holding cell phone and credit card
Posted by: Howard Dvorkin, CPA
Date of post: August 6, 2018

You can learn a lot about people from their plastic.

When you study credit cards for a living, your workday is a roller coaster ride between highs and lows — but mostly lows. That’s understandable once you consider that the total credit card debt in this country is more than $1 trillion. That’s more than the national deficit, at least for a few more years.

If you want all the depressing numbers, Debt.com compiled them on its Personal Finance Statistics page, where you learn, “157 million Americans have credit card debt to pay off.” There are 250 million adults in the country, so the math is depressing.

That’s roughly equivalent of this: Look at the person to your left, and now to your right. Two of you are stressed out about credit card debt.

Will Americans ever get fed up with being in debt? Perhaps like they get fed up with being overweight and start dieting? One small but encouraging sign became the headline of a recent study: “Majority of Americans Won’t Use a Credit Card to Pay for This Summer’s Vacation.”

An alternative credit company called Affirm polled more than 1,000 adults and learned, “only one-third of Americans said they plan to pay for travel this summer with a credit card.”

I often look at travel spending as a barometer for the overall financial health of Americans. Why? Because Americans are never more detail-oriented about their money than when they’re planning a vacation.

I’ve written before about Americans’ aversion to budgeting. Yet as the Affirmed poll shows, “55 percent of Americans said it’s very important to have the cost of the vacation paid off before going.” They study 3-5 travel sites before booking a thing. Do you know how happy I would be if they did the same thing about their monthly spending when they aren’t on vacation?

What this tells me: Americans aren’t stupid. They have the brains to spend smartly. So we don’t need to train them, we just need to persuade them.

Here’s the problem: While technology has made budgeting easier than ever — Debt.com shows you how — it’s made overspending even more pernicious.

Headline from another recent study: “One in Five Americans Think Their Payments Will Be Completely Cashless in Their Lifetime.”

This might excite some people, but it scares me. I wrote in my book Power Up that everyone should go cold turkey on their credit cards at least once in their lives. As I wrote then, “When you hand over your credit card, there is no money involved, just plastic. With tens and twenties, you see it disappearing before your eyes.”

Now imagine you can’t even go cold turkey. It’s no longer possible, because there is no more cash. I’ve always embraced technology, but not when it actually reduces choice instead of expands it.

Americans obviously love their credit cards, but I firmly believe they love cash, too. We’re a proudly private people. Liberal or conservative, we don’t want the government intruding into our lives.

So I predict Americans will demand to keep their cash even as they continue to embrace their plastic. Credit cards are never going away, but it won’t replace the anonymity of cash, either.