Former credit card connoisseur triumphs Perez Hilton: from big debt to celebrity blog success
Page | 1 | 2 | 3 |

He believes many college students think their education will reward them with high-salaried jobs and the students have become reliant on what they could be making in the future.

"It's a forecasted self-worth. It's almost a sense of entitlement. We've gone from 'buy now what you might be able to pay for tomorrow' to 'buy what you can't even pay for tomorrow.'"

However, Tamara Draut, author of the book, "Strapped: Why America's 20- and 30- Somethings Can't Get Ahead," doesn't agree.

"Most young people's expectations are aligned with reality," she says. "If anything their expectations have been lowered so much that it's OK to go into five-figure loan debt, and that shouldn't be accepted."

Ulrich says the problem is not just the availability of credit but also the rising cost of a college education, the need for the education and the lack of college grants.

Dave Jones, president of the Association of Independent Consumer Credit Counseling Agencies, or AICCCA, says consumers' misuse of credit is the major cause of most bankruptcies.  

"Ninety percent of the misuse of credit is due to financial illiteracy," he says. "The other percentage is due to things that happen to people beyond their control."

But, "credit cards are usually a major contributor to bankruptcies," he says.

Jones explains it can be good when consumers transfer money to another card to get a better interest rate. But if they keep the old card and get the new card and charge up the credit balance on both, it only increases their debt. This misuse of balance transfers is a relatively common practice seen by credit counselors at the AICCCA agencies, says Jones.

Cash advances aren't as common, but Jones warns a cash advance on a credit card costs far more than a regular purchase. 

"The first thing they ought to know is the rate could be 8 percent to 10 percentage points higher," he says.

Jones wants consumers to beware of something similar to cash advances: checks sent to you with your credit card statement.

"They suggest if you wish you can use one of these checks, but they are charged to your account just as it would if it were a cash advance."

Taking out a significant cash advance right before bankruptcy is considered fraudulent, according to David Skeel, resident scholar for the American Bankruptcy Institute. The new bankruptcy law tightens the restrictions on the use of this credit before filing.

"Before 2005, cash advances aggregating more than $1,225 obtained on or within 60 days of bankruptcy would be presumptively nondischargeable," he says. "Now it's been reduced to cash advances aggregating more than $750 within 70 days of bankruptcy." 

Turning a new leaf
Hilton slowly overcame his debt-ridden state. One day he decided to use his skills as a freelance entertainment reporter to start a blog.

Hilton says he didn't make any money on his Web site for more than a year after he started.

"The money just kind of came to me. It happened by luck and hard work, I guess," he says.

He says his site, perezhilton.com, brings in 4 million visitors a day. He makes his advertisements affordable by charging as little as $200 a week.