Are there people who just should not ever have credit cards? They have enough money and are smart, but their personality is not right for cards. I'm thinking of my sister “Janet.”
I think I understand you. Janet is an intelligent woman. After all, as her brother, you share the same DNA, and you deal with credit just fine! Sis, however, is irresponsible or just plain compulsive. She can never keep her personal finances in order as you do. Big balances, collection accounts, bankruptcies, repossessions, foreclosures — she's got 'em all. People like her should have their credit card privileges revoked, right?
Well, yes and no. It's true that some people are naturally gifted in budgeting, saving, and charging. Credit cards are great tools for them. If you fit in this category, remaining debt-free is easy for you. Maybe you automatically review accounts before charging more, or simply maintain a running total in your head. You plan, prepare and prudently hold back.
For further explanation about inherent traits and borrowing behavior, I asked Mary Gresham, an Atlanta-based clinical and financial psychologist, to provide some insight.
“Yes, there are people who should not use credit cards,” agrees Gresham, who says it's not so much about personality but other, primarily brain-related, issues.
Lack of impulse control is a main one, says Gresham: “This is a situation in which a person has a momentary desire and cannot resist it.” Teenagers and college students, for example, are often unable to see the consequences of their actions, explains Gresham. “For some people, poor impulse control is a lifelong problem, not just a developmental stage, and they are better off without credit card access.”
Gresham also says shopping addicts and compulsive over-spenders ought to eschew plastic. “They get a rush of dopamine, the pleasure hormone, when they spend and it has become an addiction for them,” says Gresham. “They cannot go to a shop or a mall without getting an overwhelming urge to spend. Many of them also have to forgo getting on the Internet or watching shopping channels.”
There's a final category of people who Gresham says can't process what she calls “digital money” transactions: “I have had several clients who cannot remember what they have spent on a credit card because it just does not register in the brain. They benefit from a visual system such as envelopes with cash or a running tally in a checkbook in which they have written out what they have spent.”
Whether “Janet” has any of these issues is not clear, but I must say that even people who don't possess an inherent talent can learn to treat credit positively. In most cases, they've just got to be committed to changing bad habits and adopting better ways. If your sister isn't receptive to you being her mentor, don't press the point. Suggest credit counseling. Nonprofit, accredited agencies offer free to low-cost education and support, from individual counseling sessions to group workshops.
In the meantime, separate yourself from your sister's spending problems as much as you can. Avoid lending her money or rescuing her from self-generated jams. Encourage her to dig herself out of any holes she's dug. Trust me: After doing her own dirty work, she may change her charging ways in the future, or come to the conclusion that credit cards are not for her, after all.
Got a question for Erica? Send her an email.