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Who's To Blame For America's Consumer Credit Card Debt?

[May 14, 2009.]


Anticipated Credit Card Legislation Addresses Credit Companies
In recent credit card news, the Senate is near an agreement for the highly anticipated "Credit Cardholder's Bill of Rights" legislation. As soon as this legislation passes to law, consumers could expect to see actual changes in the credit card industry early next year. As for the current holdup, there is existing opposition to the proposed interest rate cap of 15 percent on balances. Senator Bernie Sanders of Vermont commented on this opposition with a humorous, yet serious observation, saying that "when banks are charging 30 percent interest rates, they're not making credit available, they're engaged in loan-sharking".

Who's The Real Cause of Credit Card Debt Woes? Is It You?
In a recent Time's article, one columnist brings up a valid observation that the real problem in the credit card industry isn't just with the credit card companies, but with you, the consumer, too. Sure, the confusing fine print, double-cycle billing methods, and unsuspecting rate hikes can be problematic.  But while these issues are currently being addressed by the credit cardholder's bill of rights, consumers need to accept the deeper issue at hand.

As the Time's article points out, credit card holders are often guilty of making bad decisions--even when disclosed all pertinent information fully and fairly. In particular, the report noted problems from the very beginning when many cardholders actually preferred marginally lower teaser rates despite being fixed for half the typical period.  Additionally, many cardholders underestimate their expense budgets, and end up carrying a monthly balance despite their plans to pay off the account on a significantly shorter timeline.  The same theory applies to monthly fees, penalties, and balance interest rates. All this information is readily available, but most of the times it manages to escape the cardholder's line of thought. In the end, consumers really just don't know how much they're actually paying for their credit cards.

And once the actual card arrives in the mail, consumers seem to lose even more financial common sense. In one simple generalization, credit card spending often doesn't feel like spending real money. In one severe case, a MIT experiment showed that consumers were actually willing to pay almost double for basketball tickets when using credit cards compared to actual cash. Unfortunately, these are all decisions which cost cardholders serious money and eventually entrap individuals in a serious financial struggle.

How Can You Get Out of Debt?
While debt solutions do exist, many debt consolidation programs, for example, are simply a tool without any guarantees. As mentioned on this site numerous times, debt consolidations loans and debt settlement program do little to cure bad spending habits. In short, cardholders should not merely use this recent legislation as justification to point the blame on the credit card companies.

Although the industry's been in need of many changes and reform, the majority of the responsibility still lies with consumers themselves. Instead, cardholders should take advantage of these changes, but at the same time rethink they way they've been using these credit cards all along.  Instead of just paying attention to the fine print and contract details, try calculating how much interest you're paying every month. Interest rates and contract details are certainly important, but realizing you paid almost $800 for that $500 television set certainly drives the issue much closer to home.

To speak with a credit card debt specialist and discuss possible debt consolidation loans, be sure to visit our site's resource page to find a lender in your area.

The Real Problem With Credit Card Debt--The Cardholders : [Time]


About Author:

Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.

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