as the saying goes, these people don’t pay their bills on time. This directly affects their credit report. “Late pays” and “slow pays”—taking a very long time to pay off your bills—look bad on your credit report.

Having bad credit affects your ability to do many things.

It may mean being unable to purchase a car or house—or having to pay extremely high interest rates to do so. It may mean being unable to open a checking account, or being unable to rent an apartment. Some employers even reject job applications if a potential hire has poor credit.

As you can see, debt can cost you a lot more than just money! It not only has the power to affect you today, but it can also severely damage your future!

With this in mind, it becomes imperative to understand why so many fall into debt.

The Cause of Debt

As a result of blessings that God bestowed on the descendants of Abraham, the modern-day Israelite nations—primarily the U.S., Britain, Canada, Australia and New Zealand—have accumulated a lot of wealth. The U.S. in particular has an overabundance of shopping malls, restaurants, movie theaters, department stores, electronics stores, and much, much more.

Do you know what else America has a lot of? Bankruptcies!

Last year, America set a record for the total number of bankruptcies filed—1,661,996. So far for the 2004 fiscal year, 1,660,245 personal bankruptcies have been filed (www.firstam.com). And this figure does not even include bankruptcies on the small business and corporate levels.

What does this tell us? Many people are unable to manage their finances. There is too much glitter for them to resist. They impulsively spend money. They seek immediate gratification. They lack the discipline needed to curb their appetites.

Some people overeat as a way of self-medication—it makes them feel better. Then there are those who impulsively shop as a way to deal with their emotional problems. They seek that emotional fix, and shopping gives them a temporary feeling of euphoria.

Others take pride in the material goods and wealth that they can accumulate. They extremely value what others think of them. As a result, they try to be something that they are not. Some desire to be better than others, so they try to accomplish this by purchasing a lot of costly merchandise. In the end, they are looked upon in the same fashion, but now they have loads of debt to accompany them.

Then there is the main reason why people fall into debt—covetousness. People try to accumulate much wealth in their lives. It’s almost a contest to see “who can die with the most toys.” They deny themselves nothing. They try to fulfill every want and desire.

Many try to escape the stresses and pressures of this life through pleasure-seeking. While they may accomplish their goal for a little while, they always come back to the same problems they were facing when they left. God gave a specific prophecy about the covetousness of our time. Notice: “For from the least of them even unto the greatest of them every one is given to covetousness; and from the prophet even unto the priest every one deals falsely” (Jer. 6:13).

Now you know the terrible effects of debt and why people fall into debt. It is time to take action. It is time to learn the things that you can do now to ensure that this does not happen to you later.

Avoiding the Snare

The key to avoiding the debt trap is learning to manage your money. There are two important things that must be done in order to be successful: (1) Make a partnership with God and (2) learn to control your wants and desires.

Including God as a part of your financial future is crucial. You must pay God’s tithes. This automatically forces you to manage your money better. You must budget your money so that you pay first tithe and save second tithe. There are many blessings that come with paying God’s tithes and offerings. Notice: “Bring you all the tithes into the storehouse, that there may be meat in mine house, and prove Me now herewith, says the Lord of hosts, if I will not open you the windows of heaven, and pour you out a blessing, that there shall not be room enough to receive it” (Mal. 3:10).

Making God your partner will ensure that you will be prosperous.

Learn to have power over your wants and desires. They can be an overwhelming force, but you have to learn to control them. Understand. Aside from God’s help, you are virtually on your own. There are many people out there who will help you decide how to spend your money, but not how to save it. Therefore, it falls on you to develop the self-control needed to be successful. Realize the difference between wants and needs. A general rule of thumb is: If you can live without it, then it is not a need. This does not mean that you can never purchase merchandise or things for personal enjoyment. But there must be a balance or else you will never have any money. God’s Word states, “He that loves pleasure shall be a poor man: he that loves wine and oil shall not be rich” (Prov. 21:17).

The Good Attribute of Credit

You also must understand when and how to use credit. When used correctly, credit cards can teach a person how to be financially responsible. They can be good tools used to establish a positive credit history.

First, understand this point: A debit card—also known as a check card—is attached directly to your checking account. It can be used in the same way as a credit card. They are very convenient. If you don’t want to carry around a lot of cash, then you can use your debit card to make purchases. However, if you do not have the money in the bank to cover the charge, your transaction will be rejected. But be careful when using debit cards. Their ease of use can cause them to be just as addictive as using credit cards. Overusing debit cards will leave you with virtually no money in the bank!

Here are a few things to keep in mind when using a credit card: Don’t make purchases with a credit card if you don’t have the money in the bank to cover the charge. However, when you do make purchases with your credit card, use the money that you have in the bank to pay them off over the course of two to three months. This is a quick way to significantly raise your credit score. Other than dire emergencies, never make a purchase with a credit card without having the money in the bank. Another general rule of thumb is: If you can eat it, drink it or wear it, then it is not an emergency.

Always pay your bills on time—or preferably ahead of time if possible. One late pay will drastically lower your credit. And the late pay will stay on your credit report for seven years.

Also remember that your credit report says something about your character. Proverbs 22:1 states, “A good name is rather to be chosen than great riches, and loving favor rather than silver and gold.” Your credit report tells people whether or not your word means anything—whether or not you can be trusted. So work hard now so that you can establish a positive credit history later.

The apostle Paul said, “…they that will be rich fall into temptation and a snare, and into many foolish and hurtful lusts, which drown men in destruction and perdition” (I Tim. 6:9). Make certain that this does not happen to you. If you employ these principles, you can avoid the credit card debt trap.