Atlanta is No. 1 in credit card debt as overspending, recession collide

Rick Kearney has a credit card problem. A decade ago, he had 15 with a combined balance of $75,000.



Today he has four cards and $10,000 debt.

While that might look like someone slowly absolving himself of his credit debt, in truth the Duluth man remains deep in a hole, on a second wave of financial free fall. After declaring bankruptcy in 2001, the former home furnishings store owner had made headway in his credit card reliance, but he lost his job 19 months ago.

He's gone from using credit cards to fund his business to relying on them to finance his basic needs: groceries, utility bills and gasoline. He apparently is not alone.

In a recent report, credit information bureau Experian found Atlanta has the highest average balance among major U.S. cities, though it residents carry fewer credit cards than they used before. Utilization, or the percentage of money available in use, is at 33 percent, up from 31 percent in 2007, compared to the national average of 28.8 percent, said Michele Raneri, Experian senior director of analytics.

Kearney is a prime example for explaining Atlanta's unwanted credit standing. The first time, he overspent his means. The second time, he's fighting for survival.

"You feel like you’re a failure to your wife," Kearney, 56, said. "Feeling like a failure is huge.”

Credit experts say the combination of frivolous spending and economic desperation have led to the city's average card balance (including home equity lines of credit) of a nation-leading $6,753, which is a drop from $7,114 in 2007. The average card balance for 20 comparable cities is $6,105.

Atlanta's overspending horror stories are wide ranging, with most people too embarrassed or ashamed to publicly identify themselves. There was the local woman who continued to freely use a credit card for clothes, recreation and other necessities, even after her husband was laid off and they faced foreclosure with their house. Another area woman was buried after giving a second card to a business partner, whose spending spree left her with huge bills and damaged credit. Others spoke of maxing out credit cards with medical bills and opening new cards without hesitation.

The housing market collapse and unemployment surge helped elevate Atlanta to its No. 1 ranking in the Experian report, said Mechel Glass, director of education for the nonprofit credit counseling center Credability.

"It’s not in all cases frivolous spending; it's people taking care of necessities," Glass said. "They need gas to get to their job and food on the table, so they’ll use their credit card."

Furthermore, Credability's hardest-hit clients are paying their credit card fees before paying their mortgage. The reasoning is if they stop paying their mortgage, consequences won't hit for several months. Foregoing credit card payments quickly would cut off their ability to pay other bills.

Michael Rethinger, an Atlanta bankruptcy attorney, said most cases he's seen in the past two years involve people considering bankruptcy after divorce, joblessness or mortgage troubles.

"When you talk about credit card debt, people think it affects people who shopped a lot; that's not necessarily the case," Rethinger said. "The credit card debt I'm seeing is mostly people using their cards to survive when they are out of work."

Collette Craig, 47, a barber and Sandy Springs resident, relied on her credit cards to support family members when they arrived in Atlanta after Hurricane Katrina destroyed their home in New Orleans. She also used them to support her shop once business tailed off. At one point, she had nearly a dozen cards, with debt on two business cards totaling $40,000 alone.

Craig has reduced her card usage to eight and balance to $17,000, and is relying on Credability to help her become her debt free. "I'm on an extremely tight budget; I can’t even buy a peppermint," Craig said.

Unemployed for 19 months, Kearney, the former home furnishings store owner, is in negotiations for a sales management job that would help him escape his latest credit card calamity.

"Overall, and as a man, there's a lot of stress," he said. "The biggest stress is the feeling of not being able to provide for my family. ... I hate it. I just hate it."