For as long as James Sappington can remember, he's relied on credit. As a kid, that meant using a charge account at the local grocery, but over the years Sappington's credit dependency ballooned.
"Credit cards to me became a way of life — if you didn't have the cash, just buy it anyways," says Sappington, now 67 and living in Merriam, Kan., of his philosophy.
Balances built up with little charges — clothes and dining out — alongside birthday and Christmas gifts. But in 2002, Sappington's spending took a new turn. Fresh from a divorce, he decided to rehab his house before getting remarried, ultimately charging an entire house worth of furniture and electronics on his credit cards.
By early 2005, Sappington and his new wife, Beth, 65, owed $60,000 spread over a half-dozen credit cards and he knew something needed to change if retirement was to be a reality. The couple stopped using credit cards entirely, started living on a budget and paid off the debt in late 2008.
"I decided that my way wasn't working," Sappington says.
Now a series of reforms are making it harder for other consumers to fall into the convenient trap where Sappington found himself. In February 2010, the Credit Card Accountability, Responsibility and Disclosure (CARD) Act took effect, imposing sweeping new limits on interest rates and fees and requiring credit card statements to spell out the true level of a consumer's debt more clearly. What's more, the new law forced creditors to verify a person's income, assets and financial obligations before issuing credit.