Credit cards are one of mankind’s most convenient and useful tools in today’s society. In an electronic world, credit cards help people keep up financially in a practical fashion. On paper, credit cards should be building responsibility, keeping our economy flowing, and making people’s lives much easier in terms of their finances. Despite this golden ideal, according to the words of Golden Financial Services: “In the United States there is $15+ billion in delinquent credit card debt (people who are more than 90-days behind on credit card payments).” Surely a certain amount of this debt is due to actual delinquents, people who are unfortunately untrustworthy, but not 15 billion dollars-worth! There must be something that we can do differently. Simply putting more limitations on people is not known to be a practical technique, so restriction on the act of lending is agreeably not a viable solution. To imagine an applicable solution, we must identify certain possible faults in the system and in people’s habits of maintaining credit cards. Once we truly understand the issues, we can compose a reasonable response.
We must face a fact at this moment that we tend to have trouble accepting: people are not perfect. Even when we wish to do right and make no mistake, circumstances arise that hinder our potential righteousness. Let us ponder some faults in character or responsibility that could cause a person to be disloyal to their planned credit payments. Consider this dirty habit: gambling. Gambling is an exciting game, but sometimes a little too exciting. This dangerous type of spending to win is addictive, and I will give you a little tip about casinos – they are not built to lose money. Getting into the habit of gambling leaves no room for financial planning, for there is no way to plan in gambling.
Along the same lines of gambling, since gambling is a very specific fault, is what some describe as ‘banking on a windfall.’ I categorize the two together because ‘banking on a windfall’ is going out on a whim and hoping for something indefinite. A bonus on a check or winning the lottery can be a great fortune, but these are not events that we can plan for, and thus they are inadequate for credit card users.
Credit cards rely entirely on trust and loyalty, so planning ahead is a must. Planning ahead could be the main problem, sometimes, and not just a branch off of the bad-habit tree. Besides these two ugly habits that involve a surplus amount of money, we must consider the plain, old, poor money management skills. Some people tend to just disregard saving ahead and they end up trying to pay large payments all of a sudden, out of thin air. Even people with shared finances, which you would think could be a benefit to paying off debt, end up deeply pitted in debt due to a simple lack of communication. Procrastination and poor preparation can be found at every checkpoint in the butterfly effect leading to inadequate credit payments in these cases.
I am going to give these hypothetical people a break now, because we must admit the fact that this massive, nationwide credit card debt is not solely the fault of the people in debt. The faults of the people are clearly shown, but how about the circumstances that come about that are out of their own control? I will share this upcoming case first due to the fact that it is a fault that must be addressed by both the person who makes unsatisfactory payments and the credit system itself. Income and or hour cuts occur often in our economic state as a country, and unfortunately it can tear the rug out from some people financially. People tend to hit a bump in the road at this point because they do not always subsequently adjust their living expenses to fit their new income. There will obviously come a time (often too late) when the living expenses will out-do the new income, and before they know it they are submerged in debt. Speaking of a “new income,” let us address the worst type of “new income”: no income! Unexpected unemployment happens all too often in an economy that lives like a roller coaster with ups and downs. Unemployment is devastating for everyone involved; the unemployed suffers and the government suffers as it tries to help support these unemployed citizens. Credit card debt follows them, even though it is probably not the primary concern of that person (i.e. providing food or shelter for their families or themselves).
Aside from income complications, people have expenses that must be met unexpectedly from time to time. Medical bills are an exemplary example of this unfortunate circumstance. Our lives matter much more than our money, so emergency medical attention is usually met whether or not a person is prepared for the expenses. There is no way to plan for medical complications, of course, so the person is thrown into the water without a life vest so to speak. Along with unplanned medical issues, an obvious stress-inducer is becoming more and more common in our society: divorce. Despite it being an already awful life experience, it becomes even more terrible once the expenses push the couple-no- more into a pit of debt.
Finally, I cannot exclude a terribly common, rather broad, and easily fixable factor leading to credit card debt: financial illiteracy. It is all too sad that adults are thrown into this complicated world of financing without having the proper knowledge to be successful with their hard-earned money. I can personally vouch for this one, as I cannot recall any time that I was educated sufficiently on the many dynamics of finance. Now, I imagine the following argument arising: do not sign yourself up for a credit card if you are not knowledgeable of what it entails. To rebut, I want to bring to attention the fact that people may truly believe that they are fully informed and ready to go when they really are not. The result is a deer in headlights; the person is left in shock and in debt.
Now that I have the picture painted for the colorful road down which credit card debt inflates, we can open up to the most important part: how can this be fixed? I must say that I am very pleased that this solution will be far from the erroneous conception that increased restriction on lending does credit card debt justice (increased restriction on anything is typically bound to go wrong). With that said, I have basically three solutions to go hand-in-hand with one another, as well as allowing card- holder and card companies/businesses to to go hand-in hand with one another by helping to develop a practical bridge between the card-holder and the card company or business.
First of all, we need more financial education. It needs to be instilled in school curriculum and it needs to be prioritized (how to responsibly handle a credit card first, how to read Shakespeare second).
I understand that this will not reach those whom which have already graduated from a school or those who will not complete school. The next step in financial education is up to the credit card company or business itself. These companies cannot be built on foundations to make people fail, it should be an absolute priority that they ensure their customers are beginning the use of their credit card on the stable ground of full-knowledge. The potential card-holder needs to be aware of every possibility, every option, every consequence, all the pros and cons, and then that person can adequately decide to not use a credit card or to use it confidently and faithfully.
Next on the list of solutions I bring up is a more unique payment plan per person in times of need (in times of debt). Credit-debt relief programs are off to the right start. Everyone is different of course, our lives are ever-changing, never black and white. It is difficult to have only a certain set of standards for paying off debt when people do not live their lives by the same certain set of standards. As said before, these companies cannot be built on foundations to make people fail. If so many people are failing (like, say, 15 billion dollars-worth!), then it is up to the company itself to step in and fix the system. Payment plans should be made more accessible and more specific to the needs of the person in debt. A deeper connection between the company and the customer will do some good on both sides!
Speaking of forming a deeper connection between the company and the customer, what better connection than a friendly and rewarding relationship in credit card business. Rewards always bring people to their feet and at attention. Where these days do we not see rewards being given in thanks to a person’s business? Annual rewards for a solid and responsible person is motivating, for sure. If people have the ability to handle their payments conveniently through credit AND get rewarded for loyal payments and business, it can be as simple as dog-training (anyone want a treat?).
As you can see, the only part of the credit card situation in the United States that is black and white is the fact that it is a mess. We pride ourselves in the fact that credit is an excellent idea, so ridding of it is most definitely not the solution. Putting limitations on people (especially in a democratic republic) hardly gives good results, either. To help the dig our nation out of this $15 billion deep hole of debt, we must first understand the situations of the people and the companies. Then, we need to reevaluate, educate, and renovate. Compromises and new ideas are what is going to fix our debt situation and ultimately rejuvenate our nationwide credit card establishment.