The Plastic Trap: Why Credit Card Debt is Built Into Our Economic System

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Credit card companies are heavily pursuing college students. College students used to be a previously unattractive market, but with the deregulation of interest rates, they, too, are being targeted as potential customers. American Express has the Blue Card for a younger, hip market. Commercials feature Sean White, the amazing Olympic gold medal-winning snowboarder, endorsing American Express as “my card.” Credit cards are often offered in exchange for free hats, shirts, bags, or other gifts that double as advertisements for the company. 

Credit cards are an addictive mental process and are all too easy to use. You have the money right in your hands... “Even though I can’t afford that game, I’ll buy it now and pay it off later”, is what some often tell themselves. Although you can’t afford it, all your friends are going out to eat, to a movie, or to the bar. It becomes harder and harder to resist such impulses, especially if the activity is attractive. Other professionals agree.

“Since the 1970’s, there has been growing evidence supporting the frequently heard conjecture that credit cards encourage spending,” writes Duncan Simester. Simester is a professor at M.I.T’s Sloan School of Management who specializes in marketing. His research was done in the 70’s and 80’s and shows that individuals who own more credit cards are more likely to tip better, make larger purchases per store visit, and underestimate the actual amount they spent on recent purchases. 

In 2000 he did an in-depth study and found “willingness to pay” can be increased up to 100% when using credit cards instead of cash. People often don’t even know they are performing these actions. “For these types of effects, we find that even when we tell people about it, they still exhibit the phenomenon. What mechanism is driving it is unclear. We’re still scratching our heads trying to work out why people are doing what they are doing. The findings are intriguing.” 1

Stuart Vyse is a psychology professor at Connecticut College and author of the new book Going Broke: Why Americans Can’t Hold On to Their Money. In his book, he takes a different approach than most would. Unlike other author he does not entirely blame the victim. He brings together fascinating studies of consumer behavior and argues that debt is an inevitable byproduct of America’s hyper-charged economy. He states that “immediate choices are extremely powerful and difficult to resist.”2 In his conclusion, he adds that economic and social change would promote the positive financial health of Americans. 

1. Martin, Patrick. “Bush signs bankruptcy law: another cruel blow in a one-sided class war.” World Socialist Web Site. April 2005.

2. Becker, Andrew. “The Battle Over ‘Share of Wallet.’” PBS Frontline. November 23 2004 

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