Ask John: Changing our Credit Attitude

John,

I don't know what to do. I took out a lot of cash advances from my credit cards last year and my minimum payments are very high. I'm employed and I have a good salary but I'm still barely able to make ends meet because of my credit card debt. If anything happens to my job then I will lose everything. I'm so scared and I just feel like nobody cares or will do anything about it. I also have a very expensive auto lease payment of $1,200 each month. HELP!!

- Gardenia

Gardenia is in the same position as tens of millions of other people in the US. She backed herself into a financial corner and now she’s looking for help. The best she can do is hope she can stop the flood now and make her payments long enough that she actually can pay off the principle amount of her credit cards and survive that ridiculous $1,200 lease. (Incidentally, I confirmed with her that she drives a fully loaded and admittedly “tricked out” Escalade.)

Gardenia is a product of today’s credit environment; an era where people feel like they are entitled to a lavish lifestyle regardless of whether or not they can afford it. Expensive cars, high-end clothing and jewelry, pricy vacations, and uncontrollable spending all come with a longer-term downside. Eventually you have to get out of the debt and doing so can be very painful since all of your options stink.

In the movie Trading Places, one of the characters commented that the best way to ruin a rich person is to make them a poor person. This is exactly what is happening to Gardenia and others in her same position. She is used to living a lifestyle that she can’t afford and now that she’s up against the wall, it’s terrifying. Terrifying, not because she’ll become homeless, but because she knows that she’ll have to pull way back on her spending and live a much more modest lifestyle that requires she drive an economy vehicle.

So who is to blame here? Certainly Gardenia has to be responsible for her actions. She’s an adult and she can certainly read the credit agreements that she’s been signing. And, I assume that she knows how to add and subtract so she knows that spending as much or more than you bring in will eventually cause big problems.

I suppose that you can also point the finger to the army of creditors that line up to give anyone access to credit cards and car loans. The problem there is that they’ve made no representations that they are in existence solely to help you live high on the hog. They’re in business to make money and you’re their target.

We have to change the mindset we have toward credit cards, specifically. It’s not a path to a lavish lifestyle. We should use credit as a tool for convenience and hardly anything more. If you can start thinking of your credit card bill as a 30 day, no interest loan that must be paid back in full by the due date then you’ll be far ahead of millions of other people.

Your credit scores will be in good shape and you won’t be in the same situation as Gardenia, who looks very nice in her $80,000 Escalade but is full of worry.

If you have a question or comment for John or would like to suggest a topic then please send him an email to AskJohn@credit.com

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