Psychology of Easy Credit

You ever wonder how it is that people get into debt so heavily on the highest interest credit you can get?  That would be credit card debt.  How could normally rational, responsible people get sucked in so easily.

If you want to avoid this trap then understanding how marketing and credit card companies work together to make us feel inadequate until we buy their stuff. 

I'll call it the psychology of easy credit.  First, the demand for products must be created.  Then, paying for the product must be addressed. 

First, the marketing angle:

Think about commercials on TV.  The product is flashy with vibrant people all smiling and happy because they: get a better shave, drink better beer, drive a better car, enjoy better coffee, use a better E.D. medication, and on and on and on.  The advertising for these products is very expensive, so the companies that make those products must be making a lot of money to afford the advertising.

Now look at the message almost all of advertisers use.  Most ads show the product and try to make you think that you'll so much more happy if you have it.  The really smart marketers make you think you'll be miserable without it.  Good marketing companies quite literally have it down to science the 'hot buttons' to push to maximize sales.  Fear of missing out on something is the single most powerful motivation in sales.  There's a big difference in "Buy our vacuum cleaner and your house will be clean" and "Our vacuum cleaner gets 99.5% of the dust mites invading your home (insert picture of little kid sneezing)".  The next time you watch commercials try to see if you spot the difference.

These marketing people are smart and create demand for the most inane products imaginable because they know many people feel unfulfilled in life (and they shouldn't) and these voids can be filled with... STUFF.

So we buy this and we buy that.  We buy a house and car that's a little too expensive, but hey, we deserve it.  Pretty soon our monthly expenses start approaching our monthly after tax income. 

Enter the credit card people:

What's more appealing than buying something today and paying tomorrow?  Not much.  It's almost like getting it for free.  I'll just pay for it down the road.  No problem. 

Let's go back to marketing for a minute.  Of all the junk mail you get, what's the most common?  Yup, credit card offers.  Watch the super bowl this year?  That's expensive advertising you saw.  How many credit card companies ran ads. Lots!  Guess what? Being in the credit card business is very, very profitable.

So the marketing of credit cards and their "benefits" pummel you every single day. 

OK, say you go clothes shopping for the kids.  You pick up few things they need because they're growing so fast, and you see a little something for yourself that you don't need but really like.  Pick up the weeks shopping, dry cleaning, and go out to dinner.  It all goes on the card. 

Your doing the bills and shoot, this month you're a little short on cash.  You didn't realize all the stuff that you bought this month.  So, you pay more than the minimum on the card, but not the whole balance.  Next month you need tires or the home heating bill kicks in.  A little short again, float more on the card.

It sneaks up on you.  But pretty soon the balance on the card is over $10,000!.  How did that happen?  It's the psychology of easy credit and marketing geniuses getting into our heads.  They didn't hold a gun to our heads.  We willing paid for this stuff.  

How do we fight back?  The psychology of being debt free.