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Credit card debt survival
Today it is difficult to get by without a credit card. You cannot rent a car without one. There are more than 640 million credit cards in circulation in the U.S. and the average American household has seven credit cards and owes more than $9,000 in credit card debt. Today credit card debt plays a major role in bankruptcies.
Why are credit cards so hazardous for consumers?
There are several reasons
- Credit cards invite impulse buying
- Credit cards encourage consumers to borrow money to make purchases
- Credit cards promote purchases consumers cannot afford
- Consumers who carry credit card balances incur significant fees in terms of interest payments, penalties and late fees
- Consumers may not appreciate how expensive it is to carry significant balances while making only making minimum monthly payments
Consumers today are subjected to a constant barrage of commercial messages encouraging them to buy goods and services. In an unguarded moment even the most disciplined person might make a credit card purchase for something that they do not require, do not really desire, or cannot afford. In addition, an increasing number of Americans are using credit cards to buy basic necessities.
predatory and abusive lending practices
In the U.S. there are 6,000 companies issuing credit cards. It is estimated that in 2006 credit card companies mailed out about six billion credit card offers to Americans. In the past two decades credit card issuers have made a concerted effort to offer credit cards to tens of millions of low income Americans including aggressive marketing campaigns on college campuses.
In June of 2007 the House Financial Services subcommittee held hearings into unfair and abusive practices by credit card companies. These practices included unilaterally changing the terms of the cardholder agreement without notice and assessing higher penalties for missed or late payments. In the past few years penalties for missed or late payments have risen dramatically. Some lawmakers want to ban a practice known as universal default in which a credit card issuer raises interest rates for a customer when the cardholder is late on a payment to some other creditor.
The average U.S. household pays $800 a year in interest and late fees. Americans pay $800 billion each year in interest payments and late fees on credit card balances. Since half of cardholders pay their balance each month and pay no interest and late fees only half of U.S. cardholders pay interest and late fees. The largest six credit card issuers in the country receive 80% of their revenues from cardholders, 70% in interest charges and an additional ten percent in penalty fees. Today credit card issuers are making huge profits taking advantage of low income Americans.
taking advantage of cardholders carrying balances
Credit card issuers receive a small percentage of their revenues from merchants. They obtain virtually no revenues from cardholders who do not carry a balance. In order to maximize profits credit card companies concentrate on obtaining revenues from cardholders who do not pay off their cards at the end of each month. This revenue comes from interest on outstanding balances and various penalties for missed or late payments and exceeding card limits.
Today credit card issuers may increase a cardholder’s credit limit without a cardholder’s request for an increase. A cardholder carrying monthly balances with a low credit card limit benefits from the modest limit. However, the potential threat to the cardholder’s financial situation grows with each increase in the cardholder’s credit limit. Few consumers refuse a credit card limit increase. For those 50% of American cardholders who carry a balance each month an increase in their card limit is in invitation for personal financial disaster.
The U.S. credit card industry is a very lucrative multibillion dollar industry. Credit card companies are only too happy to mail you credit card offers, increase your credit limit unilaterally, and encourage you to make minimum monthly payments to maximize the interest you pay. However, if you cannot make your credit card payments the credit card companies, who did all kinds of things to promote your credit card usage, won’t hesitate to place your account with a collection agency.
Mark Silverthorn may be able to help you with your credit card debt
Your goal may be to avoid paying the debt the collection agency claims you owe to a credit card company. On the other hand, you may want to settle an outstanding credit card debt on terms favorable to you--credit card debt settlement. Given his knowledge of the collection industry Mark Silverthorn may be able to help you with your credit card debt.