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I’VE KNOWN AT LEAST half-a-dozen folks who regularly carried five-figure credit card balances. In fact, I was once friends with a woman who had $100,000 in card debt—not just a staggering sum, but also a warning sign about her spending habits that I should have heeded far earlier than I did.
Folks who flock to HumbleDollar tend to be financially disciplined, so this sort of behavior will no doubt spark tut-tutting among some readers. But before we work ourselves up into a state of high moral outrage, let’s acknowledge that we’re all irrational at times and we all have weaknesses, perhaps failing to act wisely when it comes to food, tobacco, exercise, alcohol or gambling. Even frugality can be taken to excess, though it’s deemed more socially acceptable because it doesn’t land anybody in rehab, hospital or bankruptcy court.
Still, what intrigues me is why people end up with horrifying card balances. On the way to five-figure or six-figure card debt, you have to imagine there’s a moment or two when cardholders think, “Maybe this is getting out of control. Maybe it’s time to stop spending.” And yet they don’t.
So, why do folks rack up huge card debt? Based on those I’ve known, there’s a handful of reasons.
Financial need. To be sure, the word “need” deserves quotation marks. The folks I’ve known with large card balances usually started with a legitimate reason: unemployment, home repairs, medical bills, unaffordable mortgage payments, funeral expenses, helping parents financially. But that initial justification then opened the floodgates. “I had to put $5,000 on the card to fix the roof. What’s a few thousand more?”
At that juncture, it would be great if folks had a friend, partner or spouse who counsels caution. Indeed, simply giving voice to our failings—”I lost $2,000 at the casino this weekend,” “I downed a bottle of wine every day last week,” “I made two dozen stock trades yesterday,” “I put so much on the credit card I have no idea what to do”—can have a sobering effect, as the sound of our own words hammers home how far we’ve strayed.
But this, alas, doesn’t always work for couples. I’ve observed cases where spending continues unchecked because neither partner objects to the other’s behavior. In the race to the bottom, they both spend recklessly, preferring ever-larger card balances to an honest conversation about their financial situation.
Magical thinking. How do folks plan to pay off these huge card balances that they amass? No doubt some never intend to repay the money, instead viewing card debt as a way of life. Indeed, almost half of credit-card holders carry a balance from one month to the next. For some, their maximum card balance becomes their spending limit, with each new card adding briefly to their purchasing power.
Meanwhile, others insist they’ll one day pay off their balances, with those hopes resting on some fairy-tale financial break that’ll allow them to put their house in order. A woman I knew, who worked in sales, would talk about “hunting elephants.” She dreamed of landing a major client, which would then earn her a promotion and a big bonus, and suddenly her card debt would magically disappear. Did that work out for her? Not that I ever heard.
Shopping high. Many people simply love to shop. It isn’t an impulse I share, but it’s obviously widespread. Indeed, academics have compared the pleasure of shopping to that of having sex. Meanwhile, others seem to shop not because it gives them a thrill but because it momentarily pushes aside their unhappiness, perhaps helping them to forget a bad marriage or a bad day at the office.
I know a man who has regularly racked up large card balances buying gifts for his family. You might attribute those large card balances to his unbounded generosity, and he is indeed a kind and generous person. But I also get the strong sense that he simply loves shopping, and his generosity is perhaps an excuse for his retail therapy.
Losing control. The thrill from shopping can sometimes lead to addictive behavior, with folks spending uncontrollably. Shopping addiction even has a name: oniomania. I knew someone who, in the course of a month, manically racked up more than $20,000 in credit card debt before reality set in.
Remember that woman I knew with $100,000 in card debt? I tried to help her not just with advice, but also with modest sums to ease her financial stress. The latter was a mistake. The next thing I knew, she’d bought a wardrobe of new clothes for her son. That was followed by a new bicycle, a new skateboard and other new toys. Then, she bought him a dog.
All of this was purchased with the money I had given her. Sadly, it seems the best thing for her was the credit limit on her cards—because, when she hit those limits, she was forced to curtail her spending.
What should folks do if they struggle with spending—or gambling, manic stock trading, food, alcohol or some other behavior that they can’t seem to control? I’m not qualified to answer that. But it strikes me as crucial to recognize that everybody struggles one way or another, so we should push aside our sense of shame and talk to others about our problems, including seeking professional help if necessary.
Jonathan Clements is the founder and editor of HumbleDollar. Follow him on Twitter @ClementsMoney and on Facebook, and check out his earlier articles.
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You refer here to a “Shopping High.” I’ve read, and given much thought to, the concept that Shopping serves as a substitute for actual “Hunting.” We used to hunt for sustenance. Now we hunt more for bargains, good deals, and rebates, as well.
When I was starting out, I recognized that hunting-like impulse in myself. I directed the related Hunting/Shopping energy into “bagging” diverse investments and accumulating rebates.
In the first category early one, I made the arguable mistake of buying stock in individual companies. In the second category, I funneled all rebates into a separate brokerage account. At the time of my retirement, I owned mostly index funds. That separate brokerage account, built up with a great many pennies, totaled well into six figures.Meanwhile, I own a few shares that have gained gangbusters in value, while those few that went belly up, I don’t own any more.
[As for “excessive frugality” in retirement, I notice that I still go about collecting small amounts spun off by various coupons and rebates. (It seems that a lot of these items are targeted at those of us who don’t need them, yet I see no reason to turn them down.) But I have no place to literally “collect” these diversely engaging windfalls. Instead, they disappear into whatever accounts they fall into, and I just focus on constructively living through these Golden Years.]
Regards,
(($; -)}™
Gozo
In my work with the conflicted, addicted and convicted guilt shame, regret and remorse achieved toxic levels fueling selfish and self destructive behavior. All manner of profligacy and occasionally irreversible dissipation resulted.
…”modest sums”…
may i pass along my RTN?
ouch! a down vote for humour?
i’ll show u mine[humour model],
if you show me yours [humour model].
On the subject of credit cards, this might be widely known, but I recently discovered that if you pay your card total before the closing date the amount that gets reported to the credit bureaus is zero. My credit rating stays at 850 unless I miss that early payment. Paying the total monthly still dings my rating by 11 to 15 points. Who knew!
had an 815 once. good on you.
”850 ain’t nothin’ but a number”,
never an ”850”. well done.
If you only use credit cards and don’t have installment debt, such as car loans or a mortgage, it seems to be hard to get a credit score above 820 or so.
always pay cash for cars. do have 48k out on a 150k
home equity loan as i prep the house for sale. still
sitting at 790. will be interesting to see what happens if
i crack the magic 30% utilization thresh hold.
I’m truly not sure how it happened; I’ve had an 850 for a few years now. I’ve had car loans but always paid them off early. My “oldest” credit card is from 1984, I don’t use it, but I won’t close it. I’ve never been late on anything and finally paid off that mortgage. Currently we have zero debt.
Great article. Having grown up with frugal parents who were very careful with their money, I also struggle to understand why people are so willing to load up their credit cards with debts they have no hope of paying back. Yet, I see the impulse everywhere–not just on an individual level, but on a societal level. We need only look at the $31T of debt that the United States has managed to pile up on our collective credit card. Perhaps this is happening because it’s all too easy to get deep in debt without apparent consequences for our actions. We’ve lived through 15 years of easy money fed by artificially low interest rates enabled by an accommodative monetary policy. The goal of that policy seems to have been keeping the economic machine humming through crises, which it has done, but at what cost? I think we’re starting to see those costs materializing now with mortgage rates at 8%.
I think of the people loading up on debt as the “Scarlett O’Hara Philosophy.” She said (in the movie Gone With The Wind) “”Tomorrow I’ll think of some way… after all, tomorrow is another day.” Or, simply kick the can down the road.
Whenever I read that $31T debt figure, I keep in mind that it does not differentiate between Expenditures and Capital Investments. I forget where I’ve read CBO figures that assess ROI relationships among our various Outlays, but it provides strong clues as to how we mismanage our National Debt. Let’s all hope that the “what cost” does not prove overly problematic for us, in near-term or far.
Regards,
(($; -)}™
Gozo
I would have a totally opposite reaction and I imagine most of your readers would too:
“I had to put $5,000 on the card to fix the roof. I can’t spend anymore…
put a 4k auto repair on a card once. was going to pay 1k /mos.
saw the finance charge for that payment on the next statement.
gobsmacked AND mortified. never again. paid balance off in full
next cycle and ”ate beans and rice” for awhile.
I’ve never understood why someone would keep paying 18%+ interest on their credit cards month after month, much less why he or she would run up huge amounts of debt in the first place. Yet, I accept that those people are out there. They are penalizing themselves and jeopardizing their futures. To me, a person in this situation is a prisoner with the key to his cell in his own pocket, but he just can’t make himself use it.
Having said all that, I can think of a few cases where I would intentionally run up huge debt on my credit card for a while and not bat an eye. The most obvious one is if a card is all you have available to pay the huge medical bills of a doctor who is saving a loved one’s life. But less dramatically, I’ve read of some people who have put major purchases temporarily on a card – to cover a big down payment on something, or to temporarily cover another big cost, until they can readjust their portfolio to free up money. That allows them to do that methodically in a way that imposes the lowest cost. However, that should not be for more than one or two billing cycles.
(And then there are the stories of people who put giant bills on their cards all the time and them pay them relatively quickly — so they can claim lots of points. But that is a very short term event.)
People run up credit card balances probably for the same reason they buy lottery tickets. They can’t do the math.
This is a tough one. My wife and I went to counseling over a sibling who didn’t seem to understand how we would give to the Lord’s work and ministries — and not prioritize our giving to a family member. Loans were given and not repaid. We agonized over his lack of any emergency fund and the regularity of emergencies. Multiple bankruptcies until it became too expensive to claim another one. Our counselor told us that he was quite capable of utilizing his own network, government assistance, medical coverage and self-employed status to get by. He was an is a talented and resourceful individual. He still lives “on the edge”, and after a welcome hiatus he needed a few hundred dollar loan to avoid a car repossession. We acquiesced and I was floored when he paid us back! We’re in a new era now, he’s earning more and working hard. Praying for him because we love him and he really is a priority.
Great topic. In my extended family we certainly have a family member with this problem. One thing that exacerbated the situation was too much discretion and respect for privacy, so all the family members weren’t aware of the situation. This allowed the individual to continue borrowing from more of us and compound the problem deeper than we ever should have allowed. In situations like this, I’ve learned the hard way that it’s important for families to discriminate between gossiping and sharing important information that everyone really does need to know, and share information that falls into the 2nd category. This was an expensive lesson it took my extended family a while to learn.
at 65, so happy i have outlived my immediate and extended family.
my departed wife was in the same position. we both spent our self employed professional lives providing, ”home services” in different arenas. after living amongst families, we never missed ”family”.
I read your story about how you financially helped your friend, Jonathan, and had the thought “he was lucky it was a friend, not a family member.” A friend you can quietly part from and never see again; more difficult when it’s family.
One of my slightly younger sisters was in and out of work for years, and at my father’s behest I often supplemented her living funds. Not that I had much to spare but I felt really bad for her. I gradually realized she was a spendaholic, though, with a very different relationship to money than me (example 1: borrowing). This was confirmed when I stayed overnight at her place for the first and only time. I opened the door to a room I hadn’t seen and found it filled ceiling to floor with racks of shoes! I’ll never forget my puzzlement and then horror as I looked at those many hundreds of shoes. I closed the door and then closed my wallet to her.
Soon after, my sister wrote a mea culpa letter to me and several other relatives who unbeknownst to me had also been sending her money. She wrote that she was sorry and changing her ways. I guess she had just been waiting to be caught(?) As far as I know, she never went to therapy for her problem, even though I suggested it (not going so far as to offer to pay for it, though). She eventually went through bankruptcy but didn’t really change her money use—still spending more than she saves and, of course, never mentioning all the money I’d once given her. Money damaged our sisterly relationship, for sure.
I’m girding myself to be strong when retirement reality kicks in for her in a few years.
Ummmm……Jonathan refers to the person as “a woman” he knew. Without getting into Jonathan’s personal life, I’m not sure we can conclude that it was or wasn’t a family member. Regardless, both situations are difficult. In my experience, it was hard not to help friends or relatives who were raising children with limited resources when I could easily afford to help. But when those kids grew up into able-bodied adults and asked for money (this only happened a couple times), I’ve said no.
Instead of a flock of folks I think of us more as a chattering of commenters or a gaggle of grouses.
Which of the suggested terms is the correct one for “a bunch of old people”? I’m not overly eager to step on the horns of your dilemma, but whichever best collective noun it is, that’s the one that I would go with.
Regards,
(($; -)}™
Gozo
I think the problem here is fish swimming in water but unware that it is there. People have to exersize good judgement in life, not just limited to spending habits, but spending addiction is a real thing. A first cousin of mine spent herself into the grave. She was never able to hold a job but lived off her parents. When they passed away she had a limited source of money. Instead of using it carefully, she manically spent it on makeup, clothes and hairdressers. In the end she was running a gofundme while living out of her car. She succumbed to an easily treatable medical condition because of her out of control situation.
Another example is people addicted to gambling. This is a known disease and in responsbile societies such as in Europe, steps are taken to limit the damage of this type of behavior in casinos. In this country we provide nothing. Capitalism doesn’t care where it earns money from nor what damage occurs in the process of obtaining it. We take an additional step with credit cards. We feed the addiction. Worse yet, we almost require the use of credit cards to establish credit for big items like cars and homes. Pointing the finger at people with irresponsible spending habits is a case of blaming the victim.
You blame Capitalism for our societal indifference, but I consider this an unfair accusation. Nothing in the framework of Capitalism (at least, as describe at length by Adam Smith in The Wealth of Nations) speaks to self-destructive societal behavior.
Smith cautions against treating Labor (Workers) as merely another Commodity. And from the 1930s up until January 1981, America made great progress in treating our people constructively while unarguably remaining a Capitalistic society.
If our form of Capitalism was good-enough to get us through from the Great Depression through the Second World War, into the Great Society and through the tumultuous 1970s, it ought to be good-enough for us to get back to it, and start it up again.
The sooner; the better.
Regards,
(($; -)}™
Gozo
Thanks Jonathan. Trying to help your friend by giving money reminded me of long ago hearing Dave Ramsey talk about just such a situation. People with this problem will never have enough money. The problem isn’t the money, it lies somewhere else; and I expect a different underlying problem for different people. I try to live by a couple of rules: moderation in all things and to be content in all situations. (Philippians 4:11-13).
Such behavior must indicate some underlying issue, but I’m not an expert. It’s quite sad really.
I have the opposite problem, I’m obsessed with having any debt. I track card balances daily and they must be paid in full on the last day of the month, or before. Sometimes we do without until the money is saved for the purchase- travel is a good example.
My view is that the most satisfying experience is knowing you can afford to buy something, not necessarily doing so.
I’m the same way or worse. I often pay my credit card balance off once or twice before it is due.
Jonathan, thank you for this honest and thoughtful article. In my life experiences I can think of people who fit into all the categories you mentioned. And a few who put their relationships and businesses in danger of collapse because of financial and addictive behaviors.
Unfortunately, too many do not seek professional counseling. It amazes me that they seem to stay afloat, surviving the chaos. But the strain of it is debilitating.
I understand it. I confess to the retail therapy.
After the deaths of close family members, the only solace I found in “pushing away the unhappiness” was to get out of the house and distract myself by shopping. Being somewhat of a stylista it was my weakness.
I kept my expenses to small purchases—but even small purchases add up. I soon took hold of myself. It was a waste of time and energy. I found more comfort in volunteering activities, much to my peace and satisfaction.
Boy, I really feel you, Marjorie! In my case, I called it “Sorrow Spending.” I kept track of it to make sure that I wasn’t totally out of control. It wasn’t a huge amount, and it did help the pain. Eventually, I tucked my “Sorrow Spending” list away with the other mementos of the loss. Like you, I have found great purpose, as well as new friendships and joy, in my volunteer activities. 😊
I think you’d do better in this particular corner of the internet by the writing the column on excessive frugality.
I wonder, there is so much consumption in the USA that most of us could afford to buy less of almost everything which could help the environment.
Putting water into condiment and shampoo containers to get every last drop? I found it doesn’t work very well with hand lotion: you have to unscrew the top and use some utensil to scrape out the undiluted lotion, otherwise you’re trying to slather greasy water on yourself. 😀
I’ve recently read two books on money, both recommended in this space. One is “The Next Millionaire Next Door” and the other is “Die with Zero.” They basically espouse opposite viewpoints about money goals. Though both preach being financially responsible, in the latter book, the goal is to quit working as soon as you have enough money and enjoy your life through using your money for satisfying experiences (and give away any excess money to family or charity if that brings you joy) and in the former, the goal seems to be to just make/save money and live below your means so that you have tons of savings when you die and people are stunned at how rich you were because you never lived like a rich person.
I read “Die with Zero” first and found it thought-provoking, and now I’m reading “Next” more critically (I read the original “Millionaire Next Door” years ago).
Yes, among HD’s readers, excessive frugality is no doubt a bigger issue than credit card debt. Indeed, some writers have addressed the struggle in going from saver to spender once retired.
Jonathan, how about a contest to see who has the most outlandish frugal practice? I give you permission to eliminate/refuse to publish any contributions that would be considered gross or unhealthy. I DID recently throw away a mostly-used jar of mayonnaise that had a funny color, while saying repeatedly to myself “When in doubt, throw it out.”
And this is why it’s nice that this article is not in the spirit of “look at these losers” but rather in trying to understand how and why some end up where they do.
I’d like to see that defined. I follow a blogger who makes money telling people how to be frugal. She claims to buy all her children’s clothes and toys at garage sales and thrift shops, even shoes, but she and her husband “retired” in their thirties.🥲
Yes, it makes you wonder where she purchases her own clothing.
If Costco doesn’t sell it, I probably don’t need it.
My younger self made the mistake of buying into the consumption smoothing theory. I wasn’t alarmed at my growing credit card balance. When we won the cold war, my defense industry job went away. No job and high debt finally alerted me that I had a problem.
Step one: stop adding to the debt. I held the line on spending.
It took me years of hard work to pay off that debt. I’ve paid the balance in full for decades now. The dreaded card has even become a welcome source of cash-back.
It would have been easier to declare bankruptcy, but I’m proud not to be the kind of person who does that. Too many made their own mess but refuse to honorably struggle in paying it off.
This is the part when people protest that sometimes tragedy imposed enormous debt at no fault to themselves. Okay, that happens on rare occasion. But nearly all the debtors I’ve met are chronic overspending deadbeats. Harsh but I feel that removing the stigma is part of the problem.
Jonathan: Such undisciplined spending could be a symptom of financial addiction, which is as real and debilitating as alcohol and drug enslavement.
Consequently, it requires therapy for recovery. In fact, there are support
groups, such as Compulsive Spenders with chapters located in 15 countries.
Such spenders need to be encouraged to seek help before the financial roof caves in upon them. Kudos to you for highlighting the issue.
Charles thank you for mentioning Compulsive Spenders as a solution for the awful disease of spending addiction. I would add Debtors Anonymous to the organizations that can help. I’ve seen peoples’ lives transformed by this program.
I haven’t failed to pay off a card each month in many years. But some time before that, I was one of those people with a five figure balance – and five figures was worth a lot more than it is now. I empathize.