Welcome back to Let's Talk About Money, where we ask real college students about their relationship with money.
Jose’s relationship with credit goes back to middle school. “The first time I thought about credit was in terms of extra credit on a test.” While it may be a different kind of credit than we’re used to talking about here at Fizz, the idea of credit as an indicator is similar. Credit on a test shows that you know the material, and credit on your credit report shows that you’re trustworthy with money.
Jose’s first experience with credit in a financial sense came during his senior year of high school when he took out student loans to attend Albright College in Pennsylvania. He understood the concept of student loans well enough, but his mom made sure he understood the full scope of what to expect.
“My mom is an immigrant, so she didn’t have a ton of experience with finance and the US credit system, but she made sure I knew that it wasn’t free money and that I’d have to pay it back,” Jose explained. “She had kind of a fearful look in her eyes and emphasized that if I didn’t pay back this loan, people could come after me.”
Jose is a pretty thoughtful guy, and he took his mom’s advice to heart. He also saw what student loans could do to people when he got to college. “I had plenty of friends who took out tons of student loans without doing research and with the mindset that they were getting free money. And now a lot of them owe hundreds of thousands of dollars.” By working hard, saving and getting a little help from his mom, Jose was able to pay off his loans within a few years. But it wasn’t easy, and he’ll be the first to acknowledge how easy it is to slip up.
Student loans didn’t prove to be more than Jose could handle. So when he was 21 and taking a year off of college, he opened his first credit card. “I had done fine with my student loans, so I figured a credit card would be fine too,” he told me. “But the credit card was different because it was immediate and a direct reflection of my spending.”
His first card was a Capital One Platinum card, a common starter card that doesn’t have a rewards program and offers lofty credit limits. “Even though my income was pretty volatile at that point, I had this credit limit of $1,000 and I maxed it out almost immediately,” Jose told me. “Like she did with student loans, my mom would remind me that I needed to pay off what I spent. But I just ended up paying the minimum.”
As you might already know, paying the minimum payment on your credit card is a surefire recipe for getting yourself into credit card debt. That’s why at Fizz, we don’t even give you the option. We don’t let you spend more than you have and all of your purchases have to be paid off in full, every day if you want to keep using your card. But without Fizz, Jose built up over $1,200 in credit card debt.
“Again, I was working in sales and my income was so inconsistent at this point that I stopped paying the card off altogether. I was young, I was impulsive, and I didn’t think anything that bad would come out of it. Instant gratification was so much easier. So I just ignored the issue.” But eventually, he couldn’t ignore it any more.
After a few months of missed payments, Capital One closed Jose’s account and sent the balance to collections. “Not only was my credit destroyed from this card, but I had a collections agency hounding me to pay off this debt that I owed.” It wasn’t until he went looking for a job post-college that he decided he needed to sort things out. “I had a job at a big bank that I knew I wouldn’t be able to get with an outstanding debt on my credit report, so I finally scraped together the money to pay it off. Luckily, I got hired, but I know plenty of people who have had offers rescinded because of bad credit scores alone.”
This was a turning point for Jose. “My credit score had cratered. Even though I had always made my student loan payments on time, the missed credit card payments were way more impactful.” He tried applying for a card through his company but was denied. “That was another eye opening moment for me, and honestly, it was kind of embarrassing.” Undeterred, he opened a secured card which helped rebuild his credit. Today, he mainly uses his Apple Card, though he’s looking for something even better.
“I’m kind of a credit success story, but I know there are a lot of people out there who aren’t as lucky as me. My mom cosigned for things when I needed them, and her guidance always helped things from getting even worse than they did.”
Jose’s story is a common one. He’s quick to admit his own faults when it comes to his credit card debt and his credit score, but it’s worth noting that the system made it really easy for him to mess up. It’s why Fizz is such a great option even for college students that consider themselves reckless spenders. We won’t let you spend more than you have, we won’t let you go into debt, and we can help you build your credit - what’s not to love?
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Our one-on-one with Jose is the one of many interviews in Fizz’s Let’s Talk About Money series. Give us a follow on social media to stay up to date with the latest content and perspectives that will help you work towards financial freedom in college and beyond. Know someone who provides a unique perspective on money and credit during college? Email us at firstname.lastname@example.org for a chance to be featured!