In this series, I’m looking at our changing attitudes to money, and answer the simple question: are we all credit card slaves now? Part 1 was entitled Where did our attitudes to money come from?. Part 2 is Credit Cards, Bank Accounts and Salaries.
The Credit Cascade
As we head into the week following Black Friday with record amounts spent over the weekend, many people have been buying crazy items at sales all across the U.S., like at Best Buy Stores and WalMart (junk that will likely fill next year’s landfill as summer approaches). Doubtless, retailers feel that the lead upto the Christmas shopping season is the most important for them, it’s also the MOST important for shoppers, consumers and earners (as all of us are).
For many Americans, Christmas is a time when festivities spur all sorts of spending; it’s also a time when budgets get brushed aside; credit cards get maxed out; and everyone forgets that the January statement will be landing on their doorstop just days after they have finished the turkey stuffing and the Christmas wrapping paper has been thrown out.
The interest rates on those credit cards are inching ever up, and for some the game of ‘robbing Peter to pay Paul’ begins again. I’ll skip this payment on this card to make a payment on that card. I’ll borrow money by consolidating my cards into a low-interest rate loan on my house. I’ll withdraw money from this card to pay that bill which is overdue.
So, the credit cascade begins with such simple acts: acts that by themselves don’t mean much, but that can trigger an avalaunche of debts later, as each simple act compounds on itself creating the effects that make subsequent debt much harder to deal with. And if you don’t doubt: I’ll link to a couple of awful stories that highlight what happens when this game plays itself out.
- The Simple Dollar has blogged extensively about his own road to ruin, and I cannot add a word to it.
- Joel Maxwell’s situation was quite different… but he managed to compound his debt in the same general way.
I’ve posted a few stories here as examples of what went wrong, and more specifically, how they got out of their messes. I only wish my parents had been as informed and as fortunate, but then that’s another story, I guess. If you would like to share your own story and experience in the Credit Cascade, I’d love to add them here.