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Let's Break the Chain of Consumer Debt

Charge-card debt and other monthly obligations have turned millions into credit slaves

by James M. Flammang

Updated: June 2020

Even when credit terms are enticing,
why can't we learn to "Just Say No"
to buying more goods on time?

Developed decades ago as a convenience, credit cards have turned into monsters that suck the financial life out of millions of Americans. For every person who pays those monthly bills on time, several others barely come up with the bare minimum, forking over shocking amounts in interest every single month. Whether they realize it or not, they're stuck in a rut of never-ending debt. Paying the minimum makes it certain that you'll never climb out of that credit hole, but will keep sinking further into the mire.

Credit-card issuers know full well how addictive their "products" have become. That's why we've kept receiving so many offers for additional cards in the mail - even during times of less-available credit. They make plenty of money on all those credit accounts, and crave even more.

But they're not the sole culprits in this economic game. No, the blame has to be shared by shoppers who cannot resist making more and more purchases, without even thinking about coming up with the cash to pay for them at some exorbitant interest rate. Another share of blame goes to our school systems, which - with some notable exceptions - have failed miserably at teaching young people how to handle money wisely, and keep debt to a minimum.

As the financial crisis grew in late 2008 and into 2009, triggered in large measure by the subprime mortgages that lured millions into signing up for home loans they couldn't possibly afford, lenders reacted by closing the coffers. Finally, the finance industry realized that pushing what came to be called "toxic" loans was dangerous business. Those who sold such loans typically profited handsomely, but their nefarious deeds threatened the American - if not global - economic system.

Not unlike hard-pressed car owners who gave in to temptation, and then had to endure the attentions of collection agencies and even the "repo man," huge numbers of homeowners in default have faced, or soon will face, foreclosure. In the 21st century, automobiles had been increasingly sold to subprime customers, eager to slip behind the wheel of a vehicle that was, by any reasonable measure, well beyond their means.

While tightening of credit during the 2009 financial crisis had the beneficial effect of preventing borrowers from acquiring impossible-to-repay burdens, its impact upon responsible shoppers took a far different turn. Those who live within their means, and use credit sensibly, may also be shunned in the credit market. Thus, they may be unable - or unwilling - to make purchases that could help stimulate the economy back to life. The "stimulus package" put forth by President Obama, and endorsed by prominent economists, couldn't work unless people began to spend. Yet, at the same time, to avoid intensifying the worrisome financial debacles, they've had to be discouraged from spending with credit that they wouldn't be able to handle when the monthly payments came due.

Stepping into more contemporary times, consumer spending patterns became a major concern in spring 2020. As the magnitude and intensity of the Covid-19 pandemic became evident, the federal government, under Donald Trummp, decided to send a check to every taxpayer in the country, because so many workers had lost their jobs abruptly. As states and cities went into lockdown mode, businesses large and small began to "furlough" or lay off employees, at least for the duration. Individuals received $1,200, and $600 apiece went to their children. Making it possible for recipients to spend more, government officials proclaimed, would ease the "pain" for millions of workers who had lost jobs. Though the assistance was undeniably helpful, many of those checks went to workers who were still employed, minimally affected (at least financially) by the pandemic. At the same time, some families that were hit hard by job loss received nothing, at least initially.

Returning to the question of excess credit use, it may come as a shock to folks who carry a five-figure balance on their credit cards, paying interest rates that have reached 20 percent and upward, but some of us actually pay our bills in full, when due. Many always have. In part, at least, that's because we don't borrow money to purchase things that we don't truly need, and/or cannot afford. Simple, but true.

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