Credit Theories . . .

I have a few theories – actually more than a few – but here’s a couple about credit for now.

First, I believe there’s a connection between credit cards and wages.

Back in the early 1990s, the credit card interest rate rules started to change and lots more banks were offering lots more credit cards to lots more people. So much so that today the average person has something like 8 credit cards.


As De Niro says in Casino – ‘just keep them playing.’

Over the years, this changed our thinking to something I call “credit card mentality.” Here’s an example: I spoke with a man who was in a rage because his credit card company had lowered his available credit limit.

“They took my credit,” was how he started the conversation. When I asked him to explain, he said he had a $10,000 limit, and a $4,000 outstanding balance he paid on every month. But then all of a sudden, the company lowered his credit limit to $4,000- so he had no more available credit. And he felt robbed.

This is a widespread problem – Americans consider their available credit as a savings account. We typically don’t have much (or any) cash in savings accounts, but we can always charge it. To the point where it has became a point of pride to have a high credit line(s).

What’s this have to do with wages? Well, another of my theories is that when people stopped worrying about having money in savings because they had plenty of available credit they stopped worrying about how much they were earning – they just charged when and where needed.

What happens then? No one demands higher wages, or if they do it’s muted by the ready access to credit . . . it takes the bite out of the bark. Thus the availability of credit has contributed to the stagnation of wages in the last generation (“the credit card generation”).

Is this sounding familiar at all? If you don’t have 3-6 months of earnings saved in a savings account, then maybe this is why. If your earnings haven’t kept up with your household expenses, maybe this is why. If you have credit card balances you can’t seem to pay down, maybe this is why.

Think about it, and stay tuned for tips from me on how you can move away from depending on credit and start saving. One way to improve your financial savviness is to register for my Your Money CONNection series- a free series of interviews about all things financial for Connecticut residents. Go here: