Tuesday, April 17, 2012

Credit Cards and Drug Addiction

No one sets out to be a drug addict, just as no one sets out to get into credit card debt problems.  The parallels are many.  The drug user says "he can handle it" - just as the credit card user does.  Both end up in rehab.

I have tried to get across the message here that Credit Cards are very, very dangerous things.  And yet, many folks comment back that they love their miles cards and "have it under control" and it is "not a problem."

And it struck me, where have I heard that before?

Yes, from drug addicts.

The parallels are numerous - in fact, a complete parallel.  And yet you would never shoot up heroin or use Methamphetamine, would you?  You would not try to debate me, as one person did, that it is possible to have a responsible meth habit.  (No really, someone told me that once.  I no longer hang out with them).

But when it comes to credit cards, we think we are immune to their siren song of spending and their spiral of addiction and abuse.

Consider this:

Many people are drawn in to drug use by their peers.   "Everyone does it," they think, thus deriving a destructive normative cue from their peer group.   And that is true, in some peer groups, everyone does drugs, or has credit card debts (or both).   So it seems "normal" to join in - and in fact you would be mocked or even ostracized for not doing drugs or paying cash.

The local drug dealer or "pusher" is very friendly - at first.  He even offers "free samples" to get you hooked.  "Congratulations!" says the letter, "You've been pre-approved for a platinum card!"

And the initial "high" is hard to beat.   With that new plastic in your wallet, you go out and spend in style.  You feel like a million bucks - and spend like you have it.

Maybe your spouse or significant other raises alarms.  "Honey, I am not sure this is a good idea!" they say.  "Relax, I have it under control.  I can quit an any time!  Besides, I get frequent flyer miles!"

But then that "high" crashes down when the first monthly bill comes.  What a downer.   Maybe the first month you can pay it all off.  Maybe even the second.   Maybe you go for years without any outward signs of trouble - many alcoholics do, for example.  But then one month you go around the bend, from "causal user" to full-blown addict.   You cannot pay off the balance that month.  What next?

You start to go through withdrawal symptoms.  But a quick hit from the pipe you are back on top of the world.   Pay the minimum balance, and back to spending again.   Wheeee!

You kid yourself you have it under control.  And your pusher tells you the same thing.  "Congratulations!  We've raised your credit limit!"  - and that seems like a good thing, because your balance is approaching that credit limit rapidly, if it fact you have not gone over it several times and incurred fees - and the default "penalty" rate applied to your account.

You lean really fast that your "pusher" doesn't like it when his junkies don't pay.   He leaves you in an alley one evening, after taking a baseball bat to you, to teach you and all the other "junkies" out there a lesson.

In the hospital, your wife is in tears.  "You told me you had this under control, and now our lives are ruined!"   She packs a bag and goes home to Mother.   You think you are better off without her.   All you need is another hit of that pure uncut VISA or a little toke of MASTERCARD to make you forget all about her.

Now the pusher owns you - like he does most of his junkies.   You no longer go to him, like you are a customer and in charge.    Rather, you beg him for little pittances and whatever he deigns to give you.   "Please sir, a credit line increase?"  or "Please, can I refinance this debt using a home equity loan?"

The pusher is smart - he gives you just enough rope to hang yourself.   You would think that pushers would want to keep their junkies alive - after all they are paying customers.   But the pushers know that once they've wrung out a junkie for all that he's worth, they are basically done with him.  He gives you a speed-ball and lets you O.D. and he doesn't have to deal with you anymore.

While you are slipping into a coma, the pusher loots your crash pad of your few remaining possessions.  You are now in bankruptcy court, forced to sell most of your possessions, and given a "workout" to pay back your dealer all the money you owe him.  Your credit rating is destroyed and financially, you are toast.  You will find it hard to even get a job or rent an apartment after this.  You're dead, financially.

End of story.

The parallels are frightening and very real.    Credit cards are addictive, just as drugs are.   And in fact, they appeal to the same parts of our brains - the parts that engage in obsessive-compulsive behavior.  The drug pusher knows his audience - and how they can be lured into becoming addicts.   Once they are addicts, he can control them and milk them for every last penny.

The credit industry works the same way.  They prey upon your weaknesses by dangling easy credit to you.  They send you little checks with every bill - enticing you to take a "Cash advance" on your card - at the highest possible interest rates.  Like the drug pusher, the credit card industry realizes it can make more money by destroying the lives of their customers rather than by serving them.

The credit card junkie pays the highest interest rates, the most late and over-limit fees, and is a perpetual slave to the credit industry.  Since they are now broke all of the time they have to borrow money for even daily living necessities - often paying two to three times as much for basic things in their lives.

And in both cases, the drug user and the credit card user enter the relationship voluntarily convinced that they are supermen - that they alone can resist their own brains by not becoming addicted to drugs - or to debt.

And in both cases, the initial "high" leads the addict to believe they are in control.  The drug user feels great, after taking his drugs.   What could go wrong?   The credit card fiend regales you with the bonus dollars he "scored" or the frequent flyer miles he is earning.  Far from being in trouble, he has everything "under control" - and in fact, super-control - the hallmark of the addict.

The reason I never tried heroin or methamphetamine or crack cocaine is that these are highly addictive drugs.   I read all the literature on them and realized that, once you start using these drugs, they will alter your mind to the point where you think you know what you are doing.   You can't "experiment" with drugs - they will draw you in like a trap.  (alas, even Marijuana).

Similarly, experimenting with credit cards is dangerous.   Having high-limit and high-interest cards is akin to smoking crack.   No, you don't know what you are doing, no matter how many frequent flyer miles you think you are getting.   A $20,000 limit card (not unusual these days, I once had three) with a 15-25% interest rate is nothing more than a time bomb waiting to go off.

The only way to avoid the trap is not to step in it.  Don't smoke crack - even as an "experiment".   And walk away from Credit cards that can entrap you.   If you have to get one, stick to a low limit (less than $5000) and a low interest rate (under 10%, the lower the better).

Yes, such credit cards are a weak drug.   That is the point.   You are far less likely to get hooked on them!