How do People End up With Huge Credit Card Debt?

Now, I know that sometimes there are crises, and you have no choice but to charge it. For example medical or dental bills, or unexpected car repairs. I’m not talking about those situations.

I’m talking about the people who run up huge consumer debts of 10K+ on their credit card buying… stuff.

Now, it has happened a few times that I have had large balances (due to large dental expenses, maxed out my insurance) and it made me REALLY nervous! I set all my resources to paying off the debt. Of course I had to cut back on “fun” spending to do so.

I’m not by any means a perfect person when it comes to money management… but I just don’t get how can people watch their balance grow to two or three thousand dollars and never have an inkling they need to cut back? How does it get to the point of owing $14,000 on your Visa?

Someone please help me understand this.
(ps – those credit consolidation ads where the employed middle-class person looks at the camera and says: “I made large payments but the balance just never got smaller!” drive me mad. I just have to shout “Well maybe you should stop spending then!”)

Some people simply live beyond thier means. I did this for a while (but never had more than $2K worth of debt). It took some training, but I learned when to and when not to use my credit cards. Others never learn and live thousands of dollars in debt.

Zev Steinhardt

When you said you “lived beyond your means” do you mean that at the time your debt did not concern you? Did you have mental plan for paying it back that just seemed to get put off for next month or what?

If I saw something that I wanted, I bought it. If I didn’t have the cash for it, I pulled out the plastic. I didn’t give much thought to the ultimate payback of the debt.

I have since learned my lesson.

Zev Steinhardt

If I didn’t have self-discipline, I could be hundreds of thousands of dollars in debt on credit cards. For a while there, I would get offers almost daily - most with credit limits over $10K! Then again, I’m sure I got those because I have a good credit rating, and I wouldn’t have a good credit rating if I didn’t pay my bills, so that probably explains it.

But you’ve got people like my ex-SIL who had no conscience about spending money she didn’t have. I lost track of how many apartments she got kicked out of, how many cars were repossessed, how many times her phone was shut off for non-payment. Then there’s all the money she borrowed from my inlaws… That’s the kind of person who runs up high credit card balances. Then she doesn’t pay them, and the rest of us get screwed with fees and interest rates that are higher than they should be.

I’m in a business where income is sporadic and I have carried up to 46,000. on my cards because the short term interest rate offered was cheaper ( 2-5%) and more convenient than I could get for a short term note at the bank. I paid my cards off 60 days ago but the Optima is back up to 5,000. already after Christmas.

As to how this amount gets “big” I would say that there are two main reasons. The first is that if you have reduced cash flow and need to live the cards are where expenses will go. If you have excellent credit you get bombarded with low promo interest rate periods as long a 6-9 months and quite frankly it’s not a bad deal vs taking out a personal loan at those rates, you just have to keep an eye on the termination dates for the deal rates and roll them again if necessary.

Secondly the ability to roll a balance onto a bigger card at a lower rate makes people keep the debt rather than retiring it. If it’s only costing you 400 - 500 annually to cover a 20,000 debt many people roll the debt up onto a bigger card and shelve it mentally and keep adding to the bottom line. Don’t forget a lot of people also put large purchases like car and house downpayments on cards and this can get them into the 5 figure category pretty quickly.

For my friends and I, we racked up a lot of it when we were in our early twenties. We all had good paying jobs, but the temptation to spend was so great. I can tell you our “weaknesses” were vacations. Not just travel expenses, but when you’re far from home, it seems easier to A) buy stuff you wouldn’t look twice at at home, and B) to spend more on stuff.

If you only pay the minimum payments, the balance never goes down. I never got to $14,000, but I had large balances on two cards. I paid them off eventually, but the interest I paid was enormous. But I had fun, and don’t really regret it.

I’m not $10,000 in, but I’ve managed to dig a pretty good hole simply by being laid off right after Christmas. Three years in a row.


…and how can anyone possibly get overweight?

…or develop a drinking problem?

…or become addicted to drugs?


i want this, i want that, those shoes would be nice, hey, how about some groceries? Wow! These pants are on sale! I’ll pay for that! Car Repairs??? New purse! Score! Britney Spears is coming town! Billy needs braces??? Only $19.95 and the knife cuts through a tin can? Keen! I got the new Star Trek DVD box set. Merry Christmas, here are your presents!
What the?! Why is my Credit card bill so big? There must be a mistake. Luckily i only have to pay $21.00 this month…

By paying about $5000 in wedding costs on a credit card in early December, knowing full well you can handle more than the minimum payments and chip it down to nothing in 24 months, then three weeks later lose your job, but you still have mortgage payments and car payments to make while you search for another job in a slow economy, and when you sell your house finally there is a “surprise” extra $1000 in the closing costs which sucks you dry, and you need all of your new paycheck to pay for housing and food, and since finding a job took two months of $300 a week unemployment, you are in arrears at Visa and Sears and the Dentist and JC Penny and MasterCard. It is really quite simple.

part of it is,
you have to promise yourself that you’re going to pay off the whole thing at the end of the month.
hell, it’s only a $30 pair of shoes
another part is that you have to only look at the current purchase, not others you’ve made that month with the card

So, you buy a pair of shoes on the 3rd of the month, then you maybe use the card for dinner on a date a week later (so as to look suave or avoid looking awkward with cash, or whatever) then, maybe something you saw at Old Navy, plus one for your brother later that month,

then the bill is like $100, and you can’t pay that off when it comes because it’s at the same time as rent, the phone, the gas, and you have to get groceries, and if you just pay $20 on it, you get to eat well.

Do that for a couple of months, and presto!

Greck, I agree. We don’t buy anything we can’t pay off at the end of the month. If we’ve overdone it a little, we dip into savings just to get that bill cleared. That doesn’t happen often.

We are scheduled to have our annual BIG FINANCE POW-WOW right after we have our taxes done. We sit down and itemize what has to be paid, any major expenditures we anticipate for 2003, and what we want to spend on extras after we feed the savings account. We had credit card debt at one time, and it truly sucked. Never again.

I wonder what percentage of people run up bills because of unforeseen financial hardship and what do because of irresponsible spending and then paying only the minimum.

Another really good way to get into huge credit card debt is to use several credit cards all the time rather than just one or maybe two. That way, eventually you won’t even be able to pay the minimum on all of them. Also, allowing people to pay you the cash and then you charge it is good way to get in trouble.

My VISA card is one I originally got in college, so it has a ridiculously high interest rate. Thing is, I like that and have never tried to change it. The high interest rate is very good incentive not to run a balance. You get smacked by that interest once and it’s enough to open your eyes.

I have only one credit card, and it never leaves the house. It’s only for online purchases. With the exception of last month, we pay the balance in full every month. A Disneyworld vacation, unexpected dental problem and Christmas actually gave us a balance of $1000, of which I only paid half. I had almost $6 in interest this month! :o

For everything else, we use our debit card. We ran up about $3000 when we first moved to Fort Worth, because I’d just started my first real job, my husband hadn’t yet found one, all our money went into the move, and we needed to be able to eat and wash clothes and get a few nice work clothes. After about six months, we paid it off and didn’t use a credit card again until about a year ago (meaning 5 years without any credit card debt).

My sister in law spends when she is depressed. So she loses her job and makes herself feel better by buying stuff. If she is employed, if she has a bad day at work, she’ll treat herself to a new outfit.

She’s a sucker for a bargain - well, its on sale - so I’m really saving money. And has the bad habit of taking up expensive hobbies and discarding them quickly (photography, painting, gym memberships, etc).

She also is competative when it comes to life, she likes to “keep up with the Joneses.” So if someone she knows is driving a new car, she wants one, too.

Since spending makes her feel good, she spends compulsively. Being able to buy makes her feel secure. I must be successful, I can take a trip to Hawaii.

You and I on the other hand, think financial security feels good. A balance on the credit card?! I worry about that all month. Having little or no debt feels better than anything I could possibly buy.

I have a slightly different story. When I was in law school, my wife and I made a conscious choice to average out our standard of living. Here’s what I mean:

Track A: Live like a pauper while I am in law school because that’s all we could afford. Then, when I graduate from law school and get a high paying job, our standard of living jumps dramatically higher.

Track B: Go into debt somewhat in law school, living slightly better than we could afford to. When I graduate and get a high paying job, we keep essentially the same standard of living and use the extra funds to pay off the accumulated debt.

We chose Track B, ran up some credit card debt, and paid it off after graduating. I don’t regard it as a major moral failing in my life. I chose to pay the interest associated with the Track B choice. I’ve kind of always wondered if those who condemn people for running up debt would condemn this choice.

I used to work at a law office that handled personal bankruptcies. Credit-card debt and hospital bills ran neck and neck for the #1 reason people got in trouble.

Basically, as stated above by others, the reasons people run up giant debts are inexperience, denial, horrible luck, selfishness, lack of discipline and sheer stupidity, in varying amounts from case to case. We’d occasionally get somebody who hadn’t been able to catch a break in a year and had gotten onto a misfortune treadmill, but most of the time they were just dumb. That contributed a lot to my mistrust of the little plastic cards, and it’s why I said no to all the bank offers when I went off to college a year later. Student-loan debt is bad enough.

There is nothing immoral about having debt, squooshed. It’s borrowing without the intention to pay back that is immoral.

However, don’t even think of letting your OOTP team fall into debt! :slight_smile:

Zev Steinhardt