This article from the Associated Press outlines the new credit crisis, this time of credit card debt.
Nevermind the fearmongering from an industry smelling blood in the water after Bush’s bailout of the mortgage lenders, this is one that just perplexes the hell out of me, because there are two immediate solutions.
First, most people “defaulting” on credit cards and such get caught up in the 19.9% (or higher) cards. Rather than having over $900 million in defaults, why not just ratchet the rate down to something more affordable — and cut off the credit lines.
Second, completely recognizing there are irresponsible people out there, why dangle these 0% for a time interest rates that turn into 9.9% rates after one or two years?
When I first went to college, there were specialty cards from MasterCard outlining some minuscule line of credit with a horrendous late fee of 24.9% if you paid late (on a 9.9% interest card). It struck me then as predatory. It strikes me now as predatory.
Of course, let’s keep in mind that the overall problem is not the credit industry per se. Credit has it’s uses, as I used it to fix up the home I’m living in today. And bloggers like Bench Rest Gallery really do try to help people learn more about credit and how to use credit cards sensibly to get the most out of them. But the abuse of credit is something that exists beyond the ability of the credit industry to control. While the temptation of overextending credit exists for some firms, recognizing that it will always be those who either can’t be trusted or overextend themselves that will overtax the system is key…
…when that occurs, blame the lender for jeopardizing the other 90% of borrowers who pay on time, borrow modestly, and stay ahead of the curve.
In days past, government simply annulled what was owed, and did so at a rate of once every seven years — at least during the medieval period. Other civilizations such as the Byzantine Empire managed from 1075 to 1204 to impale themselves on credit, monetary debasement, and vacillating leadership, going from the unrivaled power in the East to the humiliating Sack of Constantinople — from which the Empire never recovered.
Any comparison is hyperbole, of course. But it’s important to recognize that some principles are indeed timeless. Reckless lending and reckless spending translate into reckless results. Personal credit card debts can be crushing for people who don’t know how to get out of it or are confused about which road to take, CreditAssociates can help you with that and show you how to get yourself out of debt with your credit card. Other people are able to get out of credit card debt by using a loan to consolidate it. These types of loans are often secured loans, which are able to help people get enough money to eradicate most if not all of the debt.
Let’s hope the industry is wise enough to fix the problem, without the hand of government.