In this episode, John Smith (not his real name) exposes the ugly truth about credit cards which pushed him to bankruptcy. As a young man who came to Canada in 2003, he led an easy-going life just like any student his age would do. He had it all. He had come to Canada with enough money and had a giving personality. He loved partying and would foot the bills of everyone at parties and restaurants just like his rich friends. He could do this because he had credit cards in his hands. He was spending more than he was making or could afford as the credit cards provided him that luxury. His splurges shot his credit over the roof and he could no longer pay what he owed. When he could not bear it any longer, he filed for bankruptcy.
In other words, John went through legal proceedings to be free from the debt, while also providing creditors an opportunity for repayment at a federal court. While he did get out of and the case was settled in court, this is not a path you would like to be on.
Bankruptcy is a thoroughly humiliating experience that has enormous disadvantages apart from the grueling questionings and interviews. Anyone who files for bankruptcy has the potential of losing all credit cards and damaging credit history to the extent that obtaining a mortgage or loan would be awfully hard. Someone who files for bankruptcy can also lose all property and real estate, have tax refunds denied, as well as have jobs and housing stigma. And that is not all.
If you think that John’s was an exceptional case, and he was reckless in spending you may be right. When it comes to spending through credit cards you can adopt a more prudent approach to avoid the traps. However, caution alone will not do. Credit cards give you the illusion that you have more money than you really do because you can spend money you do not yet have and may never have. This illusion is what leads many people into bottomless pits from where one may never rise.
“Everyone has a show face,” says John. Your show face may just be different from his but trust me, most of your credit card spending are on your show face!
The good news is … You can avoid bankruptcy!
But if you are already in that hole, you can get out of bankruptcy.
John did and so can you.
Here are some tips from the podcast:
* Earn first.
* Save some and spend later.
* You should not spend just because you have a credit card.
* Try to avoid credit so that credit does not do you in
*Choose who you spend on right.