Negative Effects Of Credit Cards

Peñaloza, L., & Barnhart, M. (2011). Living U.S. capitalism: The normalization of Credit/Debt. Journal of consumer research,38(4), 743-762.

In today’s world most people have a credit card by the time they turn eighteen years old. Nerd Walt, a financial website, stated “Average credit card debt in 2013 reached $15,480 per household in the United States”. (Bower) The average household credit card debt has probably increase since the 2013 study. “Overall U.S. National debt is rapidly approaching $18 trillion” (Bower). “20% of credit card users often pay off monthly balances on two or more credit cards” according to a study (Bower). In today’s society it is normal to swipe a credit card to buy your children Christmas, because credit card companies now offer rewards where an individual receives money back or maybe even a discount flight. People used to not want to buy their children’s Christmas on credit, but rather work a little harder and save up the money to buy it. Children now days see their parents buying them stuff on credit card, so when they become teenagers they expect to receive everything they want even if their parents cannot afford it. When the child becomes a teenager, and they are finally old enough to get a credit card they take advantage of the credit card. Young adults should learn to spend their money wisely and efficiently at that age.

“In a nutshell, the system is geared to keep you in debt” Kevin Trudeau writes in his book “Debt Cures” At the time of publishing his book (2007) The average American consumer had more than $8,000 in credit card debt. Today the average American household owes double the amount at $16,000 in credit card debt. As NerdWallet puts it “Debt is American as apple pie.” Being the 4th highest type of debt in America at $750 billion, just below mortgage, auto debt and student loan debt. Credit card debt is one typical type of debt Americans have to deal with because of the “aggressive practices by the entire lending industry” Trudeau says. Kevin

The main argument throughout this documentary is that credit cards are the main cause of the debt crisis, which occurred in 2006 in America. Credit cards are portrayed throughout this documentary to carry negative consequences, aiding in the corruption of the system, and ultimately creating debt problems that America faces as a nation. The main question we are left with is, can we as a nation live without credit cards?

U.S. consumers remain addicted to credit. Consumer debt continues to rise to record levels and a significant number of households have lost control of their finances. Credit cards can be a useful financial tool when used appropriately. However, research clearly indicates that consumers are not using credit cards wisely and consumers do not understand the terms and conditions of the credit card contract. Adding to this public dilemma, the practices of numerous credit card issuers have been described as predatory. The Credit CARD Accountability Responsibility and Disclosure Act of 2009, also known as the Credit CARD Act of 2009, is the first major reform of the credit card industry since the Truth in Lending Act of 1968. The Credit CARD Act of

Income inequality has been a persistent problem in the United States, practically since its conception. It has been probed, studied and blamed for many of society’s ills. While some would suggest that outside influences, such as pop culture, are the culprit. Others would argue that is actually the policy makers that making it increasingly difficult for the poorest in our society to relieve themselves of the hardship of being financially challenged through what one would call “Modern Day Debtors Prisons” ( Rappleye and Seville pg. 1)

Before the causes and resolutions are discussed, debt must be understood. Terry Herman, a financial advisor for Edward Jones, expresses this definition: “Simply put, debt is a product bought or a service utilized that you still have a financial obligation to” (Herman). To further that definition, debt is the borrowing of money with the entitlement of repayment with interest; this explains the financial obligation Herman expressed. While family members and friends may not enforce interest, interest would not demean the situation. The current consumer-driven culture has significantly increased the amount of personal debt from decades ago. A chart derived from statistics collected by the Federal Reserve and Bureau of Labor Statistics displays the climb of debt from $1,186 per person in 1948 to $10,168 in 2010 (Indiviglio). As shown, the increase over 62 years is approaching a factor by the multiple of nine. Consumers are clearly spending irresponsibly, which Herman manipulated into the “complete difference between an investment and expenditure” (Herman). An investment is something expected to obtain an additional value while an expenditure is unnecessary spending. Thus, consumers must be acquiring expenditures more frequently than investments.

Ten percent of US families are “Unbanked”, of which the underserved community accounts for 4% and, 17% are teen mothers and, 22% are victims of domestic violence. Did you know, male abusers use psychological tactics such as economic abuse (Lecia, 2014) on their victims, which may result in the victim’s inability to maintain gainful employment and financial independence? Studies have shown 52% (Brown & Robinson, 2015) of abuse survivors are unable to return to work, thrusting the survivors into poverty. Financial depression is the silent killer of many dreams and aspirations in underserved communities on a global basis. (The National Strategy for Financial Literacy , 2006). This is primarily due to inadequate financial management skills within these communities, being passed down from generation to generation. Although household net worth as a percent of disposable income has increased over the past decade, poverty in the underserved communities has rapidly increased. And, consumer debt has increased during 1989 to 2017, from 20% to 26% respectively, while debt was 29% higher in the underserved communities. (The National Strategy for Financial Literacy , 2006) Today, financial insecurity continues to threaten communities and economic prosperity, 2 out of 3 households lack sufficient savings for unforeseen circumstances and

In today’s modern world, I can say without hesitation that we live in a disposable society where throwing away items isn’t a tough commitment, rather we spend money aimlessly on extravagant items only to add to our wishlists after the last purchase was made. As individuals use their credit card to make purchases locally and abroad, many appear to overlook the fact that daily periodic interest charges are added to their credit card balances. Consequently, John Verdant brings the subject of purchasing into play as he describes the regular routine of the Able family. According to Verdant’s statement, “When they decide on a purchase, the Ables pay the local merchants in cash unless they choose to a credit card to get a warranty extension or to buy something locally. Paying by cash or check saves the merchant the 1.5% to 4% percentage fee they pay to the credit card company on the purchase plus the per transaction fee they have to pay to the bank.” (Verdant, pg. 153). Although card transactions can be made in the blink of an eye, the biggest disadvantage of this method of payment is the amount of debt held by the

This study examines the "Debt Poor" defined by Pressman and Scott (2009) as individuals and families who have more consumer debts than those categorized as poor, but also do not qualify for government subsidies, such as Medicaid. The scholars argued that interest payments on consumer debt should be subtracted from household income to measure poverty, yet an estimated additional 4 million Americans from 2007, likely middle class once having access to considerable consumer credit following a loss of income put their living standard below the poverty threshold. In contrast, extensive evidence determines that the debt poor are slightly similar to the poor (they are unlikely to own a home or hold private health insurance), somewhat like middle-class

6). Interestingly enough, in a study by Pew Charitable Trusts (2015), 69 percent of Americans, when asked about nonmortgage debt, say although they prefer not to have debt, it is a necessity in their lives. Similarly, 68 percent of Americans said they would not have been able to make purchases or investments with just their income or savings alone yet loans and credit cards allowed them to do this (p. 8). Beyond “rainy day” savings, “…more than half of all American households lack sufficient retirement savings to maintain pre-retirement lifestyles, even if family members continue to work until age 65” ( Wuorio, 2015, para. 3). This paper examines where many American families are financially, why a majority of Americans struggle with saving money, and what changes should take place in order strengthen financial security and develop healthy spending habits.

Many of the Americans in today's world believe that life is not life without debt. In order to buy big ticket items or have vacations requires you to get migraines the next day thinking about the debt you have just created. I am here to tell you that it is simply false way to think of money. I am here to tell you to go out and have fun, go buy a 60 inch flat screen, go to Europe. But I am telling you to do it responsibly and with debt free burden. To live free willed with your money. Do not follow the average American even if they look wealthy. Because the truth is the average American IS broke. Living barely paycheck to paycheck and paying debt off for almost every big ticket item they own. But how are you to live without a credit card?

In the United States today, inequality in wealth is everywhere. Emmanuel Saez and Gabriel Zucman are two economists who have done multiple studies to attempt to measure the amount of inequality in today’s society. What they found is this: “In America, the wealthiest 160,000 families own as much wealth as the poorest 145 million families, and that wealth is about 10 times as unequal as income,” (Matthews). This is a particularly devastating statistic, considering how many families in America are dealing with poverty, and yet those few families in the top one percent nearly control the economy. When so many people are struggling just to get by in today’s economy, it becomes crucial for something to be done. In communities, small actions can be taken to improve the economy locally, and little by little the economy can be rebuilt into something that can help everyone, and exclude no one.

For many consumers in the world today the ability to pay back their unsecured credit is becoming difficult. Credit card debt is the largest unsecured loan that people hold at this time and trying to get these debts paid off is difficult. When interest rates rise on the balances very often the consumer is placed in a position that they can never get out from under the mounting stress of owning bills. It is at this time that many try to weigh their options to find a different way to resolve their revolving credit issues. One of those options is the consolidation loan.

For a market economy to grow, consumers need to increase consumption and have confidence that spending money is in their best interest. In Colin Crouch’s words, consumers need to “be confident enough to consume at levels adequate to enable capitalists themselves to sustain confidence to invest and maintain profit level” (384). However, as government becomes less and less connected to the working class, the largest group of consumers, that confidence has decreased. Instead of consuming a vast number of goods, consumers have begun to feel that they ought to save for the future. This lack of confidence, in turn, significantly contributes to the financial depression and recession. If this trend continues, economic inequality will skyrocket rather than shrink. Indeed, as Thomas Piketty points out, right before major economic depressions of 1929 and 2008, the income inequality in the United States escalated to astronomical numbers. In fact, on both occasions, the top 10% of the population shared around 50% of the national income(Piketty 297). One of the major consequences of such drastic disparity is that lower and middle class don’t have the adequate purchasing power to support the growth of the economy. As a result, they are forced to take on unfavorable loans from the unregulated banking system that is only concerned about making a profit (Picket, 297). Essentially, the members of the working class become gambling chips for privatized corporations looking to maximize their profit. While this leads to a large increase of wealth for the wealthy, it diminishes the income of the lower class citizens and significantly contributes to