Are the Credit Card Companies Guilty?
by Doug
Willey
The opportunity to overspend has never been greater than it is in the age of credit cards. And overspend we have. Personal bankruptcies have gone from about 200,000 per quarter in 1990 to over 300,000 per quarter in 1999. Debt counseling became a significant growth industry in the 1990s and continues to grow.
Consumer advocates are up in arms over this trend and have identified the credit card companies and their aggressive marketing campaigns as the villains. Their proof is in the solicitations and "pre-approved" credit cards that appear in the mailbox daily. They point out how credit cards marketers are now targeting college students and younger. They believe that too much credit is available for people who cannot handle it and someone (legislators?) must intervene to protect those who are incapable of protecting themselves.
I do not believe the credit card companies are the problem. Credit cards provide a real benefit in terms of service and convenience. The real problem is that a credit card does not come with even the most basic tools for managing it nor even a hint that it needs to be managed. Even a checkbook comes with a register.
The exploding debt is a clear signal that consumers need tools to help them control their credit cards. For many people struggling with their credit cards, the only solution has been to cut them up and to return to an all cash system. While this certainly works, the benefits of a credit card are lost.
The measure of whether a credit card is being used successfully is whether the balance is being paid off each month. The question that most people struggle to answer is: How do I ensure I will be able to pay off the balance each month?
To be able to answer this question, the credit card holder must implement a financial management system that accomplishes two things. (1) It must help a user set spending limits, which usually means a budget; and (2) It must provide a method for recording and tracking expenditures to ensure the spending limits are not exceeded. Clearly, this will require some extra effort but successful credit card usage requires extra effort. Those who quit blaming the credit card companies and instead implement a system to help manage their credit cards will maximize their chances of financial
success.
Learn How TO Do Your Part
<Back To Articles
|
