Raising four teen-age kids through the '80s, Lucette Dumas knew what it was like to be hit by a barrage of expenses.
"Shoes -- my God!" Ms. Dumas, a Hyattsville nurse, sums up that category with an explosive exclamation. "Then there's that ski trip with the sophomore class. The equipment for the photography club. And the clothes. You wouldn't believe the clothes."
But Ms. Dumas -- who also went through a divorce during these years -- never found herself strapped for funds. Not for the shoes, the ski trip, or even the frequent dinners in restaurants and twice-a-year trips to visit her sister in California.
"Plastic -- that's the American way, isn't it?" Ms. Dumas says with a laugh about how she covered her mounting expenses through the years.
She's laughing now because next month she will make the final payment on a credit card debt that had reached $10,000. Counseling and a payment plan that she set up four years ago with a debt counseling service have brought her around to a new philosophy of spending:
"I will never have those cards again," Ms. Dumas vows. "If I don't have the green stuff, I won't buy it."
But for every Lucette Dumas who pays off a large credit card debt, there are thousands of other Americans who fall far short, who manage only to make their minimum payments, borrow from Visa to pay MasterCard, and have settled into credit card living and credit card debt as a way of life.
Last year Americans owed $154 billion in bank card debts and $218 billion for all credit cards. The average American owes $2,474 in credit card debt and is paying $465 a year in interest at an average rate of 18.8 percent, says the Nilson Report, a Los Angeles-based newsletter covering the credit-card industry. Three-fourths of credit card holders maintain a balance, up from 50 percent five years ago.
With interest rates on credit cards far higher than rates for any other form of borrowing, the issue came to a political boil last month when President Bush suggested voluntary rate caps and Congress began to consider legislation. But a resulting stock market plunge put a quick damper on political efforts, and it is unlikely that credit card rates will be regulated into line with other rates in the near future.
With other interest rates so low, credit cards have become the banking industry's largest source of profit, say sources as diverse as academic economists and bankers. And economists don't have to look far to see why they're attractive to consumers.
"It's so easy. Credit cards have broken down the bureaucratic barriers to going into debt," explains Bob Pollin, a University of California economist who wrote "Deeper in Debt," a study of consumer debt for the Economy Policy Institute.
From a psychological point of view, the use of credit cards is "seductive," says Joseph Ciarrocchi, a Baltimore psychologist who treats patients for compulsive behavior including spending disorders.
"Credit cards are a wonderful way to deny psychic problems," Dr. Ciarrocchi says. "You just spend. There's no accounting until the end of the month, then you just roll over the balance.
"Credit cards generate a kind of magical thinking about money. That's what makes it so addictive. It cures what ails you -- magically. And there is no penalty -- or so it seems."
But it's unfair to blame credit cards themselves for the problems people have with debt, says William Ahearn, vice president for public affairs for Citibank, which issues more credit cards -- 30 million -- than any other of the 5,000 U.S. banks in the credit card business.
"That's kind of like blaming the bakery because people get fat," he says, adding that only 2 percent to 3 percent of credit card holders ever "get in trouble" with their debt and most of those are victims of circumstances out of their control, such as a job loss or serious health problems.
For both bankers and debt counselors, "getting into trouble" usually means being unable to meet minimum monthly payments. But for some debtors that criterion skirts the real issue.
"Unless we come into a major inheritance we'll be paying all our lives," says Eric, a Baltimore-area businessman who runs his own consulting and publishing firm (and asked that his real name not be used).
Eric and his wife and business partner, Christine, earn enough each month so that it is no problem for them to make about $1,000 worth of minimum payments on a balance of $27,000 that is spread over a half-dozen cards. But their debt looms as an omnipresent part of their future, even though they have cut off almost all credit card spending for now.
Eric and Christine first used their credit cards for personal expenses. Then, Eric says, "a bank would not approve me for a business loan. But I could get $5,000 on my MasterCard from Benny the Loan Shark. So we started justifying big [credit card] expenses because we were expecting a return."