Carol, a costume designer in Portland, Ore., was addicted to shopping – and buying. While living in Southern California, she racked up more than $20,000 in credit card debt before she realized she was spending so much simply because it made her feel good.
"I had a compulsion," says Carol, whose last name is being withheld because she participates in a group called Debtors Anonymous, which fiercely protects its members' identities. "There was something inside me--this little attitude--that said I could have whatever I wanted whenever I wanted it. I call it the debtors’ disease."
And Carol is not alone. A study by Dr. Marsha Richins, a business professor at the University of Missouri, found that many people who overuse their credit cards and accumulate massive amounts of credit card debt are often buying things for emotional reasons. They hope that the things they are buying will make them happier, more popular or better equipped to succeed in life.
Credit card debt surviving the recession
The Great Recession may have many people pinching pennies, canceling ski vacations and squirreling money away in emergency funds. But the fact is that despite high unemployment, shrinking retirement accounts and the collapse of the housing market, many of us are still buying stuff with our credit cards. Lots of stuff.
The nation's credit card debt still tops $800 billion--or about $9,000 per household with a credit card. And although the Federal Reserve Bank reports that the number of credit card accounts has declined since 2008, we're still putting more than $1.9 trillion a year on our credit cards.
What's driving all that credit card debt? Well, it could be a sign that the economy is improving and people are showing a willingness to spend again. That's how some economists see it.
It could also be that people are turning to their credit cards to make ends meet, and that does not bode well for them or the economy. According to the Washington State Department of Financial Institutions, about 40 percent of Americans say they are living beyond their means.
Shopping feeds emotional needs
Richins’s research suggests that rampant credit card use could be a sign of psychological issues.
Richins says that some credit card overusers believe that their purchases can deliver a magical transformation in their lives. Unfortunately, those changes are often fleeting, and when they quickly fade, the shoppers find themselves out on another spree. Sort of like a drug addict looking for another fix.
"For many of the people we studied who overuse their credit cards, making purchases was exciting. When they talk about buying things, their faces light up," Richins says. "These were people who expect magic to happen to them when they buy things."
In Carol's case, buying things with her credit card gave her a sense of great self-worth. She says she felt "like an adult, like a real business person."
Does spending money make you happier?
That attitude is similar to what Richins found in studying people who overuse their credit cards. She identified four types of transformations people expected:
- Self improvement, such as the woman who believed spending money on cosmetic dental work would make her more confident and popular.
- Improved relationships, such as the father who was certain buying a built-in swimming pool would improve his relationship with his daughter.
- A newfound sense of adventure--what Richins calls "hedonic transformation"--such as the expectation of wild fun that might come from buying an ATV or a sailboat
- Greater effectiveness, which is what some buyers might expect from buying an expensive iPad or even a new car.
Richins's research is groundbreaking in that it scientifically documents how credit card overusers actually have different beliefs about the products they buy than people who stay within their budget. But it's not as though the emotional urges of credit card users is news to the people who market credit cards.
"The ads you see all but promise the kind of transformations that people are looking for," Richins says. "They show the father taking his son to the baseball game and buying food and souvenirs and they add up the cost of everything and then tell you that, sure, those things cost money but the improved relationship you'll have with your son is priceless. They are appealing directly to the type of person who tends to overuse their credit card."
Hard-wired to love new things
Richins has been studying materialism for more than two decades, and she believes humans are "hard-wired" to want new things that make life better. Primitive people who had better tools survived, so they passed along an innate sense of attraction to things that make survival--life--easier.
Most people, though, come to realize that some tools are important and other tools are just a waste of money. They learn that some tools won't make them happier, or more popular or closer to loved ones. Other people don't make that realization.
"Wanting new things isn't a bad thing," she says, "but when stuff owns us instead of the other way around, there's a problem."
Where to get help
Carol learned that the hard way. It took her 11 years after she cut up her credit cards to pay off the debt she had accumulated. She went to a lot of sessions of Debtors Anonymous, which is a 12-step program similar to Alcoholics Anonymous in which participants look to a spiritual power to help control their damaging tendencies. She still attends meetings, and recommends that people who want help go to www.debtorsanonymous.org and type in their ZIP code to find a meeting near them.
And until that starts to work, she tells people to put their credit cards in a plastic bag filled with water and put the bag in the freezer. Next time you want to put something on your card, you'll have to wait until it thaws--and that might be just enough time to think it over and realize you don't really need to buy that thing after all.