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House of Cards

Jonathan Clements

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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