The summer before my junior year of college, I opened my first credit card, taking advantage of an appealing, on-campus offer for students. It felt like a logical rite of passage into adulthood. And, if I remember correctly, they gave me pizza.
In reality, I couldn’t have been less prepared to manage credit. We didn’t talk about money in my family. There were no financial literacy courses offered at my high school. And I definitely didn’t know what an APR was, much less that mine was a bloated 19.5 percent. (By contrast, the average interest rate on new credit today is 17.55 percent.) Still, I held onto my new card, waiting for the right time to use it.
Not too long after that, many of my friends left to spend a semester abroad, going to Germany, Italy and even South Africa. I hadn’t traveled much growing up and desperately wanted my own study abroad experience. So I began researching summer programs and fell in love with the possibility of spending five weeks in Salamanca, Spain.
I applied and was accepted. Flights, tuition, housing and other fees came to a cool $4,000. I was awarded a $500 scholarship, threw in my meager savings and charged the rest: $3,000 on my shiny gold credit card.
Spain was amazing. I honed my language skills, immersed myself in a new culture and met people from all over the world. I returned for my senior year with a newfound sense of excitement for the future.
I’d like to say that I hit the ground running after graduation and quickly paid off my debt, but that wasn’t the case. My salary was just shy of $30,000, and $450 monthly student loan payments kicked in shortly after I moved into my first NYC apartment. After covering the essentials, there wasn’t much left to throw at my credit card. Actually, there wasn’t much much left over, period—and for the next couple years, I used my high-interest card as backup money when my paycheck couldn’t cut it.
Fast-forward a few years, and I woke up at 25 with nearly $10,000 in credit card debt. The more I looked at that growing number on my statement (thanks, in large part, to the bad kind of compounding interest), the more shame I felt. Feeling defeated, I did something I’d never done before: I “came out” as in debt. I confessed everything to my best friend, who helped me come up with ideas for cleaning up this mess.
The next few years served as the money education I’d never had. I transferred my balance to a much lower-interest card and began contributing significantly more than the minimum payments—a result made possible by taking a hard look at my spending and making some tough cuts to my “fun budget,” while also picking up freelance work. I spoke openly with friends and mentors about money, learning from their financial successes and failures. Most importantly, I stopped using my credit card for new purchases altogether.
Now 31, I’ve paid off more than 80 percent of my balance. Translation: It’s been more than 10 years since my Spain trip, and I’m still dealing with the financial consequences.
While I don’t regret the initial experience, I do regret not understanding the basics of credit cards or how quickly debt can snowball. I would take the trip again, but only if I really understood how fast interest accumulates and had a plan to pay off the balance in a reasonable amount of time, rather than building on it.
Fortunately, the lesson has finally sunk in. Two years ago, I had a once-in-a-lifetime opportunity to travel to Asia with my now-fiancé to join him after a work trip. I agonized for weeks over the decision to purchase flights, feeling panicky as I thought back to my study-abroad blunder.
But things were different this time. I hadn’t used my credit card in years. I had a stable income, significantly higher than my entry-level struggle, and I had a firm plan to pay off the trip in two months’ time—and I did. As I lifted my card to purchase the 16-hour flight across the world, I felt the familiar rush of excitement over my upcoming adventure. Only this time, 10 years from now, I’ll be left with just great memories and not lingering debt.