Celebrity credit card lessons: The famous who became not so rich
Tori Spelling, Ed McMahon, Kim Kardashian, Courtney Love all faced credit woes
By Beverly Harzog
If fame and fortune were all we needed to be happy and secure, then there wouldn't be so many celebrities fighting off creditors.
us think that if we had the kind of money that celebrities have, we'd do a
better job of managing our credit card debt. But if you have a credit limit of,
say, a million dollars, you might have trouble reining in your spending, too.
a look at how celebrities Tori Spelling, Ed McMahon, Kim Kardashian and Courtney love joined the ranks of those with those who got into credit card debt. And there
are some lessons here, too, for us regular folks.
daughter of late billionaire, Aaron Spelling, and author of "sTori Telling,"
revealed in a "20/20" interview that she had hundreds of thousands of
dollars in credit card debt when her TV show, "Beverly Hills 90210," went off the air. She blamed the debt on her "bad
shopping habits." Spelling says she got used to having a hit TV show and spending
a lot of money. To her credit (no pun intended), she went back to work and got
out of debt on her own.
for the rest of us: When
things are going well, don't rack up debt just because you can. You may have a
high-paying job today, but resist the urge to whip out your card and live the
high life. There's no guarantee that you'll have the same job when the bill
there's a reason why it's easy to get caught up in "bad shopping habits."
Spending money on something you want activates the pleasure center in the
brain," says Dr. David Krueger, author of "The Secret Language of Money."
"Spending creates pleasure, but using a credit card also creates a
separation between the spending part and the payment part," says Krueger.
So it's easy to get into a cycle of spending because you're not thinking about
the other end of the sale -- the part where you get your statement and owe the
the spending cycle, it's important to take responsibility for your debt. Otherwise,
change is difficult. "Spelling was able to get out of debt because she decided
not to be in debt any longer," says Justin Krane, a financial planner
in Los Angeles.
McMahon died in June 2009, he was deeply in debt. He faced foreclosure on his
home -- he was $622,000 in arrears and defaulted on $4.8 million in mortgage loans --
and reports also showed that McMahon and his wife had a huge amount of credit
card debt. (Reports ranged from $180,000 to $750,000.) In an interview with Larry King, McMahon said it happened because he spent more than he made.
for the rest of us:
Most of us would have to do plenty of shopping to rack up that much credit card
debt. But when you have a huge limit and your spouse is also spending, things
can get out of hand in a hurry.
couples approach finances, there's a power aspect involved. "Whether you
make $20,000 or $200,000, decide that each partner gets to be autonomous over a
specific amount, say $20 per week. Then sit down and communicate about where
the family needs to go from a financial standpoint," says financial planner Ken Clark, author of "The Complete Idiot's Guide to
Getting Out of Debt." When you each have a small amount of "mad
money," these talks are easier to swallow. And be sure that you agree on
what card you'll use for these "mad money" purchases.
was hired as a "stylist" for R&B singer Brandy Norwood. Norwood's
mother allegedly gave Kardashian her American Express card and permission to
make one purchase. According to news reports, Kardashian made a purchase, but
then shared the card with her sisters, ringing up more than $120,000 in credit
card debt. Kardashian claims she had permission to use the card for more than
for the rest of us: The
Kardashian and Norwood
case has since been dismissed by the courts, but the basic credit card lessons
of being responsible with plastic -- especially other people's plastic -- is at the heart
of the matter. "This is an example of why it's important to teach your
kids about credit cards and the value of money," says Krane. "Kids
who understand that are better equipped as adults to manage their money
what about handing your card over to someone else? This is never a good idea. And
not just because you can't control their spending. "You shouldn't trust
others with your card. When it comes to identity theft, it's often someone you know,"
Love: American Express was suing Love for failure to pay off
her $350,000 bill on her gold card earlier this year. Love said she wouldn't
pay because the charges were fraudulent. According to her attorney, Love believed
her Social Security number was stolen, and she hired a private investigator to track
down the perpetrators.
for the rest of us:
Love's situation shows how important it is to remember
the basics when it comes to protecting yourself from fraud. It's important to look
at your credit card statements every month and take immediate action if you see
charges for things you didn't purchase.
and their high-powered attorneys need to understand that when it comes to
responsibly using credit, the same rules apply to them as to the rest of
us. They need to promptly open their credit card statements each month and
check to make sure that all the transactions were authorized. If not, they
should immediately report any inaccuracy to the issuer, and if identity theft
is suspected, consider putting a freeze on their credit report. Delaying a
dispute only complicates things, something I'm sure Courtney Love would attest
to," said Gail Cunningham, spokeswoman for the National Foundation for Credit
See related: Wife's credit card spending may have brought down Ed McMahon, When your spouse's debt collection becomes your nightmare, How to cope when spouse's secret debts come to light, How to check for, fix ID theft or fraud, Britney Spears does something modestly -- charge on credit
Published: December 9, 2009