
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: MONDAY, March 23, 1992                   TAG: 9203210066
SECTION: BUSINESS                    PAGE: A7   EDITION: METRO 
SOURCE: DONNA LARCEN  The Hartford Courant
DATELINE:                                 LENGTH: Medium

CREDIT-MAD AMERICANS OWE BILLIONS

Walter Cavanagh of California is in the Guinness Book of World Records as the holder of 1,208 credit cards. He is known as "Mr. Plastic Fantastic" and keeps his cards in a 250-foot-long wallet weighing 35 pounds. The cards potentially give Cavanagh $1.5 million in credit.

Another card lover accumulated 30 credit cards, took the cash limit on all of them and used the money to pay for a house. (We don't advise you try this. She went to a bank a few days later, arranged for a mortgage and used that money to pay off the credit-card companies, all within the grace period to avoid any interest charges.)

Americans are credit mad.

The go-go '80s ended with 97 million Americans holding 262.5 million Visa, MasterCard or Discover cards. There were 1 billion credit cards of all types issued in 1990. That same year, total spending was $563 billion.

But not everyone paid their bills in full. The outstanding credit-card debt was $218 billion. Of that amount, $5.1 billion became bad debt, a write-off for the banks, according to the Bankcard Holders of America, a non-profit consumer group in Herndon.

We are going to let you in on a little secret: When you use a credit card, you are essentially taking out a loan.

And if you do not pay off your loan, you pay big interest. The average annual credit-card interest rate is 18.9 percent.

If you are like millions of other consuming Americans, you get invited weekly to apply for this or that bank's credit card. The sales pitch is slick.

Dear Donna Larcen: At Citibank, we're always looking for ways we can save you money . . .

Translation: "We're always looking for ways that we can make money."

The reason you and I are so popular is that we have a record of debt and a habit of making payments on time.

"Somehow you stand a little taller, you feel a little prouder because the bank likes you," says Beverly Tuttle, president of Consumer Credit Counseling of Connecticut. "You have been chosen to join their club."

Banks and retail merchants invite you in because they hope to make money on you.

"Spendaholics imagine that as long as the bankers keep offering them credit, they must not be too deeply in debt," writes Jane Bryant Quinn in "Making the Most of Your Money" (Simon & Schuster, $27.50).

Tuttle, who runs nine offices in Connecticut counseling those in financial trouble, sees overuse of credit cards every day.

"People use their credit cards because they want something now," she says. "The average person can't come up with the cash for that new couch, so they charge it."

Younger Americans see credit cards as a normal way to buy things. Older, Depression-era adults are more accustomed to paying cash.

"What I recommend to people is no more than two credit cards," Tuttle says. "Try to get one with a lower interest rate for those long-term big-ticket items. Use the other sparingly, and pay it off every month."

"It's not difficult to get a card with an interest rate of 18 percent or higher," says Mary Beth Butler, program associate of the Bankcard Holders of America. "But if you use it for convenience and pay off in full every month, it matters not what the interest rate is."

Not all credit cards calculate interest the same way. The best method for you, the card holder, is to get a card on which interest is charged on the unpaid balance after a grace period. You usually have 25 days from the billing day to pay off the balance.

by CNB