Kicking the credit card habit

Can I confess? There was one time I got into credit card trouble and it scared me quite a bit. I had a department store credit card.

I was just starting out as a reporter for The Baltimore Evening Sun. I wanted some nice clothes for work and a few items for my newly purchased condominium, which I bought a year out of college.

I ran up $500. Today, that amount may not seem like much but for me, it felt like $5,000. When I opened the statement and saw that my charges were that high, I panicked. I put the card away and spent a few months paying it off. I rejoiced each month when my statement came and I could see the balance dwindling. To this day, I hold onto that feeling and remember it whenever I use a credit card.

What about you? What’s your credit confession? Let’s talk about it, especially given this time of year so many people run up their credit cards. To help get the conversation going, I’ve selected “Confessions of a Credit Junkie: Everything You Need to Know to Avoid the Mistakes I Made” by Beverly Harzog (Career Press, $15.99) for this month’s Color of Money Book Club.

At one point, Harzog was about $20,000 in credit card debt. Her cathartic tale might help you fess up and do something about it. Harzog went to work on the debt. It took her two years to pay it off. The journey was life-changing. She ended up leaving her corporate finance job to become a financial journalist specializing in credit cards. “I wanted to help others avoid the huge mistakes I’d made,” she writes.

It’s amazing to me that at one point Harzog was an accountant. Shouldn’t she have known better about her credit card spending? But she fell in the trap so many people do. The credit card offers came at the beginning of her career and she responded by accepting them without fully understanding the burden she was building for herself.

“I still remember holding the offer letters and thinking about how important I’d become,” Harzog writes.

It was like a Sally Field moment, she says. She saw the offers as a sign that the banks really liked her. The letters gave her confidence. “I bought into the hype and began to think that, yes, by golly, I did deserve these cards.”

And thus a junkie was born.

Nearly two in five Americans carry credit card debt from month to month, according to creditcard.com. Harzog outlines the top 10 bad decisions she made with credit cards. Her No. 1 mistake was opening multiple accounts. Her second: Not reading the fine print.

“Looking back, I have to take my confession further and admit that I had no idea there even was fine print,” she says.

Only 47 percent of credit card customers said they understood the terms, benefits and rewards programs, according to a survey by J.D. Power of 14,000 consumers. Of those customers, seventy-three percent didn’t comprehend the interest rate they were being charged. At least know the interest rate you’re paying or the penalty rate if you don’t pay, Harzog cautions. It might scare you straight.

“Confessions of a Credit Junkie” is an instruction manual that covers a lot of ground. Harzog explains credit scoring and why you have dozens of scores, plus credit monitoring services, how credit is priced, how to build a good credit history, getting the most out of reward cards and getting out of debt by consolidating what you owe on a card with zero percent interest.

There’s a quiz to determine how you use credit. Find out if you have a “walking disaster” credit personality. If you do, Harzog says, step away from the cards.

There is some advice in the book I don’t recommend. Harzog suggests, with some cautions, that if you want to rebuild your credit, get a co-signer with a good credit history. I don’t believe you should ever co-sign for anyone other than your spouse on a joint account.

But generally, Harzog intersperses her confessions with good advice. She doesn’t want you to completely abstain but become a better, wiser credit user.

I’ll be hosting a live online discussion about “Confessions of a Credit Junkie” at noon Eastern on Jan. 16 at washingtonpost.com/discussions. Harzog will join me to answer your credit card questions. Every month, I randomly select readers to receive copies of the featured book donated by the publisher. For a chance to win a copy of this month’s selection, send an email to colorofmoney@washpost.com with your name and address.