Robert
Manning, professor of consumer finance and director of the center for Consumer
Financial Services at the Rochester Institute of Technology is perhaps one of
the most outspoken and informed observers of financial trends in this country
today.
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His milestone book, "Credit Card
Nation," published in 2000, illuminated just
how much credit cards have changed the way we think
about and spend money. An avid consumer advocate devoted
to helping solve what he sees as the consumer debt
crisis, Manning frequently appears before the Senate
and House committees offering expert testimony and
advice. His next book, "Give Yourself Credit,"
to be published this spring, will help consumers use
credit cards and other debt wisely and responsibly.
You've said in the past that credit cards have fundamentally changed the
way Americans think about money. How so?
Credit cards have created a cognitive disconnect between
what Americans buy and what they can actually afford.
When a purchase isn't cash-based, people don't calculate
the real cost -- like how many hours of work did it
take to get that? The buy-it-now-and-pay-later mentality
makes you feel like you can always afford it.
Try this simple trick if you want to see what I
mean. Go to the mall and leave your credit cards in the drawer at home. You'll
be surprised how many times you'll reach for something and then think better of
it if you have to pay in cash.
Research shows that Americans will buy
15 percent to 25 percent more with a credit card than
they will if they shop with cash. Americans now spend
130 percent of their discretionary income on their
financial obligations and a huge amount of that is
credit card debt. No wonder the Commerce Department
just reported a negative 1 percent savings rate for
2006, the lowest level since 1933, during the Great
Depression.
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