In this post, I will expand on the tumultuous love-hate relationship that I have had with my beloved credit card over the past 4 years and how I ended up with R78,000 worth of debt. Mind you, this figure, which is my current credit card limit, doesn’t even take into consideration the amount of interest that I have paid over the years, which, at 22% p.a. easily brings up my total bill to more than R100,000. It even hurts me just typing that out. To put things into a bit more perspective, being someone who used to get a meager R500 per month as pocket money during my University years not so long ago, R100,000 is a lot of money.
And before the inevitable judgment gets passed (i.e. “how could you be so reckless?”, “why would you do this to yourself?”, “how could you be so stupid?” etc etc), as a disclaimer I would like to mention that this is definitely one of the aspects of my life that I am actually quite ashamed of, to be perfectly honest, and it is also an aspect of my life that still confuses me to this very day, because it literally feels as if overnight, I went from being completely debt free to literally drowning in a pool of debt. However I can’t disregard the benefit that this debt has brought into my life because without having access to this money, there is a very high chance that I wouldn’t have been able to fulfill my business ambitions over the past 3 years. So as with everything in life, there are always pros and cons.
This story began in early 2014, my first year out of university. Sometime in March, after a night out in the town I had somehow managed to get my +1 year old Samsung Galaxy S3 pickpocketed from me at Club 169 on Long Street in Cape Town. This was the second time I had lost a phone on a night out. Needless to say, losing possessions is one of the usual results of mixing loud music, crowded rooms, darkness, and cheaply priced alcohol.
I was quite bummed out that I had lost yet another phone, but thankfully I was now a working man so I was pretty confident that I would get a new one fairly quickly. The following week, after the denial, the depression and the hangover had finally subsided, I had approached Vodacom in order to apply for a new phone on contract and they told me that I needed something called a `credit record`, so in response to that I figured I may as well get a credit card, which seemed logical enough. The next day I approached my bank and applied for a credit card, and when asked what limit I want – based on some advice that I received from a work colleague at the time – I went for the highest limit that I could get, which was R45,000. So less than two weeks later, my bank approved my credit card, Vodacom approved my contract and now I had a brand spanking new cell phone and an extra account on my banking profile with a R45,000 balance.
When I received the credit card the consultant at the bank explained the T’s and C’s to me in great detail. I was basically allowed to use the money interest-free as long as I paid it back within 55 days. If I did not pay it back within those 55 days, then I would be charged interest on the outstanding amount which was 22% p.a. Then, on top of this, each month my current account (i.e the money I receive my salary in) would be debited 3% of my credit card outstanding amount, i.e the ‘minimum payment’, which would then go towards my credit card. So essentially if I used R1000 and did not pay it back within the 55 days, the following month my current account would be debited R30 (the 3% minimum payment) and I would be charged R18.34 (i.e 22% p.a ) interest on my credit card, which would thus make my outstanding Credit Card balance R 988.34 (R1000 + R18.34 – R30) . And then the cycle would continue month by month, which again, seemed logical enough. I had no plans of actually using this credit card, so none of this really worried me. And if I was to use my credit card I was pretty confident that I would clear the balance within the 55 days limit, thus incurring no interest whatsoever. In hindsight, 22% p.a is a very high interest rate, but 21 year old, naive, phoneless Ben wasn’t too worried by this at the time.
The first purchase
So I have this new credit card right. I may as well make use of it, you know, just to make sure it works and all. So in the early days of winter in 2014 I decided to buy a new gas heater. We had used gas heaters at home so having one of my own brought me some comfort, familiarity, well-needed heat and of course a lot of nostalgia. Growing up, before the days of gas heaters, we used to make fires in the fireplace with actual firewood (which I dreaded having to clean the next morning). And in the evening the whole family would sit around the fireplace and either watch TV (my older siblings), play with toys (my little brother, Isaac), contemplate the meaning of life (me), read a book (my Mum) or just eat dinner and fall asleep on the couch (my Dad). However, as I grew older we eventually upgraded to the glorious, efficient, lean mean heating machine, the gas heater. Which was a welcomed change, because it meant that I didn’t have to be subjected to carrying firewood into the house on Sunday afternoon, or cleaning the ash from the fireplace on Monday morning.
So equipped with my new nostalgia-inspired purchase, I now had a piece of my Swazi home in my Cape Town apartment. And as promised I paid off the credit card within the 55 days, incurred no interest, and kept warm during the harsh Cape Town winter.
Bad habits: when you have more month left at the end of your money
I had just started working at my first full-time job, so I was still getting used to managing money, which understandably meant that on some months I would have more month left at the end of my money. When this happened during my University years I would either text or call my Mum, explain my sad situation to her with my puppy eyes and poverty-stricken voice and then hope and pray to the financial gods that I would soon receive an in-contact SMS from FNB, which was usually the case, because, you know, mothers rock and all that. But now that I was working, paying tax and receiving an actual salary every month, it made it a bit harder to have to ask my mum for money, and due to the fact that I had developed an overly active, extremely masculine-oriented ego over the years, I had come to regard the humble act of asking for money as taboo and extremely emasculating. I mean, I have to ‘be a man’ right? And men aren’t supposed to struggle or ask for help, or so I thought.
So unfortunately for me, the combination of my ego, my bad money management and my access to a high amount of credit had devastating results, because this meant that as the months went by I would rely on my credit card more and more. Initially, I would faithfully clear the outstanding amount as soon as I received my salary, but eventually, I became a lot more relaxed about it, and I would delay my payments to the following month, then the following month and so on and so forth. Keep in mind that we are talking very small amounts here (my outstanding amount was never more than R5000 at a time), however, the real issue was the bad habit that I was forming within my pattern-seeking psyche. I was essentially teaching myself that it was okay to borrow money from my future self, by using money that I did not have at the time. This is a habit that would eventually come back to bite me in my debt-ridden ass. The sad thing is that the purchases that I was making were not even life necessities. It would be one thing to use my credit card for emergency medical bills and the like. But I was spending money on unnecessary things, which of course, at the time I thought I couldn’t live without, like concert tickets, clothing items, and online shopping. Tisk tisk Benjamin Mmari, you reckless human being you.
Increasing the limit
Now in June 2015 during our annual performance reviews at the company, I was told that I would be receiving a bonus and a raise. The bonus came just in time because I was planning a trip to Tanzania for my cousin’s wedding, so I quickly put that money to good use. The raise also came just in time, because, obviously, any time is a good time for a raise. Then to my surprise, a few days after the second post-raise payment hit my bank account, I received a call from the credit card division of my bank asking me if I wanted to increase my credit card limit. I remember this call very vividly. It was a blue-skied sunny day and I was standing on the balcony of my Loop Street office situated on the 22nd floor of the Triangle House, overlooking the beautiful Cape Town landscape and I was asked by a lady with a majestic, soft, soothing voice if I wanted to increase my limit to R78,000. Initially, I thought it was some sort of phishing scam, but after realizing that it was indeed the bank and after the surge of dopamine that ravaged the multitude of neurons throughout my brain had finally settled down, I eventually said: “yes, sure, increase my limit”. I mean, I was never going to need the entire R78,000, but if I ever needed quick and easy access to money, then it would be readily available. And just like that, I received an extra R33,000 in my credit card account, which I was obviously quite pleased about, however, over time, this R78,000 limit would come to serve as both a blessing and a curse.
On 8 September 2015, I handed in my resignation from my job, with my last day of work set for October 9, 2015. I quit my job for a number of reasons: firstly I was not happy, secondly the mental conflict between wanting to forge my own path and being stuck on the hamster wheel was having a major negative impact on my mental and physical well-being, and thirdly I really just wanted to be fully dedicated to working on my own business ventures, despite the fact that they were not generating any income whatsoever at the time.
Now while the act of me quitting my job was something that was on my mind for a long time, it is not something that I had planned in great detail. I spent months lamenting my situation and envisioning my lavish life of self-employment, but I only spent a few hours over a random weekend planning my finances on a google spreadsheet. According to my overwhelmingly positive calculations, after making the leap I was supposed to last at least 5 months on my savings alone, but this was the best case scenario, ceteris paribus. And obviously by the time this 5 months was up, my businesses would be flourishing, I would be a millionaire, working remotely on an exotic island, eating organic grapes, drinking mineral water, while sitting on a beach, snacking on low GI gluten-free treats, thinking of my next big money making idea. However, to my dismay, my business did not flourish as quickly as I thought it would, I never made it to the exotic island, the optimistic 5 months runway was actually reduced to 3 months and towards the end of 2015 I found myself in a state of intense panic as I stressed out about how I was going find/steal/forge the money to pay rent come the end of January 2016.
Please note that at this point in the story my credit card was still relatively unused, and I had no plans on making use of it because I obviously was not going to be able to pay it off if I wasn’t earning a stable income. However over the course of 2016 this gradually changed, this account that was only supposed to be used in an emergency situation is something that I became fully dependent on due to my irregular business income, my masculine egoic tendencies and an overall bad approach to money management.
To be continued
In part 2 of this post, I will expand on how my downfall unraveled over the following two years, and how I am currently, gradually pulling myself out of a self-imposed credit card debt of R78,000.
Please, kids, don’t try this at home.