Reining in the purveyors of plastic
Many credit card holders have experienced an embarrassing moment or two at checkout counters. Even presidents.
During a spring holiday break in Utah in 1999, then-President Bill Clinton stopped by a bookstore. After selecting some reading material, he went to the counter and took out his credit card to pay, but the shopkeeper awkwardly declined his card, saying it had expired. Clinton had forgotten to bring his newly-issued card and the poor shopkeeper tried in vain to call the credit card company to get approval. Short of cash, President Clinton finally borrowed money from his secretary and sheepishly left the shop. Even the leader of a country as mighty as America can get tied down with credit card trouble.
Americans have been the longest and most loyal fans of paying on credit. As of 2000, credit cards issued topped 1.5 billion, meaning credit card holders in the country own an average of 10 cards.
Most users pay the minimum due on their credit card balance. As result, outstanding debt piled up to $8,400 on average per household.
Benjamin Franklin would have lamented if he knew all his efforts to build the virtues of frugality and industry in America have fallen on deaf ears in the 21st century.
Robert Manning, author of “Credit Card Nation: The Consequences of America’s Dangerous Addiction to Credit” believes income growth in American families after the Second World War sowed Americans’ love of spending.
Retailers raced to lure customers with card rewards, giving birth to Diners Card in 1949. Big lender Bank of America joined the credit frenzy in 1958, introducing the first card that allowed late payments.
From the very beginning, the credit card industry fattened themselves by nickel and diming consumers.
The Bank of America sent out credit cards to 100 million customers without their prior consent. Others followed suit until the government stipulated a law to prevent reckless and abusive card issuance.
During the 1980s, lenders intentionally ignored the requirement for parental approval and swamped university campuses with credit cards.
The modern way of living on the credit chain - paying off your MasterCard debt with your Visa card - has finally backfired, choking American households already mired in mortgage and employment crises. Many of them, out of jobs, are struggling with mounting outstanding debt and interest rates.
The Obama administration and the U.S. Congress have at last turned to aid consumers by tightening restrictions on credit card issuers.
The measures may bring relief to many debt-stricken families and hopefully restore smart economic sense in American consumers.
The writer is an editorial writer of the JoongAng Ilbo.
By Shin Ye-ri [shiny@joongang.co.kr]
with the Korea JoongAng Daily
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