Among credit cardholders and within the credit card industry, the current buzz is the credit card bill and what it will mean for each and everyone of them.
The credit cardholders are hoping that the legislation in the bill will give them a better arrangement for paying off their debts and keeping their credit. The credit card industry is dreading the cut in profits that the credit card bill will bring.
With the credit card bill in place, predatory practices by credit card companies will certainly be curtailed. The leeway that this will give to customers in paying off their debts will be very much welcome. It will certainly help them survive the economic crisis in a much better financial state. While there is going to be a considerable cut in profitability, credit card companies will certainly not be going bankrupt, their current doom-saying not withstanding.
All this is well and good but, does the credit card bill really go deep down to the root cause of the problem in the first place?
A study recently released shows a very dismal picture. The figures were taken in 2008 and it shows that more than 78% percent of households in the U.S. have at the least, one credit card. That translates to 91 million households. Each household, on the average has 5.4 credit cards. Figures from December 2008 show that the total credit debt is at $937 billion, each U.S. household averaging $8,329 in debt. Coupled with the very low savings rate of the U.S. and the picture gets very dismal indeed.
Consumers now know very well how credit card companies created policies which encouraged more debt among credit cardholders. By giving credit to subprime borrowers, credit card companies cashed in on their inability to pay off their debts by collecting only interest and penalty fees off them. As disgusting as this practice may be to the average credit cardholder, they must also acknowledge that no one really ever “held a gun to their head” to use their credit.
The credit card industry is, indeed guilty of encouraging a lifestyle where relying on credit and being lax on paying it off is the norm. For many years, American consumers have been very quick to use their plastic for purchases, some of which they could have done without. While doing so, they have also been very slow in paying off their monthly debts.
The credit card bill, fortunately helps in these matters. The bill, while discouraging the predatory practices of lenders, also penalizes cardholders who do not keep up with their debt payments. Even better are the amendments in the bill which put limits on who lenders can give credit cards to. With these amendments in place, only people who can actually pay off their credit can carry credit cards.