A Tale of Two Debts

Scenario One

A man named George comes home from work one night. He’s tired. All he wants to do is slip into something more comfortable and sit in front of the TV watching the news for awhile. George’s spouse, however is upset. The spouse has just read that you shouldn’t spend more than a third of your credit limit for your credit card. George’s credit card is at 40% of its limit.

The spouse insists that George take his card, put it in a plastic bag with water and store it in the freezer. George objects. He points out that they really need a few things around the house. He wonders how they’ll pay for the party they have scheduled for next week for their youngest child. The two argue. They argue on into the night.

The spouse, who has control of the checkbook for the family, finally says, “No more. No more credit!”

George asks, “What about the bills?” The spouse doesn’t care. The spouse has taken his card from his wallet and now refuses to pay the bills until George stops wasting their money.

The utility company is first to not be paid. It tacks on a charge and sends more bills. After all, it’s a utility company. It has to work with them. They miss a car payment. Their credit union calls and asks for its money. George says sorry, next month. He had to pay for the insurance policy on the car instead.

Then they miss their mortgage payment. After a month, they receive a call from the bank that holds their mortgage. The couple is warned that their stellar credit rating is about to slide downwards. The couple argue – long into the night. George insists what they are doing is crazy. The spouse insists that they cannot go into bankruptcy by using their credit card any more. They must start saving money.

The spouse says they will only pay minimum interest on the card and they should start cutting down on their expenses. George, stymied, tunes out the spouse and stops caring.

Cable TV goes first, then the second phone. The heat gets turned off, the car repossessed, an eviction notice arrives. The spouse is happy. At least they don’t have pay insurance on the car and house anymore. George has just been spending too much money.

But now they’ll have to find the money to move to a smaller place. They do move, but their credit rating is in the toilet along with the credit card. Nasty creditors begin calling at 6 am. and on weekends. The word bankruptcy hangs in the air.

Oh yes, each of the kids do get their birthday party, but there’s no cake and they don’t get a gift – just a greeting card from the spouse saying they can’t afford a gift this year.

Scenario Two

A man named Fred comes home from work. He’s tired. All he wants to do is sit and watch the weather channel for a spell. But his spouse says she has something urgent to discuss. The spouse has just read that using a credit card in excess of 33% of its limit can lower their credit rating. They now have 40% of their card tied up in debt. They have a debt problem.

Fred groans and sits at the table while they go over their expenses. They disagree about what debts to cut. But both agree they want to keep their good credit rating. Without it they will have to pay higher interest on the card, and that will eventually put them into bankruptcy.

Fred has a sudden inspiration. They’ll put the kids to work picking and delivering fruit from their trees in their yard and the neighbors’ trees too (if the neighbors agree.) The kids in return will have to pay for the gas and insurance on the car. But they can use it for fun as well as delivering the fruit.

Everyone pitches in. The family raises money from picking the fruit. The kids are happy. They get to use the car now, as long as they work to pay for the gas and insurance. George gets to watch the weather channel, while his relieved spouse takes care of paying down their credit card. Soon they are under the 33% mark.

The couple can now actually make and save money while paying down their credit card a little more than the interest owed each month. The couple finally celebrates with an magical evening out together.

NOTES: I used 40% as the figure because that is the amount the US government pays on servicing its current debt – 40 cents out of every dollar. And I did not make up scenario one – it actually happened in my home when I was a teen.