The Consequences of Addiction to Credit
By Carol Forsloff
“There are some things money can’t buy. For everything else, there’s Master Card.” What’s the message? Money can’t buy most things these days? Paying out of pocket with cash and coins isn’t valued? Indeed the slogan suggests that plastic has more value than money, that credit is more important than assets. But what does that do to the average consumer, especially the disadvantaged, the seniors and ethnic minorities? And what are the consequences for the country if the addiction to credit doesn’t end?
We can get anything we want these days using credit cards. The messages come in the mail, in television advertising, over the Internet and through direct telephone solicitation. We are urged not to leave home without a plastic card. The implication is that an emergency might warrant extra funds, however the rest of the story is given in that “everything else” message by Master Card. That everything else is often not what we intended to buy and not an emergency. It’s a loan on our future, a debt we must repay.
Across the country banks have been closing in minority communities. So where do poor people get money they don’t have and need or want? Credit cards are easy to get, easy to use, with consequences poorly understood by folks teased by 0% interest or low interest rates that are raised by more than four times the average bank rate on savings within months of initial use. Paying them off or paying them down becomes increasingly difficult with unexpected needs that develop and during times of inflation when the prices of meeting those needs increase more rapidly than income. Then there are the rent-to-own facilities, the pawn shops and the check cashing services that have multiplied in poor communities. With high interest rates and a system designed to make money from folks lacking credit experience or financial savvy, these businesses present themselves as the solution but in truth increase the problem that many people currently face. In addition to all this, the FTC reports that seniors, the disadvantaged and minorities are more frequently victims of fraud than other population groups, which increases emotional, financial and social stress that can lead to health problems and cause further difficulties. These difficulties can lead to a cycle of poverty that is repeated across generations.
These days folks don’t think about paying off debt as much as they do consuming, often things that they could do without. So what happens when later comes, especially when young people are taught to get what they can while they can? For parents, it’s living lean because children can’t stop spending. So increasingly seniors will fend for themselves, at a time of crisis in medical care and rising living costs, making independent living more and more difficult. And economists predict that things won’t get much better either. So in the coming decades we’ll likely see more and more seniors continuing to work or dependent upon the social system for support.
Young people also often spend more than they make and rack up debt that takes years to repay. More and more students are financing their education by using credit cards. That’s in addition to school-based financial aid programs. So they start their careers already in debt, then pile on more with the consumerism that comes with those jobs. The ERIC clearinghouse on Urban Education, New York, has found that 25% of low income students help finance their education with credit cards and end up with debt. It gets worse if the creditor is late with a payment on one credit card and ends up paying a higher interest rate on the late card and any others. So the problems multiply for those who find they have problems paying the bills.
What’s the answer when everything from reserving a hotel room to renting a car requires plastic these days. Perhaps consumer education might focus on preventing problems rather than advertising credit availability. Perhaps we can get tighter controls over company solicitations to give credit not previously asked for. Knowing the problem is the first step to solving it, and in difficult economic times it’s something worth the effort.
About the Author:
Professional journalist with small town newspaper with hard copy and online editions and political and social blog. Licensed also as a mental health counselor, certified as a teacher, and experience over 40 years in multiple areas.
Article Source: ArticlesBase.com – Get More Than You Bargained For: the Consequences of Addiction to Credit
