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Professor Finds Wealthiest Americans Also Are Heaviest Borrowers

April 7, 1985

ATLANTA (AP) _ If you’ve got a few bucks, you’re likely to owe more than most people, says a Georgia State University professor who has researched the nation’s borrowing habits.

The average American household pays about $700 per year in interest payments, but people earning $50,000 to $100,000 pay more than $6,000 annually for interest, says marketing professor Thomas J. Stanley.

″People in the million-dollar income (category) spend nearly $200,000 in interest on loans,″ he said in a recent interview. ″They’re also the biggest holders of credit cards and usually of a wide variety of unconventional loans.″

″Much of their money is put away in ways that it is not readily accessible,″ he said. ″So most affluent people have a rather unpredictable cash flow,″ making them heavy users of credit.

Stanley said his research included interviews with thousands of wealthy Americans.

The most credit-prone people tend to be professionals, self-employed business owners and senior executives of large corporations, he said. Other affluent consumers, such as middle-level executives and administrators, are less likely to be heavy borrowers.

Very wealthy people often borrow heavily to finance business expansions and investments, Stanley said.

″The intriguing thing about their behavior is that the biggest borrowers in America are also the biggest investors. Much of the money they do borrow is not only for goods; much of it is related to investing. So they are, to a large extent, the backbone of the economy.″

But their investments often tie up their money so that they become overextended, he said.

″These people really have that once- or twice-a-year windfall (such as a property sale), and much of their big purchasing behavior is based on that windfall ...

″It’s fat city in the house and everybody gets new clothes, or it may be a new boat or new car,″ he said. ″But much of the other time it’s not paying the club dues on time.″

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