Jay Seaton is a pioneer of the credit counseling movement. He has been teaching the principles of sound personal finance since 1979, when he became president of Consumer Credit Counseling Service of Northeastern Ohio. He is one of the founders of the America Saves program, a collaboration between the Consumer Federation of America and the Ford Foundation that is used by more than 1,000 nonprofit, government and corporate groups.
Seaton is also known for his “Bring Out the Millionaire in You” workshops. He was the keynote speaker at Consumer Credit Counseling Service of Buffalo’s recent 50th anniversary celebration.
Q: Who taught you to be thrifty?
A: It’s fascinating because as I look back at growing up, my family was thrifty, so I was around conversations about thrift and debt and money, and it’s the way I do things personally in my family and as a career.
Q: How did you see that pay off for them?
A: There was a comfort level and a security. My mom didn’t work outside the home, my father worked for General Motors for many years before he retired. It wasn’t luxurious, it was a middle-class existence, but you never felt a crimp on the money side.
Q: Do you think some lessons are tougher to grasp than others?
A: I think the concept of credit is a difficult one to wrap your arms around in a practical sense as you build your life as a young person. The idea of a plastic card as a substitute for money, that you need to pay it back, that it’s not something you can just use and someone else in the system will take care of it. That’s a concept that needs to constantly be reinforced.
Q: You’ve been at this a long time. How have things changed, particularly since 2008?
A: I remember purchasing my first home in the 1970s, interest rates were over 20 percent. My 15-year mortgage rate was 13.2 percent. I was so excited when I refinanced a few years later to a 9.7 percent interest. That was just fantastic.
Having said that, there’s been a real dramatic shift in terms of people’s behavior, since what I call “the bad times,” the recession or however you want to characterize it. It’s partly the message has gotten through in how you balance the dollars in your life, the use of credit and debt. It’s partly because people were scared stiff by what happened and the result of it. And it’s also a result, I think, of regulatory focus. People aren’t allowed to get into so much debt.
Q: What are the most common mistakes people make?
A: People should get their free credit report at least once a year, and only 35 percent to 40 percent of people ever do that. If I had to suggest something very specific that the reading public should do, that would be it. Some of them do, but too many don’t.
Also, have an emergency fund. Have some ability to handle an emergency. I remember when I was one of the people starting the America Saves program, when we asked people what they wanted, no matter what economic level they were, everybody said they wanted a savings cushion and had a difficult time creating one.
Q: Do you think not having that emergency fund is what leads people to depend on credit?
A: Yes. I’m not anti-credit. I have cards myself and I use them. But I understand how they work. I do everything I can to pay them off every month so I don’t incur interest charges. I think people intuitively know that but they don’t practice the behavior.
I’ll tell you another thing that’s really been helpful – that minimum payment example on credit card statements that resulted from the CARD Act. It shows if you pay the minimum how long it will take to pay it off and what you end up paying in interest. I’ve had people tell me that that made it real for them.
Q: What success stories stick out?
A: People who are most successful with credit counseling after they had a bump in the road or got behind, are the ones who say to themselves, “I made this obligation, I want to pay it off. It’s important to me as a person.” The second aspect is the ability to stick to it, to really have a consistency about the approach after you’ve decided it’s your obligation.
Q: Do you ever wonder if penny pinching can only go so far?
A: It doesn’t work for everybody. But there’s a significant chunk of people who haven’t tried it who could benefit if they did.
Q: How hard is it to get your message across in the age of the Kardashians?
A: I just want to believe that people may like that for entertainment but don’t think “I’ve got my one credit card and if I charge $500, suddenly I can be in their world.” I just want to believe people are savvier than that. I really have seen behavioral change since the almost-Depression times. It’s reflected in the numbers. You can see the delinquencies even on the housing side have diminished greatly. Especially on the credit card side – the charge-offs and delinquencies are the lowest some of these creditors have ever seen.
Q: Do you feel like it’s harder to attain and maintain a middle-class existence today?
A: It’s a question I hoped you wouldn’t ask me. But yes, I think overall it is. I think it’s more difficult but I think it’s still attainable.
Q: Do you think personal finance should be taught in schools?
A: Yes. It’s small steps that fit together and that’s one of them. The CARD Act is another one. The free credit reports. The future is going to be free credit scores. The blossoming of good resources on the Internet. All these things fit together to suggest that it’s easier to be financially literate than it was before. Are some people not taking advantage of that? Sure.
Q: Do you have a favorite cheapskate tip?
A: My tip is a simple one. If you’re using a credit card, even if you want to incur interest, pay more than the minimum. The hurdle for people is they don’t have an extra $100 lying around and they figure, “Well, if I don’t have an extra $100 it’s not going to make difference.” I tell folks, 50 bucks, 20 bucks, 10 bucks, whatever you’ve got, apply it to that card and don’t use the card, you’re going to get out of debt. You don’t have to have $200 under your mattress.