Why Big Debt Has Become the Norm

Generation Debt: Take Control of Your Money - A How-to Guide
by Carmen Wong Ulrich

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Memo To Creditors: Stop Throwing Money At Us!

So how's a young upstart to pay for all this stuff?

BankFirst now has an Usher debit MasterCard. There's a Hilary Duff card, too. Who would want a credit or debit card with the face of their favorite pop star on it? Even better, Visa now lets you put your own face on your credit card, or any other picture you'd like. (Ah, the ultimate brand promotion - you!) Disproportionately, it's young people who are interested in these custom jobs. Junior Achievement says that 13 percent of teens age thirteen to eighteen have credit cards now. Teenagers barely know how to manage cash, let alone a credit card. But that doesn't stop credit card companies from approving lines of credit to someone too young to have a job.

As you're all too aware, college campuses are huge credit card recruitment centers, with sign-up kiosks all over campuses and credit offers stuffed in mailboxes. Creditors are eager to get you started borrowing early and young, and they know that college is probably the best place to begin. Bank of America has a "CampusEdge" debit card that can be linked to a credit line that offers monthly fees for only the first six months, or free for five years if a parent has an account.

They just keep making it easier and easier to borrow money. And what a growing amount of money it is.

CardData reported in late 2004 that in the month of July, $5.6 billion was added to the total of revolving credit Americans have, most of it in credit card debt. That's compared with $1 billion a year ago.

The Stigma Is Gone: Why Big Debt Has Become the Norm

Debt has been normalized. Everyone has it, right? So what's the big deal?

Now, who do you think makes money off promoting the idea that debt is okay? That it's a normal part of life? Well, banks make money off lenders and borrowers, credit card companies make money all around, stores, too - any store, actually, since debt tends to occur when you buy something - the government, the stock market, the hospitality business, and on and on. And heck, the economy in general goes up when we spend, so maybe it's in everyone's best interest but our own?

Do you remember a weird time after 9/11 when the buzz out of Washington was that if you were not out spending, spending, spending, you were being almost un-American? We were told to go on vacation, buy clothes, eat out, and stock up. It was bizarre. Instead of the usual sacrifices asked of Americans during unstable times in the past, we were asked to support America by spending money. And for most of us, it's money that we don't have.

What kind of culture supports such a seemingly backward and potentially crippling way of life for its citizens? A consumer culture.

When did America become such a culture of consumers? Well, according to Lendol Calder in his 1999 book Financing the American Dream: A Cultural History of Consumer Credit, before the 1920s the practices of installment payments and loans to make purchases were not held in high esteem. The popularization of the automobile changed a lot of that. Detroit knew that it had to sell cars on credit since they were too expensive for most of the population. Pre-1920s, America was being told by critics that it was promoting "consumptive" behavior. But soon enough, that word with all its negative connotations (tuberculosis used to be called consumption) was changed by marketers and economists to the bright and shiny consumer. In a conflagration of events stemming from banking, Wall Street, Detroit, the government, and the Depression, mounds and mounds of consumer debt was encouraged all around. Consumer debt not only became something to be unembarrassed about, but almost became the norm. Who are we kidding? It is the norm!

How many people do you know who don't have any debt of any kind? I'm thinking your answer is close to zero. Me too. When a rite of adult passage is getting a credit card, you're backward for not having the latest tech gadget, and entry-level pay is lower than it was in the 1970s (adjusted for inflation), we've come to a time and place where debt has lost its stigma.

Extensive debt is a way of life. If it's everywhere and nearly everyone's got it - we're all living beyond our means - why fix it?

Because too often, it hurts. Because it squeezes and wrings until your hard-earned money is unable to breathe, or even see the light of day. Because as you're teetering on that precipice of losing what you have and just squeaking by, it doesn't feel good - it makes you tired. If debt is not managed well, it can become your prison. But if you take control of your situation as soon as you can, you can prevent that multiple-year sentence for overspending. Instead you have every power to nip it in the bud, start up new and better habits, and actually maybe enjoy that raise you got this year.

Best of all, soon again, you'll be able to breathe.

Web Links

generationdebt.org The original "Generation Debt" site, with information, blog, and commentary on the state of young people and debt.

maxedoutgen.com Another good site to commiserate with other young folks in debt.

gao.gov The official web site of the Government Accountability Office, it studies how the federal government spends taxpayer dollars.

villagevoice.com An alternative web site for New York City and the nation: news, features, fashion, gossip, arts, opinions, classifieds, personals, entertainment listings, restaurant reviews.

bls.gov The site of the U.S. government's Bureau of Labor Statistics, with more info on workers in America.

ed.gov The U.S. Department of Education web site, with good info for students on financial aid, research and statistics, and many other programs.

nelliemae.com The site for our government-lending lady friend Nellie Mae, with info on loans, money management, and more.

vault.com A job information site with career services, job management, and company information.

monstertrak.com An info-based web page for the job-hunting site Monster.com, with connections for students to employers and career centers.

internships.com Find and apply for internships in multiple fields, and get more info on your rights.

money.com Info from Money magazine on cars, real estate, personal finance, and many other areas to help you in building your future.

businessweek.com The Business Week magazine site with the latest news, investing tips, business schools, and a career section.

Copyright © 2006 by Carmen Wong Ulrich

About the Author

Carmen Wong Ulrich was most recently the special projects editor at Money magazine. She's also a guest lecturer at the annual NFL rookie camp and is a former contributing editor at KING.