High Income, Empty Wallet — The Dangerous Rise of “Credit Card Poor”

I’m in $71,000 worth of debt right now. So, let’s see how we got there.

Is it just me, or does it feel like everyone is credit card poor these days?

Obviously, not everyone, but it feels like credit card debt just keeps shooting up.

I mean, in late 2024, American credit card debt hit the $1.21 trillion mark, the highest level recorded by the Fed in 20 years.

And yet, at the same time, it feels like everyone is living it up.

Every day, we’re bombarded with the hottest trend that everyone’s impulse buying, outfit hauls where hundreds of dollars are being dropped, trendy bottles or totes being hoarded, and expensive vacation pictures are filling our social media feeds.

I mean, what is going on?

A couple of things. For one, social media is doing what social media does best: it is warping our reality.

What we see online is not the full truth.

And I’m going here because it is something we need to get through our heads.

Even though it might seem like everyone out there is swimming in money, the reality is far from that.

#1. The Rich Are Overrepresented.

Here’s something crazy:

The Wall Street Journal reported recently. Nearly half of all consumer spending is being done by just the top 10% of earners, aka those making over $250,000 a year. 30 years ago, they accounted for only 36% of spending.

That means the wealthiest are spending more and likely flexing more for everyone to see and compare ourselves against. That is one thing that’s distorting our reality.

#2. The other people are living on borrowed money.

Yeah, at first, it might seem like credit card debt going up would mean flexing goes down, right?

Like, “Oh, people are struggling, so they don’t have as much, but I don’t think so.”

I actually suspect the opposite happens more often. Flexing is a sign that credit card debt is rising and vice versa.

Just take this year’s Coachella as a prime example.

According to Forbes,60% of general admission tickets at Coachella were bought through a buy now, pay later plan.

60%. That is insane. And it wasn’t just the tickets. It was the lodging, the transport to the festival, the outfits, probably even the food they were eating at Coachella. All of it was financed on credit.

And just like Coachella’s buy now pay later wave, credit card debt is quietly subsidizing millions of people’s lifestyles beyond their means.

And in the process, trapping more people than ever. Hey, how are you? Quick question for you.

So, yes, while some people might seem like they are thriving on Instagram, there’s a good chance that they might just be credit card poor.

With that in mind, let’s talk a little bit more about:

What exactly does it mean to be credit card poor?
How we should avoid falling into the debt trap.

#1. What is “Credit and Poor”?

So, being credit card poor is basically the state of having spent money you don’t actually have through credit cards and now having to deal with the debt and aggressive interest rates that come with the territory.

Being credit card poor is trippy because usually you fall into it by trying to maintain a certain lifestyle that you can’t really afford, which creates this unexpected effect where, on the surface, everything looks okay.

If anything, it looks way more than okay.

You’re not only covering your bills, but you might be taking yourself out for dinners, buying nice gifts for your friends, heading to the Caribbean for spring break, and then Europe for the summer.

Things look and at first feel pretty awesome, but under the surface is a whole other story.

It says here that you have 700 in your checking account and 957 in savings.

Beneath the flashy spending, it feels anything but awesome.

It feels terrible because every purchase is piling on more expenses, more debt, more interest that you’re going to have to pay off eventually.

And the more you pile up, the harder and harder it is to get rid of.

The average credit cardinterest rate is around 24%. That means almost a quarter of what you owe is going to be charged to you every single year on top of what you already owe.

So, let’s say that you have $5,000 of credit card debt with a 24% interest rate.

If you throw $100 at that debt problem every single month, guess what happens?

That only covers the accumulated interest.

Even though you were putting money toward that debt, the overall amount that you owe would not change.

And if, for some reason, your interest rate ever went above 24%, even just by 1% point, you’d literally be owing more every single month, even though you were paying $100 monthly.

Now, say that you bump that up from $100 to $200 that you were putting toward your debt every single month.

Yes, you would finally be lowering it, but it would still take 36 months, 3 years, to finally pay it off.

And by then, you would have paid a total of $7,000, $2,000 more than you ever took out.

What’s crazy is that this is all using relatively low amounts of $5,000 of credit card debt.

Unfortunately, many people owe more than that. And sometimes they owe way more than that thing at all.

In 2024, the average credit card debt amongst those with unpaid balances was over $7,000.

But for those who are really down the credit card poor trap, they could be looking at tens of thousands, if not hundreds of thousands of dollars of debt.

You’ll probably notice I’m using a lot of clips from Caleb Hammer’s financial audit show because credit card debt is one of the most popular issues that seems to come up with his guests.

The audits are revealing for 2 reasons.

#1. It just shows you how many people out there have staggering credit card debt in the first place.

#2. It gives you insight into the flawed logic that pushes people into these situations, such as thinking of credit cards like free money.

#2. Predatory Tax Bill?

Before we dive into this flawed logic and the psychology behind why people fall into being credit card poor, I want to first revisit just how predatory some of these credit card companies can be and why they are that way.

To be clear, I am not saying that you should not use a credit card. I actually only buy things using a credit card, and I personally love my credit card.

It makes things so convenient for me, and I love getting cash back on my purchases.

So, when used properly, credit cards can be an incredible part of your financial toolkit.

But, and this is a big but, I treat my credit card as if it’s a debit card. Meaning, I only spend what I know I have sitting in my bank account.

And honestly, I’m even more conservative than that. I usually won’t even buy something unless I know for a fact that I could afford it twice and still be fine.

But that is not the case for everyone.

And there are a lot of things that we could point to:

The lack of personal financial education in schools.
The way unhealthy money habits get passed down from parents to kids.
The tendency some people have to brush off debt and treat it like it’s no big deal.

Truth is, most people who are credit card poor are probably dealing with some mix of all these things.

And credit card companies know that. They want you to carry a balance because that is how they profit from you.

It’s why they’ve encouraged a system that relies on those with bad habits or situations.

And makes escaping credit card debt so difficult.

Credit card companies have a long history of lobbying the government to chip away at consumer protections, something that ultimately screws over a lot of everyday people.

Whether it’s trying to push for no caps on late fees, higher interest rates, or being able to hide more loopholes in the fine print of their contract.

That last piece is actually something I found in an interview with Elizabeth Warren, talking about it back in 2010.

Nobody should have to worry that hidden back there somewhere in the pages and pages of fine print are tricks and traps.

You know, there is nothing in the fine print that’s ever good news for the consumer, which feels like the perfect thing to highlight here because it not only captures the very sneaky way that people can slip into being credit card poor.

But it also perfectly ties into another topic I really wanted to talk about today, which is a kind of lobbying campaign that is poised to really screw over everyday people.

And that is in the form of this year’s tax fight, where Donald Trump’s 2017 tax relief for the ultra-wealthy is set to either expire or get renewed in 2025.

But unfortunately, so many people don’t even know it is happening, which I think is exactly what Trump and the Republicans pushing for this tax bill want to see.

They don’t want us paying attention, or we’re going to realize how screwed over we’re getting.

So, before I talk more about credit cards, let me explain a little bit more about this tax fight because this stuff is incredibly important.

So, essentially, in 2017, a tax policy was passed by Trump that cost $2 trillion.

It gave huge tax breaks to corporations and billionaires. And this year, some of those are set to be renewed.

If they are renewed and made permanent the way that Trump wants, we are looking at adding $7 trillion to the national debt in the next 10 years and 37 trillion in the next 30 years.

To put that into perspective, that is how much national debt we have as a country right now, but it took us almost $250 to get there. $37 trillion of debt is an insane amount.

What’s crazier or sadder, I guess, is that money has to come from somewhere.

If you’ve seen lots of news about:

Doge is laying off scientists.
Cancelling research grants.
Cutting lunches for kids from poor families.
Taking away health care from millions.

And you’ve wondered to yourself, “ Why are they doing this”?

Like, who benefits from hungrier kids in school or less research for cancer?

That doesn’t make any sense. But when you realize that all those cuts, not to mention the tariffs that are hurting small businesses and consumers, are meant to help fund billionaire tax breaks, then it starts making a little more sense.

Then you start realizing that maybe Trump and Musk might be more interested in helping their fellow rich friends rather than everyone else.

I know my content isn’t always obviously political, but ultimately, money is political.

Personal finance doesn’t exist in a vacuum. You can’t budget your way out of every single financial issue.

Sometimes there are systemic issues that arrive and then there are systemic solutions that are needed.

So, to wrap this part up, let’s go through a little list of what that 7 trillion dollars of Trump’s proposed tax break for the billionaires would be able to fund us instead.

Universal, affordable child care.
3 million new homes, and lower rent by 10%.
Add Medicare dental, vision, and hearing coverage.
We could have 12 weeks of universal paid leave.
Fix all bridges nationwide that need serious repair.
Expand social security by $200 a month, and we would still have money left over.

#3. Psychology of Poor Credit Card Poor

So we know that credit card companies can be predatory, and we know that there are, unfortunately, a lot of bad money mindsets and habits that send people into spending beyond their means.

But I want to be clear that being credit card poor is not reserved for a certain income level.

I think it’s easy to assume that only poor people can have credit card debt and that once you hit a certain salary, maybe it’s $100,000, maybe it’s $500,000, then that is no longer a problem.

But that is the thing about the credit card poor trap. It can happen to anyone.

I’ve said this before on my channel, but if you don’t have good money habits when you’re making $50,000 a year, you’re not going to suddenly have good money habits when you’re making $500,000 a year.

The amount you spend might go up, but you can still fall into debt.

So, why is that?
What is the psychology that propels people toward being credit card poor?

#1. We have something I’ve covered on this channel before called present bias.

It’s this idea that present rewards are always going to be valued higher in our minds than later on consequences.

When it comes to credit cards, buying something on credit gives us that dopamine rush now.

It lets us have whatever we want in the moment, and the pain of paying comes later, aka out of sight, out of mind.

Mix that in with the illusion of wealth that credit cards give you, and you have a recipe for spending way beyond your means.

For some, a high credit limit makes them feel like they have all this extra money to spend.

And I kind of get it because if you look at your credit card account, it shows you this big number.

It’s not only tempting, but if you have no education on the topic, it could honestly be confusing.

But we have to remember that the amount of credit that we are offered is not equal to the amount of money that we actually have.

At the end of the day, a credit card is a loan, and it comes with a cost.

#2. FOMO, the fear of missing out.

I have a whole video talking about FOMO culture and how it keeps you poor. But it’s worth revisiting the topic because FOMO is just social pressure.

It’s us seeing how other people are travelling or shopping or upgrading their lives and then feeling like we’re falling behind.

Once you add credit in the mix, whether in the form of credit cards, buy now pay later schemes, or even trust fund kids getting what’s essentially a line of credit they never have to pay back, we start seeing something that’s referred to as money dysmorphia.

But surface level, money dysmorphia can manifest into this feeling that you’re the only one out there who is broke, that everyone else in your social circle, or that you see online, is living it up while you’re forced to struggle with bills.

And as I mentioned at the start of this story, that warped reality might be coming from everyone around you having their lives temporarily subsidized by credit.

It is borrowed time, borrowed money. And when we fall for that, we are that much more likely to fall into the credit card pore trap.

#4. What Can We Do?

I think that’s important to include. So to avoid being credit card poor, here are a few steps.

#1. Pay off your balance in full every single month.

Not some of it, all of it, every single time. What I do is set up my account to autopay so that it always pays in full, and I never accidentally forget about it.

#2. Track your spending before the bill hits.

It’s that present bias issue again because credit cards delay the pain, and it is too easy to forget what you spent money on by the time your credit card bill comes around.

Personally, I find budgeting apps or a spreadsheet really helpful.

#3. Don’t confuse your credit limit with your budget.

Just because you can spend $10,000 with a credit card does not mean you should.

I don’t think that I have ever even gotten close to spending the amount of my credit limit. And honestly, I don’t want to.

#4. Ignore other people’s highlight reels.

That influencer with the $4,000 shopping spree, she could be in deep debt.

That co-worker who just bought a fancy $80,000 truck might be supercar poor, and he probably should have watched my car poor video before buying.

Bottom line is, there is always going to be someone out there who has more of something than you.

But don’t let other people’s spending influence and affect your financial future.

#5. Pause a little before you spend with a credit card.

Ask yourself, if I had to pay this in full today,

Would I?
Could I?

Because a credit card should be treated like a debit card. Only spend what you can pay off in the moment.

But what are your tips and tricks for avoiding being credit card poor?

And if you’ve ever been credit card poor before, what was the experience like?

Thanks For Reading 🙂