Credit Card Debt Doesn’t Only Happen to Bad People

There’s a lot of moralizing that goes on about credit card debt, and people who have been smart enough to avoid it often look down their noses at those who’ve got themselves into deep trouble. So it was refreshing to read Trent Hamm’s “confessional” piece in the Christian Science Monitor last Friday.

Trent, who’s clearly neither bad nor unintelligent, described how he left college with “manageable” credit card debt, but found himself a few years later owing $20,000 on his cards. The monthly repayments on that were costing him more than his rent, and he had reached a point where he simply couldn’t satisfy all his creditors. He’s turned things around now and acknowledges his mistakes, but his explanation for his experience illustrates how human–rather than immoral or stupid–his actions were:

Why did I buy? There was a mix of things going on. Poor impulse control. Career-related anxieties. Lots of stress. All of these things were solvable on their own and buying things I couldn’t afford was merely a short-term salve for them. It was easy to forget that pain if I could go home and read a new book or play a new game for a while.

Credit Card Use Overseas

Yesterday’s Seattle Times explored the difficulties that Americans often face when trying to use their credit cards abroad. Banks in many countries (across western Europe, but also elsewhere) stopped relying on magnetic strips for swiping credit cards many years ago. Instead, their cards contain a microchip, and customers never sign for transactions, instead typing their PIN into a keypad.

This undoubtedly reduces queues at check-outs because it’s a faster process than swiping and signing. It also has some security benefits, partly because it’s supposed to be inherently safer (though not perfectly so), and partly because you never need to lose sight of your card. In a restaurant, for example, your waiter brings a portable terminal to your table and conducts the transaction there.

This is all very well, but what happens to Americans, who don’t have chips in their cards? Well, in theory, outlets should print off a slip and allow you to sign. But some smaller ones don’t. And automatic machines that sell tickets, gas, highway tolls, and so forth simply won’t work. So if you’re travelling overseas (and Canada and Mexico are both introducing “Chip and PIN” at the moment), your credit card use could be affected and you probably should carry more cash than you usually would.

Student Credit Cards

Last week (July 19), the Index Credit Cards news blog mentioned a number of student credit cards that could suit those who will soon be off to college. Today’s Detroit News raised an additional point on the subject that’s worth repeating.

If you’re not convinced that your son or daughter is yet ready for his or her own credit card, then you could always order an additional card for him/her on one of your accounts. Of course, the trouble with this is that your offspring could go off on a spending spree with your credit limit.

However, people with American Express charge cards can set (and later change) individual spending limits on each of their additional cards. Now, try that on your husband/wife/partner, and you may well find that the consequent cost of couples counselling outweighs any savings on your card bills. But use it on your son’s or daughter’s additional card, and you can prevent out-of-control spending, while still being able to up the limit in an emergency.

If you’d like to to have the ability to help manage your child’s student spending, then check out the American Express® Preferred Rewards Gold Card, or other American Express cards that offer this functionality.

You could find the best credit card news you’ve seen in ages.

Published 07/26/10 (Modified 04/23/12)