I Survived College Without Consumer Debt, and So Can You

by Jim Crider

I entered college 29 years ago this month. I graduated slightly more than 25 years ago, amazingly (now that I think about it) without debt. Some of this was fortunate — I’d earned a full-tuition academic scholarship, and my parents had saved to cover the basics of room and board, which they agreed to cover provided I stayed in school and kept my grades up. The rest of it, though? It happened mostly because of the fine print.

When I went to college, banks didn’t issue debit cards, because debit cards didn’t exist. You had an ATM card, with the bank’s logo on it, and if you were lucky, your bank was a member of the Cirrus or Star networks and you could access ATMs that weren’t your bank’s ATMs — provided you were willing to pay the fees from that institution and your bank for using a “foreign” ATM. There wasn’t a MasterCard or Visa logo on the front, and you couldn’t use your ATM card to pay for your burrito.

So the world of spending was cash or checks (remember checks? Some of us still use them for certain transactions, like rent ’cause the landlord isn’t on PayPal or Venmo). Didn’t have cash or money in the checking account? You didn’t spend. Easy to stay out of debt that way.

If I remember rightly, the first credit card application landed in my dorm mailbox the very first week of school. It was the very first piece of mail I received at college. “YOU ARE PRE-APPROVED!” it said in large, friendly letters on the envelope. I was slightly excited — I’d only just turned 18 a few days before, and now here was this giant financial institution apparently willing to accept me as An Actual Adult! How about that? (Almost-47-Year-Old-Me is facepalming at my younger self. Really, we needed to get out more.)

When I got back to my room, I opened it. And, being both curious and on an academic scholarship to study engineering, I started reading the fine print: 22.95 percent interest? I got out the calculator and saw that carrying over a balance was going to get ugly fast.

Besides, I was working in an ice cream & burger shop, 16–20 hours a week, at $4.00 an hour (I thought I was doing well — minimum wage was $3.35/hour in those days). Most of that money was going for books, gas for the car (mostly so I could get to/from work), my dorm room phone (we had to pay for our own, including long distance; cell phones theoretically existed in 1986, but they cost several hundreds of dollars monthly and coverage in Tulsa was non-existent), and all the ancillary stuff that college entailed (as Nicole pointed out earlier this week). I didn’t have any headroom to pay a credit card on top of all that.

The fine print told me that applying for this card would be a Very Bad Idea.

So I tore up that application and threw it — and the dozens more that arrived in the next 4 years — away. Even after I left the ice cream shop at the end of sophomore year & got a paid internship ($4.50/hour, 20–30 hours/week during the school year, later rising to $5.00/hour). If I couldn’t afford to pay for it right then, I didn’t do it.

Soon enough, though, May 1990 arrived, I graduated, and I got a Real Full Time Job, something with a Career Track. I was solidly flush! $33,000 a year sounded like a fortune! Why, that’s roughly 70 percent of what my dad was making, and he’d been working FOREVER! (For the record, that works out to $16.50/hour for a standard 2,000-hour work year. Doesn’t sound like so much now, 25 years later.)

And now that I was out on my own, paying my own rent, buying my own furniture, covering all my own bills, saving a little and still having some money left over because I didn’t have student loans or a bunch of revolving debt, I could afford a credit card payment. I got an application from the bank at which I’d established my new checking and savings accounts, I dropped it off at “my” branch of the bank, and I waited. Surely that little plastic wonder would arrive in the mail in just a couple weeks!

I got something in a couple weeks, all right: a rejection letter. The boilerplate said I had “insufficient credit history.”

I’m an engineer. I’m a creature of logic. This made no sense whatsoever. When I was in school, working part time for very little money and thus totally unable to afford payments on a credit card, I was pre-approved, but now that I’d gotten a well-paying (by 1990 standards) full-time job in my degree field, I was a bad credit risk because I’d been smart about not getting in debt when I was in school?

I was angry about it in the way a 21-year-old freshly-minted college graduate can be. I’d show them. I’d just get my credit card elsewhere. I applied for a bunch more cards. Visa. MasterCard. American Express. Discover. Diner’s Club. Sears. Denial after denial came back. And then the denial that said that not only did I have an insufficient credit history, but my credit report showed a flood of applications (and denials), which was detrimental to my credit rating (which implies I had a credit rating, which is an amusing construct in and of itself).

What was this sorcery? My credit could be damaged by the act of applying for credit?!? NOBODY TOLD ME THIS! (Lucky you, the reader who might not have known about this practice, for I am telling you this now, so that you may be spared the three years of credit report hell it took for all that to clear up. My loss is your gain, grasshopper.) In despair, I stopped applying for credit cards. Cash or checks for EVERYTHING!

Come the winter, though, I knew I’d need to get a car so I wouldn’t have to drive my first (and current) car, a classic Mustang, in the road salt of a Detroit winter. Since I worked for a car company, I was able to buy one of that company’s products at the employee discount price, plus their captive credit arm was more than happy to extend me a ridiculous amount of credit at favorable terms — they knew where I worked, after all — and would even deduct the monthly payment straight from my paycheck (alas, not pre-tax, but still convenient).

Six months later, I went to open a new checking account at a different banking institution because of an affiliation with my then-employer and the offer of interest on my checking balance. They were very happy to issue a credit card to me because I’d been making my car payments in such a timely fashion.

The rest, as they say, is (credit) history. Would I had the college experience to do over, I’d have done something a little different: I’d have gotten one of those pre-approved offers (probably not the first one, I’d have let a few come in to compare the terms, then pick the most favorable), and then forced some discipline on myself to charge, say, a burrito on it, then put the card away, pay off the charge that month, charge a pizza on it the next month, put the card away, pay off that charge, lather, rinse, repeat. Maybe save up the money I’d need to buy, say, a TV or a computer, charge the purchase to the card, then pay off that from the savings I’d allocated for it. I would have built a credit history without incurring debt. Maybe not a great credit history, but enough that when I graduated and got a career-type job, I’d at least qualify for more credit. Maybe. The credit wheel of fate is fickle.

I would be remiss if I didn’t mention something that came into existence (or at least my awareness) after my college days: “Secured” credit cards. They’re marketed as good for repairing or building credit. They’re not. They’re just a debit card, except one typically saddled with (huge) fees for using it. You’re better off with a regular debit card from your bank. Neither one will help your credit rating, but at least the one from your bank isn’t also gouging you with fees every time you use the card.

This story is part of The Billfold’s College Month series.

Jim Crider is an engineer who spent many years designing unglamorous parts of cars & trucks and the last six years designing tools used by robot submarines. He still plays with cars. He also sometimes writes things when he really feels the need, usually on his Tumblr or Kinja. He may be found @autojim on Twitter.

Photo credit: David Goehring