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Why White Americans Love Debt

Talking Shop: Michelle Barnhart may be typical of many Americans: she won’t reveal her credit score but, if you ask her, she will tell you her age.

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Barnhart, assistant professor of marketing at Oregon State University College of Business, and her fellow researcher Liza Peñaloza spent two years following white, middle-class Americans of varying circumstances and ages about their love/hate relationship with debt.

The results of Barnhart and Peñaloza’s study, Living U.S. Capitalism: The Normalization of Credit/Debt, will be published in the Journal of Consumer Research in December, and is currently available online [subscription required]. In it, they ask, “How did America, a country once so indelibly marked with Puritan principles of self-discipline and thrift, become a nation so awash in personal debt?”

Pay Dirt: Why did you choose white, middle-class Americans?

Barnhart: We wanted to look at those who are at least regarded as the most privileged element of society to see how they were doing. We chose 27 people, so it’s not statistically significant, but we wanted people who were young, old, married, single, homeowners and those who didn’t own their own home.

What surprised you about the group?

The stark contrast between the lack of learning and the reality they ran into in later life. We studied consumers between the age of 24 and 65. Younger participants, almost all of them, had parents who helped them to get credit cards. They were told this is something they must have, but were cautioned to only use it in emergencies.

And when they grew up?

When some of our subjects got their first independent credit away from the parents, they went hog wild and got themselves into trouble. Some interpreted $500 on a credit card as trouble, others stopped at $20,000.

Were there any other differences between the age groups?

Younger consumers believe in good debt and bad debt. As soon as a culture accepts that there is a good debt then it becomes a much more normal part of society. Good debt includes school loans, mortgages and business loans, types that are viewed as investments in your future; credit card debt to buy clothes that go out of fashion is bad debt. The older consumers saw nearly all types of debt as negative, except mortgages.

What did your subjects have in common?

Everybody felt like they had to have a good credit score, but there’s a lot of confusion about how one goes about getting a good credit score. They recognize that there is some gamesmanship involved like rolling over balances on multiple cards and amassing impressive amounts of debt, but they don’t exactly know the rules of the game.

What’s your credit score?

I’ve been fortunate enough to stay out of trouble most of my life. But I’m not sure if I want to share that personal information.

What age are you?

That I’ll tell you: 38.

Isn’t that interesting?

Yes! Among our participants there was a real sense that there credit score was some sort of measure of their personal worth. These numbers that affected their financial credibility really said something about them as people. They felt bad if their score wasn’t good.

Pay Dirt readers, how do you feel about your credit score?

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    • debt consolidation loan. good, bad, or ok idea?I am 24. I had a ciannfial mistake of a year in 2007. I have one credit card that I had disregarded. It was a bad way of going about things, i know. I am finally am caught up on everything else and even back in school. anyways, My account was sold to a Law office and they need the balance of 2,400 immediately. I don’t have the money. I have my other cards down to a total under 1,000. If I consolidated it would be a total of like 3,200. Which is not much, actually being that I am not a homeowner which such a small lump of debt, I don’t really know if a consolidation loan is even worth the extra interest. I live week to week on a waitress income. I want to avoid this going into legal action at all cost. Any ideas? oh, and obviously this has put a sore thumb on my credit score ..another part of the puzzle. any experience or ideas that might help are appreciated.

    • “We chose 27 people, so it’s not statistically significant…”

      Then why is this even being talked about? These marketing academics spent 2 years collecting insignificant information. They admit it, without shame.
      Who paid these two for two years of insignificant work. LOL. How did it even get published? Oh yeah, researchers pay to get their papers published. Was this paper peer-reviewed? LOL. Yep, Oregon State professors are sure underpaid.

      And then this insignificant paper was selected for linking by Beaver Eclips…

    • I went to Oregon State for an engineering degree in the 1990s as an older than average student in my late 30s, married with three kids. I amassed a lot of debt. I’m proud that I’ve paid it all off and now have a credit score of 800. Study hard, work hard and the American dream lives, regardless of color or other factors.

    • On so many levels, the article was just bad. I find the following amazing:

      1. This person is a professor – wow, what a great reflection on her school!
      2. Smart Money published this – wow, what a great reflection on the magazine!
      3. Many of you who have commented cannot spell.
      4. Somehow in the body of the article, people found a way to start another verbal race war.

      Grow up. Borrow less. Teach your kids to think for themselves. And stop looking for stuff to fight about – we have enough of that in our world already.

About Pay Dirt

  • Pay Dirt examines the millions of consumer decisions Americans make every day: What to buy, how much to pay, whether to rave or complain. Lead written by Quentin Fottrell, the blog examines these interactions, providing readers with news, insight and tips on shopping, spending, customer service, and companies that do right – and wrong – by their customers. Send items, questions and comments to quentin.fottrell@dowjones.com or tweet @SMPayDirt.

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