OUTrageous Debt
The Magic of Plastic or Perils of
Credit?
Don't You DARE Touch My Credit Card--MOM!
When Kristin applied for a credit card
in the fall of 1995, she never dreamed that her father’s health
problems would have such a dramatic impact on her credit history
or the relationship with her mother. The oldest of three children,
Kristin enjoyed an upper-middle class lifestyle in an affluent,
white community of suburban New Jersey. Five-bedroom houses, stay-at-home
moms, membership in exclusive country clubs, private prep schools,
vacations in Europe, and expensive foreign cars were the norm of
her adolescence. Money was not a constraint on the family’s
activities as John, her father, was a Vice-President of a large
insurance company.
Unfortunately, during her senior year of high school, Kristin’s
father suffered a severe heart attack. The timing of his health
problems could not have come at a worse time as his company soon
embarked on a policy of “downsizing” its workforce.
During his convalescence, John was unable to protect his job and
he was forced into “early retirement” at only 49 years
old. What Kristin did not know at the time, was that the family
had been living beyond its financial means. Not only was there little
savings but they had accumulated substantial debts from their inflated
standard of living.
Kristin’s mother, Mary, did not accept the inevitable consequences
of her husband’s medical and career misfortunes. Although
Mary reluctantly began to work part-time, while John slowly recovered
from bypass surgery, she refused to adjust the family’s upper-middle
class lifestyle to these economic realities. For Kristin, her mother’s
behavior was a source of mounting tension. After all, she had accepted
the responsibility of financing her private college education with
student loans and part-time jobs while lowering her standard of
living. Furthermore, Kristin was angry that her matriculation at
an elite private university in Washington, D.C. would require many
years of personal sacrifices after graduation whereas her mother
simply portrayed her attendance at American University as a testament
to the family’s social status--the equivalent of staying at
a three-star hotel. Sadly, the reality of the middle-class squeeze
was more quickly understood by Kristin than her mother. While Kristin
cautiously budgeted her limited student resources, Mary pretended
that the family’s financial woes would soon pass. This fantasy
was no different than her denial of the mounting “past due”
notices from a plethora of credit card and debt collection companies.
Early in her first semester, Kristin quickly realized that the cost
of books, personal items, and weekends “out” were far
more than she could afford on her meager savings and university
financial aid. In order to stretch her limited resources, Kristin
decided to get her own credit card since she no longer had access
to her parents’ “plastic.” The “It Pays
to Discover” slogan was appealing as the “no annual
fee,” “build your own credit history,” and “cash
back bonus” features satisfied her need for financial control.
When she mailed the application, she unconsciously wrote down her
parents’ address. After all, it was her permanent address
and she would be living at home over the summer.
As Kristin prepared for her first set of mid-term exams, she forgot
about the Discover application. Her finances were tight but she
had enough money for the semester and she would get a job over the
Christmas holidays. It was not until she received a phone call in
early December, from a Discover representative, that she learned
that her credit card application had been approved two months earlier.
More startling, she was informed that it was “maxed out”
and in a delinquent status. Kristin owed over $1,500 and her credit
history was already impugned with late and over limit penalties.
Convinced that she was a victim of credit card fraud, Kristin demanded
that Discover investigate the charges to her account. To her shock,
the credit card had been used “and abused” by her own
mother. When Kristin returned home for the semester break, she confronted
Mary about the unauthorized use of the Discover card. What angered
Kristin was her mother’s explanation, “With your father
out of work... all of the credit cards were at their limit... I
needed [yours] for family expenses.” In fact, Mary scolded
her daughter for being so “selfish.” After all, she
reminded her, “we provided well for you and we still have
to take care of your [two] younger sisters.”
For Kristin, it was her mother’s unrepentant attitude that
was most disturbing. Unwilling to accept her husband’s ‘fall
from grace,’ Mary embraced the “end justifies the means”
mentality for prolonging her upper-middle class lifestyle. As Kristin
exclaimed, “can you believe it... she says that I’m
selfish but she refuses to give up her Jag(uar), country-club [membership],
and shopping sprees.” Unfortunately for Kristin, her well-intentioned
strategy of establishing a record of financial responsibility through
the cautious use of credit cards backfired through no fault of her
own.
The “payback” from Discover was not the promised 1%
cash back bonus or a carefully constructed credit history.1 Instead,
Kristin discovered that she was contributing financially to her
parents’ struggling household and unexpectedly suffering the
consequences of their irresponsible credit care use. As a result,
Kristin embarked on a nearly one-year “crusade” to restore
her financial “honor.” In the process, Kristin confided
that the relationship with her mother had deteriorated beyond repair.
Mary continues to deny the irresponsibility of her actions or the
long-term consequences that may be suffered by her daughter. In
the end, this example illustrates that the ‘social cost’
of credit can far exceed its economic value.
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