The Issue of Debt: Part 4, What to do When Family has Credit Card Debt
I was shocked to see a balance of over $700 on my credit card bill. When did I spend all that money? On further examination of purchased items, I could see very clearly that it was not my credit card bill but my younger brother’s. With almost the same names and social security numbers, the credit card company had mistakenly sent me his credit card bill. He was still in college and quickly racking up a hefty debt by charging fast food, gas and other everyday needs. He was making the minimum monthly payments but accruing interest quickly while continuing to spend well beyond his means. What’s a senior college student to do anyway? What was I to do knowing my brother was sinking fast?
I paid the bill. Then I called him and gave him the debt sermons of all debt sermons and told him to never do that again. Done deal. When our parents found out, they repeated all the debt lessons they had taught him over the years, and once he got a job upon graduation, made him pay me back with the earnings from his first few pay checks. We all learned a lesson from that and years later we laugh about our family’s shenanigans and how we had each other’s backs at all times.
Here is Dan with a few guidelines to follow when family has credit card debt
- Parents, teach your children how to use a credit card before they get to college and are bombarded with credit card offers. It is a good idea to teach credit card use early in life so they can properly use the tool of credit. This comes with teaching that young person how to budget for expenses, establish an emergency fund, and be charitable.
- Teach the dangers and consequences of credit card debt. My number one rule is to pay the bill in full every month. Parents, are you doing this with your own cards?
- Never pay someone else’s debt or co-sign a loan. Pretty silly wisdom coming from someone who paid her brother’s debt. “Why did I do it? He was my brother, I had the money, and I knew he would never do it again.” But here are a few reasons why you should not pay another’s debt or co-sign a loan to pay debt. One, You may likely end up being liable for the entire amount. Two, your relationship may very well change by adding money problems to it. Three, you’ve enabled the individual who may never change a poor habit and will repeatedly come to you for help or rotate through other family members for assistance. There is an old Jewish proverb that says, “Do not be someone who strikes hands in pledge or puts up security for debts; if you lack the means to pay, your very beds will be snatched from under you.” Borrowing, especially credit card borrowing,always presumes on an unknowable future.
- In extraordinary circumstances, pay the person’s debt, but only once! I recommend, if you are able, to pay off the debt to minimize the interest cost. Don’t expect to be repaid. Consider it a gift and give only if you have the means. Expect nothing back.
Dan and Robin Joss