Credit cards are not evil, but they’re darn close for the simple reason that they’re designed to encourage impulsive financial behavior. For example, I have a Mastercard that I rarely use and never keep a balance on. The starting credit limit was $1000 then it went to $1500 and then to $2000. What the heck? I carry a zero balance. Why would you raise my credit limit? Clearly, I don’t need the additional credit. But, what if I lost my mind one weekend and went out and bought a whole bunch of stuff I didn’t need? Everyone likes to spend money. That’s why raising your credit limit is like giving crack to a crack addict. Okay, if I asked for more credit, that would be a good reason to raise it. I’ve heard from people who said when they started paying down their credit card balance the credit card company raised their credit limit as if challenging them to spend more money they didn’t have. Something needs to change.
Overdue Credit Card Bills Hit Record High:
“Credit card companies are increasingly addicted to their fees,” said Daniel Ray, editor-in-chief at Bankrate.com, an online financial service. “Six years ago, all fees — including late fees — contributed only a minor portion to overall revenue. Today it accounts for more than 30 percent.”
About half of all credit problems stem from poor money management. Credit problems due to the loss of a job, sickness or divorce play less of a role, said personal finance expert Susan Tiffany, director of consumer publishing at the Credit Union National Association.
“That tells us people have some ability to do a better job. They are not completely helpless in the situation, and that’s good,” said Tiffany, whose trade group also is involved in efforts to improve people’s financial literacy.
Related reading: Talk Your Way Out of Credit Card Debt!