How credit card debt has gotten out of control

Long before the introduction of the credit card, consumers paid for each and every purchase with cash. When they ran out of cash, they stopped shopping. If their car was low on fuel, they might have settled for a couple of gallons to get by until payday. Before cash, we bartered for goods: two chickens for one pig, a basket of apples for a sack of corn. There was no such thing as credit or a credit card; you paid or traded for your goods at the time of purchase. When credit cards were first introduced, they seemed like a great idea if for no other reason than that they were convenient. They soon became very popular; no longer did we need to carry large amounts of cash and worry about our safety. No need to add up the individual cost of each item in our shopping cart simply to confirm we could cover the tally.
So how did credit card debt in America become so far out of control? With credit card in hand, consumers couldn't resist the urge to purchase a big screen TV, one for every room in the house. We purchased the latest video games and the fastest computer available in the current year. Our frivolous spending habits included dining out three times per week and vacations we couldn't afford. We did these things and much more. We spent money which we didn't have at the time. It was very easy to run up our total debt to a level far exceeding our means.
While the onus of the credit liability belongs to the individuals who generated the debt, a substantial portion of the responsibility must be placed on the credit card companies. The credit card industry as a whole used predator-like marketing techniques such as low initial interest rates. They even offered no interest for several months if you transferred an existing balance from one card to another. They extended credit to applicants who should not have received credit in the first place.
To compound the problem, the credit card companies offered low monthly payments. This instilled yet another level of comfort with the consumer who could charge $1,000 to his or her card in one month, and the following month they would only be required to pay the minimum payment of $10. This created a snowball effect. The consumer could spend an additional $1000 the following month. The whole time they are not conscience of their growing predicament.
The most disturbing phenomenon occurred when the financial institutions began to raise interest rates. This created a detrimental effect of compounding interest. The consumer's debt continued to grow even as they began to reduce their spending. The greed of the credit card companies placed undue financial burden on the consumer. In many cases, the unwarranted increase in rates led to consumer delinquency and even bankruptcy.
Where do we go from here? I predict we will regress to the days of cash or cash equivalents. A common alternative to a credit card has already surfaced in the form of the debit card. As a consumer, you will have all the convenience of the credit card with none of the associated risk.
To use the old cliché "what goes around comes around," look for the common credit card to disappear in the next century. The greed of the financial institutions and credit card companies will lead to their ultimate demise.
For the consumer, we will begin to purchase using only cash. We will buy only what we need and when we need it. With any luck, we will tell this story in our history books to educate our children and avoid the same mistakes of our era.


Greg Pesetsky has worked in Debt Settlement for 8 years and is considered an expert in the industry by his peers. Greg is IAPDA Certified and has a good standing in the industry. He owns and manages Practical Debt Relief. www.practicaldebtrelief.com