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January 24, 2014 at 10:07 AM
People who have experienced difficulties are often the best positioned to help others facing those same problems.
That goes for a child of divorce who now counsels clients with failing marriages, and also describes an advisor who has personally experienced the dangers of debt addiction.
Fort Worth financial advisor Jason Hull, a popular blogger, gets personal about his bouts of credit card binging in a post that is all the more interesting because he also had a later experience as a credit card company executive.
Hull covers familiar ground in noting there are two general approaches to paying off credit card debt.
The mathematically sound method is to pay off higher rate cards first, to arrest the negative compounding and pay a smaller total interest tab, ultimately.
There are those who take a behavioral approach, however, arguing that it’s of greater value to pay off a smaller debts first in order develop a feeling of accomplishment needed to make further progress.
As a newly minted Army officer with paychecks and a couple of credit cards, Hull succumbed to the temptation to use his credit for nights on the town and other unneeded expenses that did not abate after the first time his card got declined.
Rather, he would pay off debts to give himself “breathing room,” and keep on spending. That is what makes Hull suspect that there is an element of addiction involved in the experience of credit card users.
What’s more, as one who worked for a credit card company after his Army career and before he became an advisor, Hull says cardholders are essentially locked in a chess game with an opponent whose goal is to encourage indebtedness (rather than, say, encourage repayment of the debt).
“The optimal customer stays right at the edge of maximum repayment capacity,” Hull writes. “That’s why there are minimum payment amounts – to anchor you.”
