Lori Meyer has been debt-free for more than two years. For the 37-year old former teacher, it's a feat she once thought impossible. "Between credit cards, student loans and car payments, I was $30,000 in debt with no hope of ever paying it off," says Meyer, who now lives in Los Angeles.
Meyer's debt didn't happen overnight. It was a slow-growing, painful process. "I'd been in debt continuously since I was 23," says Meyer, pictured at right, "and it just kept growing and growing and growing."She admits that she made a lot of bad choices. "A lot of the stuff I spent money on was clothes or things that weren't necessary," she says.
And it added up, all those the little purchases, and the big ones, too: "I paid for my Lasik surgery with credit cards, and I spent maybe $2,000 on a vacation to Alaska." And while she enjoyed Alaska ("It was gorgeous; I'm glad I did it"), her debt was spiraling out of control. That's when Meyer, who by then was in her late 20s, started thinking more responsibly about her financial situation.
"I started thinking I'd like to buy a house and get married at some point, and I started thinking I should get my finances in order," says Meyer. So Meyer opened an MBNA America card (MBNA is now owned by Bank of America), not to get herself further into debt but to dig herself out of it by consolidating all of her debts onto one card.
"The payments were around $289 a month," explains Meyer, "and they told me that if I made those payments every month, and I didn't add to the debt, I'd be paid off in five years."
At first, everything went according to plan. "The balance went down, but slowly," says Meyer. But then she decided to move to Colorado.
Meyer, who was working as a teacher in Los Angeles at the time, had visited family in Colorado and fallen in love with the state. Rather impulsively, she quit her job and moved there -- with no job prospects or place to live. She couldn't find a comparable teaching job and wound up, as she puts it, "marginally employed" -- and eventually "on the verge of bankruptcy."
Still, she kept up her payments on the MBNA card, until one month, she didn't. The following month, she paid more than the minimum, assuming the extra amount would go to the monthly payment that she missed. But it didn't. And every month she didn't send in a payment to cover the month she missed, MBNA charged her a $39 late fee.
But Meyer didn't realize this until a few months later, when she finally noticed the late fee on one of her charge card statements. Making matters worse, the credit card company had raised her interest rate to 29%. She pleaded with MBNA to stop charging her the late fee every month and asked them to renegotate her 29% APR, but it didn't work.
"Just pay that missed month's payment," said an MBNA employee.
But Meyer couldn't afford it. At that point, she had moved back to Los Angeles and while she had a new teaching job, her finances were still too thin to be able to pay what would have amounted to two minimum payments in one month because she had sunk a bunch of cash into a "get rich quick" business idea. To supplement her teaching salary, Meyer started a ticket service in which she bought season tickets to basketball games and then sold them for a profit -- much like scalpers do. She was sure it would work out -- she'd had a few friends who'd done it with great success. So she took out a loan from a company called Cash Call to get the business started and now owed them as well.
Owing more than ever now, Meyer again tried to negotiate with MBNA, only to be rebuffed.
Betty Reiss, a spokesperson for Bank of America, said in an email that she couldn't discuss an individual's account. "What I can tell you is that we want to help our customers who may be experiencing financial hardship and encourage customers to contact us directly if they are experiencing financial stress. We offer a number of tools to assist customers, such as lowering the interest rate, reducing the monthly payment or eliminating fees. If a customer has accounts with multiple creditors, we may also refer them to a non-profit credit counseling program that can look at their situation more holistically."
Desperate, Meyer found help on her own through a debt settlement company. Fortunately, she found a reputable company called The Debt Settlement Program, which was able to negotiate her debts with both MBNA and Cash Call down to a monthly payment Meyer could afford. She began making payments on her $30,000 in debt in March 2004 and in August 2008, Meyer made her last payment and became debt free, no longer tied to Cash Call or MBNA.
During her years of out-of-control debt and the repayment process, Meyer learned a lot of lessons she won't soon forget. "I would say, borrow as little money as absolutely possible," advises Meyer. "Always make sure you know what the APR on your credit card is, and make sure you don't do anything that can cause it to be raised."
She also suggests sticking with a credit union over a traditional bank. "They are so good to me," she says of her current credit union, Schools First Federal Credit Union. "They've never charged me any fee that wasn't justified, and their customer service is impeccable."
For the past two years, Meyer has carefully managed to stay debt free, even while (sparingly) using a credit card. For all her previous financial problems, Meyers now boasts an amazing 742 credit score, proving that there truly is a financial life after debt.
Geoff Williams is a regular contributor to WalletPop. He writes a lot about debt and is the co-author of the book Living Well with Bad Credit.