In Arianna Huffington’s “The Credit Card Debt Crisis: the Next Economic Domino” she elaborates us on the steady rise of credit card holders and the very apparent rise of credit card debit in the U.S. She also talks about the number of credit card defaults and how they were on a rise in 2009 peeking off at 10% the highest for that year.
Huffington directs most of her attention towards JPMorgan Chase, the nation's top credit card lender who in 2009 began putting a $10 charge on card holders who have a large balance on top of the interest they already pay. Most credit card companies have already raised interest rates on the majority of its card holders by 3 percent even the ones with good Credit standings. Huffington also stated that “For years, credit card companies have been fattening their bottom lines with an ever-widening array of fees, Late fees, cash-advance fees, over-the-limit fees, In 2007, lenders collected over $18 billion in penalties and fees” (7).
She adds that “Discount rates for banks are at an all-time low, yet few have passed these rates on to the consumer” (14) in this blast to the banks she also brings in the mortgage crisis and its parallel similarities to the credit card debt crisis. She accuses the banks of "gouging," saying, "the list of questionable actions credit card companies are engaged in is lengthy and disturbing"(16).
Huffington’s article argues that the credit card companies and banks are legally robbing people of more money then what they borrowed or owed. The irony of the credit card crisis is that the financial industry laid the foundation for much of the trouble we are seeing with its full-throated and deep-pocketed support of the cynically named Bankruptcy Abuse Prevention and Consumer Protection Act of 2005(law enacting several significant changes to the U.S. Bankruptcy Code), a truly loathsome piece of legislation that opened the door to many of the banking abuses we are witnessing.
It made it much tougher for Americans to file for bankruptcy even the millions of hardworking Americans whose bankruptcy is the result of a serious illness. Why does this happen? Aren’t banks supposed to be broke? Didn’t the government put limits on interest rates you can be charged? And if my credit is in good standings then why would I get the rate hike also? It doesn’t matter who you are and how good your credit is with the constant rise of new card holders and more and more defaults every year will continue making rates go higher.
My purpose in this discussion is to review and analyze the issues surrounding the Credit Card Debt crisis. In this assessment I hope to reveal the reason behind high interest rates, why most card companies are converting to banking holding companies, and to dive deeper into the banks and Card Company’s relationship.
In the book Credit Card Nation: The Consequences of America's Addiction to Credit By Robert D. Manning. In his book he points out several problems and...