Is There Life After Credit? . . . : Yes, but It Requires Adjusting to a Very Different Set of Rules

What a difference a little piece of plastic makes.

Life without a credit card, Susan Rumas discovered three years ago, meant one inconvenience after another.

Without a credit card, she couldn’t get past the cashier at her local drug store. “I used to get all my prescriptions there,” the 41-year-old director of a police impound unit said, “and I had been dealing with them for 10 years. But they said if you don’t have a credit card you can’t cash a check. Finally I had to get the manager to approve it.”

Without a credit card, she learned the hard way that renting a car, buying theater tickets, writing a check in a department store were almost impossible.

Without a credit card, Rumas--who lives in Compton--found, she “felt like a non-person.”

She is not alone. The financial outlaws of the ‘80s, those who have so damaged their credit ratings that they must get through life paying cash, are on the increase.

Credit card use--and abuse--is at an all-time high. According to the Nilson Report, a monthly newsletter for credit and debit card executives, there were 290.8 million credit cards in use worldwide in 1986, with credit card spending at $223.6 billion and delinquent accounts totaling $4.7 billion.

No End in Sight

In the United States alone, the Nilson Report says, the number of credit cards issued increased 48.6% from 1980 to 1986, while spending increased 124.6% and total debt increased 79.5%.

And, by 1990, it is projected that there will be 390.6 million cards worldwide, while spending will reach $453.3 billion and delinquency accounts will climb to $8.3 billion.

Rumas ran into trouble three years ago when she changed jobs and started running up charges on 13 credit cards, including Visa and MasterCards, department store cards and gas company cards.

A single mother who was paying for her son’s schooling, Rumas took a second full-time job, as an accountant for an apparel manufacturer, to keep up with her monthly payments. For three years, she said, she worked 90-hour weeks, sleeping an average of three hours a night. But even with two incomes, she could not keep up with the bills.

“When they told me at the counseling place that I would have to give up all my credit cards, I said fine,” she recalled.

At first that led to some inconveniences. “I learned to live on a cash-only basis,” she said. “It was difficult; I’d have to get cash out of my checking account in order to survive. That period of adjustment was very rough.”

She recalled instances when not having a credit card proved annoying, like trying to rent a car when hers was stolen. “I had to take my boss with me to the rental car office so I could use her card,” she said. “Another time I tried to reserve a hotel room and ended up having to write them a letter and send a check for a one-night deposit, then wait 10 days to see if the check cleared.

“People have asked me why I don’t have credit cards, and I say that I gave them up, that I got overloaded. I tell people, you’ll have to take me at face value. I’d been doing business with this one small boutique for five years, and when I didn’t have credit cards they refused to take my checks, and I said: ‘Why now?’ ”

Paying cash for everything, however, did have its bright side. She found herself closely questioning each purchase. “It was rougher wondering if something was in my budget. If it wasn’t, I just figured it wasn’t meant to be.”

But, she pointed out, on the other hand, “What’s going to happen if you need new tires and you don’t have the money? You buy a used one that will at least last you until you can afford new ones. Or what if you’re sick? It’s easy to rely on credit cards to exist.”

It took Rumas almost three years to pay off her debts, and today she is back with two credit card companies, Visa and MasterCard. “I was elated when I got them,” she said. “It was going to make it a lot easier to exist. I realize now it’s a privilege. And now when I talk to people about it, they often say they wish they had the initiative to do that. My mother and I go out to breakfast a lot and she always puts it on her credit card. I tell her that we can afford to pay with cash, and that way the bill won’t be staring at you 30 days later.”

Robert Mendez, a 40-year-old Los Angeles executive for a nonprofit organization, has lived eight years without a credit card because of a $1,500 debt to Visa, which he never paid and which cost him his credit rating.

Mendez (he didn’t want his real name used because his current employer doesn’t know his credit background) recently discovered when he went to apply for a bank loan that his credit history with TRW, one of the largest credit rating companies, finally cleared.

But the years of being credit card-less have been difficult.

“I don’t rent cars when I travel,” Mendez explained. “I use public transportation. Writing a check in a store is generally not an option for me. When I flew to see my daughter several years ago, I tried to write a check for a plane ticket back and they wouldn’t take it. She had some cash and so did I, so between us we had the fare, but it was kind of embarrassing.”

Mendez discovered that the “embarrassment factor” of not having credit cards is particularly strong if you’re in a high income bracket (he makes $53,000 a year), where people automatically assume he has access to plastic. “Sometimes I don’t know what to say,” he said. “It’s like you have a contagious disease.”

Mendez admits to having a fear of banks, coupled with a continuing paranoia about his credit history, even though the slate is now clean.

“When I went in to talk to this guy about a car loan, he pulled the TRW and it didn’t show anything. He was surprised that I paid cash for everything, but said it sounded like I was a conservative fellow. It made me feel great!

“But I kept having this feeling,” he added, “like if I said the wrong thing, an alarm and lights would go off and they’d haul me out and tell me never to try to get a loan again.”

Repaying the Debt

According to Donna Fong, the executive director of Consumer Credit Counselors of Los Angeles, a nonprofit organization that helps people repay debts and then re-establish credit, the adjustment to life without credit cards can be “very traumatic.”

Debt-ridden clients must cut up their credit cards as part of the program, she said, but “some say they won’t cut them up.”

“They soon find out that they’ve got to do something. And once they start getting some positive things on their credit history they can go ahead from there.”

Fong said she has noticed in the last few years that the amount of money owed has increased (she estimates the average amount of debt people are in by the time they come to see her is $7,000) and that clients getting into trouble are younger, which she links to the fact that “credit is a solid part of our society now.”

A spokesman for Visa USA said credit card use and delinquency have both risen over the last few years. Total volume for the year ending March 31, 1986 was $77.4 billion with a debt charge off of 1.55% of that volume. For the year ending March 31, 1987, the volume was $86.7 billion, the debt was 1.99% of that.

Since 1978, American Express has enticed recent college graduates to apply for a card if they are guaranteed a “career-oriented job” that pays at least $10,000 a year.

Betsy Ludlow, vice president of card marketing for American Express, said the program has been extremely successful, and that students represent 15% of the company’s new card growth.

“They’re eager to establish themselves as adults,” Ludlow said, “and acquiring an American Express card may be in their mind a way to do that.”

Their record of keeping payments up, she added, “is no better or worse than other segments of cardholders.”