Are You Irresponsible with Your Credit Card?

Credit card debt is pretty much a black or white situation. There’s nothing gray about it. You either used your credit card responsibly or you used it...well, less responsibly.

$970 billion worth of greed

Chances are, if you find yourself buried under a mound of credit card debt, you have been financially irresponsible. I’m sure you didn’t need me to tell you that. However, I can tell you that you're not alone! In fact, according to the Federal Reserve, the consumer debt in the United States is approaching $3 trillion, and credit card debt accounts for $970 billion of that tab. So how did we get here?

To be honest, the answer is pretty simple. We’re greedy! In a perfect world, everyone would live within their means and be financially responsible. However, we don't live in a perfect world. Instead, we've become addicted to buying now and paying later. So ultimately, credit users did this to themselves. 

Lenders hands are dirty too, though

Before the recession, credit cards could be obtained with relative ease. Basically, if you were at least 18 years of age and able to sign your name, you were rewarded with that infamous little piece of plastic to use any way your heart desired. Lenders put credit into the hands of way too many people who should never have had access to it in the first place.

Now don’t get me wrong: If used correctly, a credit card is the best short-term loan a consumer can find. But too many credit card users don't pay off their balances each month, and the finance charges begin to pile up, forming the foundation of a massive load of credit card debt.

If lenders required consumers to pay off balances each month, the current recession would probably not be so severe. Of course, most lenders would never require their customers to pay off balances in full each month because that would cut off a major source of revenue for them. 

Credit card companies are in the business of making money. Late fees, finance charges, and other gotcha fees are what generate most of their revenue. This relationship between the consumer and the lender is pretty amicable when the economy is not weathering a storm. However, now that the economy has taken a turn for the worse, lenders are showing their true colors. The $970 billion tab left by credit card users is bound to mean more customer defaults. In order to prepare for the inevitable, lenders are creating new ways to make money, so don't make it easy for them.

What debtors can do    

If you can help it, do your best to make your credit card payments. If you are overwhelmed with credit card debt, ask for help before it is too late. In most cases, if you inform your credit card company as soon as possible of a financial hardship they will be more apt to work with you. If you avoid communicating with your creditors, your credit card company might check your credit report for even the slightest change or trouble. If it finds any late payment at all, it can still legally increase your credit card rates or prevent you from using your credit card altogether (until the CARD Act outlaws this practice in 2010, that is).

One thing's for sure though: Not using your credit card will keep you from accumulating more debt. But that is a decision you need to make on your own. (Just don’t allow your creditor to make it for you.)