A Safety Net

The card that arrived at the McAllister home more than 30 years ago was just that -- a card. Not an offer. Not an application. It was a Master Charge card, sent to them by Citibank, with their name already imprinted on it. No need for pre-approval. One hundred million other people were also sent credit cards in the late 1960s, with their names already on the cards. It was a marketing practice that would later be banned.

That Master Charge card marked the beginning of the McAllisters relationship with credit cards -- a relationship that continues today and has been passed down to the next generation. The use of credit cards, and ultimately the desire to master them, is something that McAllisters have in common with more than 75 percent of American households.

Between the two of them, the McAllisters have four bank credit cards. Though they don't carry a balance now, and are sure to pay their cards down to zero every month, there have been times when they were what the credit card industry terms "revolvers" -- those who maintain interest-accruing balances on their accounts.
Though Mrs. McAllister has at times used her credit cards for discretionary purchases -- clothes, gifts, dinners -- she has come to think of her cards as a safety net. It's a useful tool that can make life easier, not a blank check, she says. It's a sensibility she says that comes with age.

"When I was coming up, we were poor, but we didn't know we were poor because we were happy," she says. "But now everyone has to have everything new. You see it and you want it… These kids don't want to sacrifice. They want it now; the charge cards come, and they can have it now."

Mrs. McAllister's 38-year-old daughter, Lisa Clarke, a married mother of three, got her first credit card in the mid-1980s when she was in college. Today, Clarke has four cards and a balance of around $8,000. She lives in Irvington, N.J. just a few miles from her parents' house in Newark and works as a parent coordinator at a local elementary school. She's president of the county PTA and she and her husband, Stephen, a mechanic, have a combined income of around $50,000. Currently, she estimates, 30 to 40 percent of their monthly income goes towards paying down credit cards.

Clarke doesn't use the cards for big purchases, she says, but for more incidental things like clothes for her kids, and wedding or birthday presents for friends and family. The Clarkes do budget for Christmas, for example, but they inevitably exceed their budget and use credit cards to make up the difference.

"There are a lot of things out there that make you feel like less of a human being for not having or not providing for your family," says Clarke. "Do I really think I need a DVD player? We had to get that better picture."

Several times a month Clarke buys something on her credit card that she can live without. These are not huge purchases, she says. "It might be $30 here or $30 there and then at the end of the month you have a bunch of $30 purchases that add up to a couple hundred dollars," she explains.

There are occasional unexpected expenses as well. In 2000, the Clarkes took their children to Disney World for a five-day vacation. They made sure to budget, and the airline tickets and hotels were all paid for in advance and in cash. But when they arrived in Florida, they realized that they were going to need to rent a car. The cost would be $500 and they put it on a credit card -- in all likelihood at a 19 percent interest rate. They have been late with a payment or two over the years, but they don't miss payments and they usually pay more than the minimum balance due.

Clarke has a different mentality when it comes to credit cards than that of her mother.
"For us credit cards are so easily accessible. In my mom's generation they were coming off the depression era and they avoided debt. Owing someone was a bad thing," she says. "And they didn't trust banks."