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Things People Get Wrong About Credit Card Debt

Excellent article in the Washington Post titled “Five myths about America’s credit card debt.” You should read it, click here.

Highlights from the article.

1. Middle-class American families have long depended on bank credit cards to manage their budgets. Not true.

2. More people have credit cards because companies got better at managing risk and began marketing to lower-income customers. Mostly no.

3. Responsible cardholders will have to pay more to make up for the defaults of irresponsible consumers. False.

4. The credit card industry is so competitive that regulation is unnecessary. False.

5. The CARD Act finally protects consumers against the credit card industry’s most abusive practices.

Yes and no. Although touted by the Obama administration as a major consumer achievement, the long-awaited CARD Act, which goes into effect Feb. 22, offers a mix of overdue protections and surprising omissions.

Some of the worst industry practices are prohibited, including billing systems that generate finance charges on paid-off balances, some retroactive interest-rate increases and unrestricted marketing to consumers under the age of 21 who don’t have an independent source of income.

On the negative side, Congress stipulated a nine-month phase-in period for these regulations. For millions of Americans, especially those suffering from employment and income interruptions, this is too late. If you’re in debt today, this bill doesn’t help you. Companies already have jacked up interest rates, sharply reduced lines of credit, increased service fees and diluted the value of loyalty reward programs. These trends have brought consumer credit scores down, triggering higher borrowing costs and greater difficulty finding work.

Things People Get Wrong About Credit Card Debt
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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • Logan Abrams

    I really think the big missing link that is NEVER talked about is the lack of real financial education. The government can try and regulate and “protect” people all day long and it won’t do any good.
    What we really need is mandatory, required classes in high school and college that would give people at least the basics when it comes to personal finance.

    I have a new book out, Debt U- How Higher Education Breeds a Lifestyle of Debt.
    My single biggest solution is better education for everyone. Unfortunately the CARD Act comes up very short in that dept.

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