recreatingreality.com

There is continuing talk about loosening up credit for the consumers so we can shop for Christmas, buy new cars and spend ourselves into deeper debt.  STOP!  THINK!  Certainly, spending would “stimulate” the economy.  However, before you begin to “stimulate” the U.S. economy, I suggest that you look at yours.

What exactly does loosening up credit for consumers mean?  It depends on who you ask.  However, if you have credit card debt, the answer is simple.  The banks will lend you more money so you can pay them more interest over a longer period of time and dig yourself deeper into debt.  In other words, making it easier for you to spend more, when you don’t have more to spend, is not a lifeline.  In fact, it is another brick tied to your ankles as we get closer to the edge of the cliff.

I realize that most of us believe that we cannot survive a world without credit.  We have accepted credit cards as a right of passage so to speak.  We feel important when we open our wallets and pull out our VISA cards or MasterCards.  We have been lured into believing that if our card says “Platinum” we are special.  Well, it does make us special to the banks.  They know that we are the most gullible and least disciplined of their card holders.  We have a greater credit limit.  Therefore, we can and WILL spend more, beyond our means, in most cases.

The current economic crisis is the wake up call for us.  It is time to recognize the psychology used by credit card banks.  They stroke our egos by upgrading our credit cards.  Remember when you were offered a higher credit limit and the card changed from a mundane red or blue color to a more subdued color that had “GOLD MasterCard” written across it?  We believed we had proved that we were “credit worthy.”  It was a clever way to stroke the ego.  We bought into it.  And, we loaded up that credit card with debt.  But, we paid on time and pretty soon the credit card company sent us a notice with a new credit card.  The notice praised our ability to shop and spend and to pay our minimum balance on time.  As a reward, we were upgraded to a “Platinum” card with a higher spending limit. 

Think back over the process.  Isn’t that exactly what happened?  Slowly but surely, we were ego-stroked into debt beyond our means.  Psychologically we praised ourselves for being so good at spending that the bank rewarded our behavior.  This didn’t happen overnight.  The timing was right for each step of the process.  Just when we began to think that we had reached the limit, the bank let us know that they appreciated our business so much that they were going to open the door to more debt for us.

Each step of the way into the debt trap, the banks stoked our egos and baited us into more and more debt.  Then, the unthinkable happened!  Suddenly, the banks stopped upgrading our accounts, ran out of new terms to use for our favorability.  Then, something really interesting happened.  Our credit card balances approached 75% of our credit limits.  But, this time the banks didn’t offer to move the credit limit.  Instead, it seems the same banks who had stroked our egos into debt began to get uncomfortable with us.

Suddenly, the interest rates went up.  We had always paid the minimum balance and paid on time.  Why would our interest rates go up?  The banks began to worry that our debt wasn’t stabilizing or going down.  Instead, we were still approaching the limits.  We began to look less credit worthy to the banks.  These are the same banks who led us to the edge of the cliff by feeding our egos, even giving us rewards for shopping… those travel miles, or that .00000002% back for spending.

Satisfied that you and I were hooked and couldn’t afford to pay any more each month towards our credit card debt, the banks lost interest in you and me and moved on to some other unsuspecting person who needed a little ego stroking.  We are stuck in a rut.  We can’t buy more using the credit card because we have reached the limit.  We continue to pay the minimum balance every month.  And, the credit card bank has pretty much figured that you are on the hook for years… yes, YEARS!  Because paying the minimum payment each month, even if you don’t add to the debt will keep you on the books for years and years.

Try negotiating with those friendly bankers when you have reached your credit limit.  They have nothing to gain from you.  Suddenly, your best friend, the credit card bank, who stroked your ego into debt beyond your means realizes they have used you until they have used you up.  And, if you are in credit card debt, you realize it, too. 

Have the courage to face the truth.