Wednesday, September 10, 1997
The Credit Card
Contest
by
Debora Tidwell
I'm going to start right off the bat here with the disclaimer that my husband is not bothered by the fact that I occasionally write stories about the weird things he does. I've been doing it for years and he figures that if he ever does want me to stop, the best way is to quit providing me with material. Furthermore, The Motley Fool has assured me that they welcome his rebuttal as long as it's in the form of a 3-5 paragraph essay -- not because they feel sorry for him, but because they are always on the lookout for good content. (While I'm on the subject, in fact, if you have a weird spouse who wreaks havoc with your family finances on a routine basis, or are just weird yourself and would like to share your story, write it up and send it to [email protected].)
Anyway, like most young people, we had a lot to figure out in terms of finances when we decided to get married. My husband decided we should buy a townhouse and we sat down to figure out how to pay for it. That was when I discovered that he had built up what, for us, was a lot of credit card debt. He had more than 15 different credit cards just in the "major credit card" categories. There had to be close to 25, counting department store and gasoline cards. I didn't have any credit cards because I just didn't make enough money to want to risk putting myself in debt. He didn't really make much more than I did, so I asked him why he had so many credit cards. His response -- he and his boss were competing to see which of them could accumulate the most pre-approved gold cards.
By now, I imagine that the audience reading this is probably pretty much evenly divided among gender lines with the women thinking, "Guys are so stupid sometimes. It's a good thing they need us to reproduce." And the guys, because they are guys, are, of course, thinking, "Cool idea. I could beat most of my friends at this."
Some of you may think, "What's the harm as long as he doesn't use them?" This is kind of like being on a diet, and buying candy on sale for Halloween or the next big holiday that you are going to hide and never touch. Yeah, right. At a minimum, most credit cards (unless you get a no-fee card or call and negotiate to get the fee removed) have a yearly fee. Just paying the yearly fees on 15 credit cards, even at $25 per year per card, is $375. That is on the low end for gold credit cards, too. Many are in the $35-$50 per year range. With that money, you could start a Dividend Reinvestment Plan (DRP) portfolio like the one TMF Jeff and TMF Templr are running in Hall of Portfolios.
We ended up assuming an existing FHA loan to buy the townhouse, but the credit card situation would have hurt us in qualifying for a mortgage, too. Mortgage companies don't only look at the outstanding balances you hold on your credit accounts when they evaluate your loan application. They also look at how much outstanding credit you have compared to your income. If you have 10 gold credit cards that each carry a $5000 credit limit, that means you can potentially get yourself $50,000 in debt at high interest rates. They have to consider what your ability to pay the mortgage would be if you decided to do that.
We eventually got our credit card debt paid off and canceled the majority of the cards. That process was so painful my husband now always pays off the balance each month on the card we still use. I consider that progress. He still has to struggle to throw away those letters offering pre-approved credit cards, though. And, now he has a different boss -- this one trades futures contracts.