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A fat wallet makes you spend more

A surprising number of Americans lug around wallets the size of family pets. Here's why they can drag you down -- and what to do about it.

By MSN Money Partner Aug 16, 2011 1:16PM

This post comes from Charles Passy at partner site SmartMoney.


David Lat figured his wallet had reached the saturation point when he recently cataloged its contents and came upon a banking receipt from an ATM in Bogota, a gift card for a clothing store he visits only occasionally and a loyalty club card he's fairly sure will get him a free ticket on select weeknights at his local megaplex.


Oh, and then there were the transit passes from no fewer than four U.S. cities. And the scrap of paper recording the dimensions of a coffee table he wants for his New York City apartment. And the Band-Aids. And the miniature subway map. And the $178 in cash -- just in case he happens to walk into a store that doesn't accept any of the eight credit and debit cards lurking somewhere within his bulging trifold. Explains the 36-year-old attorney-turned-Web entrepreneur, "I live in fear of being without that crucial thing at the crucial time."


For Courtney Zbinden, a similar reckoning came after the New York publishing professional surveyed her wallet and spotted credit and debit cards for accounts she had closed ages ago, not to mention an ID card from her long-since-passed college days. (And yes, one from high school, too.) Her excuse? "Whenever I get a plastic card, I'm trained to think it's a permanent thing that needs to be carried," she says.


But for Rob Holland, it was less a moment of awareness than a physical sensation -- specifically, an ache along his backside. It turns out that when the Boca Raton, Fla., entertainment promoter got into a minor car accident a year ago, he landed hard on his rump -- or more to the point, on that 5-inch-thick collection of plastic, cash and personal ephemera kept in his back pocket. A day or so later, a doctor uncovered the source of his pain: "It was a bruise in the shape of my wallet," Holland says.


Here, on the posterior of many an American professional, lies one of the more unexpected twists in the evolution of personal finance. At a time when people seem increasingly reliant on their smartphones for all manner of interactions with the world, that oldest of handheld devices -- the wallet -- has remained a surprisingly enduring accessory.


Indeed, for some people, the wallet is not only not disappearing, it's getting fatter -- with many Americans now hauling around so much stuff in their pockets that their billfolds have become, in the apt phrasing of one longtime lugger, "roving file cabinets." Even wallet makers, who have been pushing slimmer models for years, seem flummoxed by the trend: That plump bifold behemoth "is still our best seller," says a spokesperson for Wilsons Leather, one of the nation's oldest wallet specialists. Post continues after video.

An average of 3.5 credit cards

It's a tale that can be told in numbers. According to an analysis by Experian, the credit-rating agency, a remarkable 11% of Americans have eight or more credit cards. And even the average credit card holder has 3.5 cards, according to the Federal Reserve Bank of Boston. On top of the more traditional plastic has come an explosion in gift, prepaid, debit and customer loyalty cards from various merchants -- categories that hardly existed a generation ago.


The loyalty segment alone has skyrocketed. Collectively, Americans now hold 2 billion memberships in so-called reward programs for everything from airlines to neighborhood frozen yogurt joints, up from 1.3 billion in 2007 -- and many of those membership cards, in turn, are carried in our pockets and purses. "I call them the mini billboards in your wallet," says Kelly Hlavinka, managing partner of Colloquy, a trade group for the loyalty program industry.


And don't forget, of course, about all the other things that have always been in our wallets and purses and seem destined to remain there: namely, the driver's license, the insurance card, the library card, the office ID, fare cards for subways and buses, even the bail bond card (a "get out of jail free" card, so to speak) that AAA still supplies to millions of its members -- just in case they have a run-in with Johnny Law.


Somehow, that all has to fit in with the saved business cards, fortune cookie fortunes and other keepsakes that work their way into the leather crevices and never seem to come out. The situation has reached such a point of absurdity that even Charles Moran, chair of the Certified Financial Planner Board of Standards (yes, the very folks who advise consumers on how to handle their money, among other things), carries a near-bursting wallet that includes such "necessities" as an out-of-date EKG report: "I could get by with half the stuff I carry in my wallet," he admits.


Can't kick the habit

There are some students of human behavior who say this trend, anachronistic as it may seem, is not so strange after all. The need to carry our prized personal possessions on our backs -- or in our pockets -- may even be hard-wired into human nature, harkening back to nomadic times when "home" was the nearest bit of tree shade or cave. And when times are economically tougher -- as in the recent financial crisis -- the tendency to cram-and-carry becomes all the more pronounced, says Simon Rego, director of psychology training at New York's Montefiore Medical Center.


Others offer a less scientific reason: It's just a habit (like overstuffing ourselves at the buffet table) that's hard to kick. Chris Honeycutt, a computer consultant and pastor in Hartsville, S.C., for one, concedes he just can't bring himself to clean out his billfold, which at present contains more than 20 cards. Among them: an ancient Best Buy gift card he knows he's unlikely to use -- especially since it has a balance of 54 cents. ("Hey," says Honeycutt. "That's 54 cents!")


One might think that in an age when everything from grocery shopping and banking to dating and even global political uprising gets conducted online, we would by now have the ideal wireless, click-and-buy alternative to our cow-tech carry-ons. And to believe the PR from smartphone makers and Internet giants such as Google, the day of the digital wallet is nigh. (Indeed, consumers in Japan already use their phones to pay for items ranging from airline tickets to cans of soda.)


Nonetheless, in this country, wallet-free commerce remains more promise than reality, held back by bickering over everything from technology standards to the matter of how to split up transaction fees. None of the industry players "want to jump in until everybody jumps in," says Kenneth P. Weiss, a pioneer in the field of computer security who closely follows the card industry.


So what should Americans do if they can't exactly go without their billfolds? One straightforward answer, say personal-finance experts, is to cut one's wallet weight in half: Hauling around all that junk not only encourages consumers to spend more (and more thoughtlessly); it also makes it harder to keep track of that spending. (Do you have too much debt? Try MSN Money's calculator.)


"The more cards you have, the more likely it is that you'll forget to pay one of them," says Peter J. D'Arruda, founder of Capital Financial Advisory Group, in Cary, N.C., who teaches clients to streamline their finances.


Greater threat of ID theft

Another concern: the possibility of ID theft. It's a point reinforced by a recent study of claims data by Travelers, the big insurer, which found that 76% of all cases of identity fraud reported in 2009 resulted from the theft of something physical -- say, a wallet or credit card. By contrast, just 9% were due to an "online or data breach."


The best advice, financial experts agree, is to find a free moment one Saturday afternoon, empty the entire contents of your wallet onto the living room rug and do a gentle purge.


Financial pros say the vast majority of consumers can get by with two or three credit cards, chosen in part according to their rewards programs (one card, for instance, that offers better mileage deals for airline tickets; another that pays more generous rebates for, say, gas, groceries or something else you purchase week to week).


As for the loyalty cards, feel free to dump 'em: Most businesses have the ability to identify a customer with other information, such as their name and phone number. And if your car breaks down in the middle of nowhere and you've left your AAA card at home, don't worry: The company will still let you call in and request its roadside service.


What to keep

What not to ditch? Surprisingly enough, that bail-bond card, whether from AAA or another provider. (There's no convenient substitute for that, short of calling up a friend or family member and asking him to head to the county lockup.) Oh, and one more thing: According to a 2009 study by psychologists in Edinburgh, Scotland, a lost wallet is far more likely to be returned if it has a picture or two inside. The return rates were highest (88%) for wallets that included a baby photo. (Just about one in two wallets with a pic of a puppy were returned.)


Those without kids, though, need not worry. Says Richard Wiseman, the author of the Edinburgh study: Get a photo of the "cutest baby you can find" and make sure it's prominently displayed.


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