Credit card addiction: How to spot the warning signs and break the habit
Filed under: Credit, Debt, Recession Diaries, Credit Reports, Economizer, Credit cards
With more than $40,000 in credit card debt and more than 20 credit cards to her name, Diana Ryan didn't think she had a problem -- even though her husband had no idea just how many pieces of plastic she had tucked in her wallet. "It sounds cliche," Ryan says, "but I thought I could stop at any time."
But the lure of special offers and other card deals was much stronger than Ryan's willpower. "I couldn't say no when a cashier asked if I wanted to open a new card to get an instant in-store savings or receive a new promotion," she says.
Ryan represents a growing number of Americans who've passed the point of merely overspending and have entered into the realm of addiction. And, in doing so, they're maxing out a record number of credit cards.
One reason for this growing epidemic is the way consumers perceive credit cards. Credit cards were designed as a form of convenience, an alternative to writing a check or going to the bank to get cash. Yet many consumers use plastic as if its extra spending money, says Ethan Ewing, president of Bills.com,a personal finance education portal. They forget about the potential liabilities of spending beyond their means or not being able to pay their balance off at the end of the month.
Spotting the warning signs
As with most addictions, the person with the problem is often the last one to realize they have a problem. That, Ewing says, usually compounds the situation. In Ryan's case, whenever she went on a shopping spree, she would rationalize her actions:
"I told myself we needed something, or might need it," she said. "I never missed a sale and would buy something just for the sake of feeling like I was getting a good deal. Whether or not we needed it or could afford it didn't really matter."
Certified financial planner Julie Casserly says identifying with just one or two of the following traits could be a sign you're heading toward addiction. If three or more of these signs are already familiar, it might be time for a plastic intervention.
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You never have cash in your wallet.
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When you do have cash, it burns a hole in your pocket.
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You buy things just because they're on sale, or because they make you feel better if you're upset.
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You have more than two "branded" or store credit cards.
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You and your spouse or partner argue over money.
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Credit cards balances are growing -- and not being paid down -- each month.
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Your cards are all maxed out. But instead of paying them off, you open new ones in order to have additional credit.
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You don't know how much you owe on the cards you have.
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You own several things you've never worn, used, etc.
Another key indicator that you're addicted to your credit cards is dishonesty. "I hid my cards and statements from my husband," Ryan said. "I'd hide purchases of clothes, toys for the kids, you name it, in the trunk or the backs of closets. I've even used the dishwasher as a hiding spot."
"Hiding purchases and credit accounts leads to far more than debt and potential financial ruin," says Ewing. It can cause extreme stress on a relationship. "[My husband and I] separated for four months," Ryan says. "He only agreed to reconcile if I went though credit counseling."
Breaking the addiction
Things got so bad that Ryan began looking for a solution to her addiction. She tried cutting up her cards, but it failed to reign in her spending.
"I tried that several times," she said, "but I always opened new ones." Instead, she found that carrying her statements in her purse served as a compelling reminder of the debt she'd racked up from her addiction. "I also joined a debtor's support group."
Ewing suggests treating "compulsive debting" as you would any other addiction and seek help. Debtors Anonymous offers support in-person, on-line and via the phone.
In addition to debt counseling, the following three steps will help keep you addiction-free.
Spend cash
Start paying with paper instead of plastic for routine expenditures like gas, groceries and dog food. Carrying cash will reduce the chance you'll toss impulse purchases onto the counter since you won't want to be embarrassed if you don't have enough money with you to pay for them. Whatever you do, urges Ewing, "don't use a revolving credit account card."
Freeze out plastic
The theory "out of sight, out of mind" really works, says Ewing. One of the easiest and simplest tricks, he says, is to put your card in a sandwich bag in the freezer. Or ask a trusted family member to hold onto it for you. "The time it takes to retrieve the card is often enough to quell an impulse," he says. Even the one minute it takes to retrieve it from the freezer can be enough to allow financial logic to kick in.
Set goals
Setting a "no plastic for 30 days" goal is a good idea. But Ewing says you should look beyond your credit cards when setting goals in order to truly break a credit addiction. "Decide what short- and long-term financial goals you'd like to achieve," he says, and once you have some goals in mind, it'll be easier to develop spending habits that encourage those goals.
Gina Roberts-Grey is a freelance writer specializing in consumer issues.
Reader Comments (Page 1 of 1)
11-02-2009 @ 11:39PM
Bill said...
Folks spend,spend, spend and just don't realize how hard it is paying down the balance, even without making more purchases.
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11-03-2009 @ 6:32AM
mike said...
have a american express card for 10 years stopped using it because work is slow so i found out they cancelled my card why i dont know they cant give me an answer
Reply
11-03-2009 @ 7:54AM
Linn said...
Only problem is, you don't have to carry your cards around...most stores will accept your drivers license or ask for your SSN.
I finally stopped my addiction..back in 2001 I was $47,000 in debt in credit cards. I made a deal with some of the banks by decreasing my finance charge (some have "hardship" programs) & last year finally finished paying off my debts.
I have less than 5 credit cards now & am in complete control. By creating a spreadsheet with every monthly bill on it, I look at that spreadsheet everyday & pay my bills accordingly. It has helped me be in control.
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11-03-2009 @ 10:33AM
gigantor said...
POOF READ PROOF READ!!!.....I LOVE AOL, BUT PLEASE PROOF YOUR ARTICLES! IT SHOULD NOT SAY "WARNINGS SIGNS" IN THE TITLE OF THE ARTICLE!!!
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11-03-2009 @ 12:45PM
lisanie43 said...
Mrs Roberts-Grey, You are quite wrong about credit cards signifying addiction. This is not generally true for most people because the accumulation of credit card does NOT signify addiction. Mostly, they are new to the concept of credit card usage and they are trying out the best card for the best rate possible and for purchase. Most store credit cards are generally pushed by cashiers because they want people to use their cards to help generate sales and profits. They also want people to get the benefits that their stores offer and generally they think it is good for competing against other stores. Most people don't buy a lot of credit cards in order to start a habitual spending spread. This is such nonsense. Why don't you try and do some clear investigation on your case why you are not entirely correct on the concept?
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11-03-2009 @ 1:42PM
Larry W. Bruce said...
I'm appauled at the abuse of bankruptcy filings. Many people are filing bankruptcy to "dump" all their debt and continue to live the " life of the rich" . They are filing bankruptcy and still have thousands and thousands of dollars in a "hidden" account. They continue to purchase new cars, furniture, homes, clothes, expensive dinners and jewelery and continue to live their life as if they make $10,000 income a month. I have seen very little credit card restraint in friends. They are in denial and in my opinion, I end up down the road, paying for their bad choices in increased credit card interest rates, new annual credit card fees, increased loan rates, and additional 12 trillion dollar national debt caused by bank bailouts and excessive bankruptcy filings. When are these people going to "wake up" and apply some common sense and restraint to their spending ? ? ?
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11-03-2009 @ 2:27PM
Marge Friend said...
I have but one credit card. The deduction goes directly to my bank and is deducted and shown on my next bank statement.
I enter the amount in my bank stub and know exactly how my bank balance stands. Therefore my bank balance is right before my eyes and if I don't have the money, I don't buy. Simple?
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11-03-2009 @ 4:06PM
paul said...
What you describe is a debit card, not a credit card.
11-03-2009 @ 3:39PM
thogordo said...
This is the reason so few people are really furious with Madoff. They have their own Ponzi Schemes going with their credit cards.
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11-03-2009 @ 6:25PM
jbjg24m said...
i'm still paying for last years Christmas presents !
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11-03-2009 @ 8:41PM
Linda said...
I am still paying for my daughter's wedding and they are already divorced!!
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11-03-2009 @ 9:54PM
diane said...
At age 70 my husband had to suddenly stop working because of an eye problem. We were in a comfortable money situation and had the credit bills to show it. When we tried to rearrange our credit payments we were met with refusal on the larger debts. Within a year we were really in trouble since now we had only our S.S. We had to go for bankruptcy and believe me it was a hard thing to do. We were not people who did not pay our debts. Some of the credit cards we had had for 50 years and were stunned when we were refused relief. During the bankruptcy period we had to take a credit counseling course and it was an eye opener for us. We learned a lot of things we never knew about how credit works. We are out of bankruptcy now and cannot believe that we can get credit cards again. But let me tell you one thing we really learned is that it feels great to pay only cash and having to wait to get something we want to buy gives you a real feeling of accomlishment. We use a debit card from our bank and do most of our bill paying online so we never really have to have cash on us. Try it, it feels so free. Incidently we didn't get through bankruptcy without paying. But you know when you are paying credit card companies hundreds of dollars without getting a lower balance, it is better to pay a lawyer to take you through the procedure with that money.
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11-04-2009 @ 12:13AM
Pete Newell said...
Thanks for such an important piece. People often forget that spending problems share many of the same characteristics of drug addiction, and therefore need to be treated seriously.
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11-04-2009 @ 5:53AM
Lara said...
Credit card use is just a symptom of the problem, not the problem itself. The problem, which is enabled by credit cards, is shopping/buying addiction. Everywhere we turn we are being marketed to, and AOL is a huge offender. AOL pays for its existence solely through advertising, so even the 'news' items are usually thinly veiled paid ads for a store or product. When was the last time you hit an AOL link and landed on a page that didn't have ads on it trying to sell you something? Scroll up this page and you'll see such ads. The thing that advertisers haven't figured out yet is that the vast majority of folks have learned to tune out the ads - my eyes don't even see them unless I look for them, as in this case. They're ads are totally ignored by most people, defeating the purpose of the ad.
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11-05-2009 @ 10:41PM
Mary said...
I luv to shop for the bargain thrift stores, swaps meets and .99 cent stores. I am not into big ticket items on charge card I'd rather put them on layaway plan. I get tired of the overdraft charges on the checking acct. 30 here 30 there its got to stop. Now the credit card companies are charging 30% apr that's a rip in itself. What next?
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