She kept credit ball in air for a while

By KATE BLAIN- | Comments: 0 | Leave a comment

Mary Malone still blushes when she remembers how many credit cards she once had.

It started with a card from Lerner's, a clothing store, when she was 20. Since Ms. Malone, a Catholic, always paid that bill promptly, she was soon offered an American Express card and a Visa.

Then, "in 1986, I got my first real, good job," she said. "Before I knew it, I had more credit cards than any one person should have. I had about 15: Macy's, American Express Optima, two Visas, three MasterCards, Sears...."

Into debt

For a while, that wasn't a problem. She was earning a good salary and paying her bills on time. When her spending habits escalated to furnishing her New York City apartment with her credit cards, it didn't concern her to carry a balance of $2,000 or so.

Then, in 1989, she lost her job.

"I thought, no problem, I could live off my credit cards till I found one," she recalled. "But it took me about three months to start looking, and I had a hard time finding a job that paid as much as the one I'd had."

In the eight months it took to find employment, Ms. Malone continued to use her credit cards. Looking only at the short term, she took cash advances from one card to pay the minimum balance on another. She found a minimum-wage job at a drugstore, but was already $52,000 in debt and now earning just $12,000 a year.

Last fling

When collection agencies began to hound her, she decided to move out of state. Before she left, she went on one last fling: a trip to Disney World, funded entirely through credit cards. She figured that she was so deep in debt, adding more wouldn't matter.

"I didn't think about what I owed," she admitted. "I `knew' someday I was going to get back on my feet and things would be alright."

In this, she had a good teacher: her mother. "I'd seen my mother do it," Ms. Malone said of debting. "She always had four credit cards, they were always maxed out, and my parents always landed on their feet -- I thought."

It wasn't until her own credit problems came to light that she learned how much her parents had struggled with theirs.

Paying up

Once she moved to Ohio, Ms. Malone paid nothing at all toward her credit balance for three months -- until her creditors found her. She began to receive phone calls from collection agencies and finally found a summons from the local sheriff on her door.

"He said I had to go talk to a judge about paying my debt," she said. "I thought that was just [nonsense]: `If I don't have any money, how can I send them any?'"

At the meeting, she was given two choices: credit counseling or jail. She wasn't even earning enough to pay a lawyer to file bankruptcy for her. Ms. Malone chose credit counseling. Her counselor worked out a deal with the credit-card companies: She would pay them $230 twice a month for four years, and they would only hold her responsible for $31,000 in debt (the principal without the accrued interest).

Back on feet

With no other choices left, she first found two part-time jobs, then a full-time position at a department store. She walked to work, walked home for lunch to save funds and allowed herself $3 a week spending money. Since she shared an apartment with a friend, her rent was only $175 a month. Her roommate agreed to pay the utility bills.

"At first, it was really hard," she remembered. "I'd gotten into the mentality that `if I want it, I can buy it.' It took about eight months to get used to not having extra. But once the year was up and I knew I was able to do this, I was pretty proud of myself."

Still, she couldn't escape her anger at having failed herself. "I was pretty bitter that I allowed this to happen: `How did I let it get this far?'" she said. "I used to be proud of the fact that I paid my bills on time."

It took more than four years for Ms. Malone to pay off her debt. During that time, she moved back to New York City and began a new career, working with the mentally ill. While not high-paying, she noted that her job is rewarding in other ways.

Rear-view mirror

Looking back, she believes that credit counseling was a better choice than bankruptcy would have been.

"Bankruptcy is an immediate solution. Credit counseling is a long-term solution that allows you to begin to budget again," she explained. "When you go to a credit counselor, you take responsibility for the debt you've accumulated, and pay it off."

About seven years after her "credit crisis," Ms. Malone's bad debt history began to fade from her credit reports. Despite the fact that experts often advise debtors not to have credit cards, she now has three: two MasterCards with low limits and a Discover Card with a $7,500 limit.

"I'm smarter now," she declared. "I know how much money I can spend and still pay these credit cards off."

Caution

She wanted a credit card again "because I couldn't get airline tickets, and you can't rent a car without a credit card. I also thought that in the next couple of years I need to buy a car, and you can't without a credit card so they can do a credit check. I have a decent credit standing now."

However, she doesn't believe in accumulating possessions as she once did.

"I don't want any more; I have plenty," she stated. "It's very easy to get caught up in, `I want it; can I go get it?' I have to think, `Do I need it?' It's nice to want something; but once you have it, it sits there and gathers dust."

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