# are credit card companies to blame for consumer debt? **URL:** \ **Category:** Great Debates\ **Created:** [November 30, 2004, 10:04am UTC](https://boards.straightdope.com/t/are-credit-card-companies-to-blame-for-consumer-debt/277305 "2004-11-30T10:04:25Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Cheesesteak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cheesesteak/32/3694_2.png) [@Cheesesteak](https://boards.straightdope.com/u/Cheesesteak)\ **Post date:** [November 30, 2004, 7:24pm UTC](https://boards.straightdope.com/t/are-credit-card-companies-to-blame-for-consumer-debt/277305/21 "2004-11-30T19:24:19Z")
> [@SNenc](#): > > Under that presumption, I should have gone without books and a computer during college simply because I couldn’t afford them, and should never fly home for the holidays. But the fact is I _needed_ those things, and I simply did not have the money for them. > > So, yes, I feel dicked around by the credit card company. They give you a bunch of money to buy things you need and cannot afford, yet you think you’ve been dicked around? Maybe we SHOULD go back to the old days where people who can’t afford things just do without. ---
**Author:** ![Grey](https://avatars.discourse-cdn.com/v4/letter/g/b782af/32.png) [@Grey](https://boards.straightdope.com/u/Grey)\ **Post date:** [November 30, 2004, 7:24pm UTC](https://boards.straightdope.com/t/are-credit-card-companies-to-blame-for-consumer-debt/277305/22 "2004-11-30T19:24:58Z")
> [@Rashak Mani](#): > > Anyone else thought this seems similar to the: “Are women to blame for rapes ?” 🙂 No. :rolleyes: ---
**Author:** ![even\_sven](https://avatars.discourse-cdn.com/v4/letter/e/dfb087/32.png) [@even\_sven](https://boards.straightdope.com/u/even_sven)\ **Post date:** [November 30, 2004, 7:28pm UTC](https://boards.straightdope.com/t/are-credit-card-companies-to-blame-for-consumer-debt/277305/23 "2004-11-30T19:28:34Z")
The practice of heavy recruiting on college campuses is indefensable. They give away tee shirts and frisbees, play music, have contests- and hand out cards like candy. They are counting on these kids racking up the fees and their parents eventually bailing them out. This is predatory and wrong. ---
**Author:** ![SpartanDC](https://avatars.discourse-cdn.com/v4/letter/s/b2d939/32.png) [@SpartanDC](https://boards.straightdope.com/u/SpartanDC)\ **Post date:** [November 30, 2004, 7:32pm UTC](https://boards.straightdope.com/t/are-credit-card-companies-to-blame-for-consumer-debt/277305/24 "2004-11-30T19:32:03Z")
> [@Cheesesteak](#): > > They give you a bunch of money to buy things you need and cannot afford, yet you think you’ve been dicked around? Maybe we SHOULD go back to the old days where people who can’t afford things just do without. Yes, I do, because I’ve been a good customer for years now, not missing a single payment, paying above the minimum, and they jacked up my interest rate by 5 percent. ---
**Author:** ![SpartanDC](https://avatars.discourse-cdn.com/v4/letter/s/b2d939/32.png) [@SpartanDC](https://boards.straightdope.com/u/SpartanDC)\ **Post date:** [November 30, 2004, 7:34pm UTC](https://boards.straightdope.com/t/are-credit-card-companies-to-blame-for-consumer-debt/277305/25 "2004-11-30T19:34:10Z")
> [@even sven](#): > > The practice of heavy recruiting on college campuses is indefensable. They give away tee shirts and frisbees, play music, have contests- and hand out cards like candy. They are counting on these kids racking up the fees and their parents eventually bailing them out. This is predatory and wrong. A friend of mine and I always joke that if we’re ever elected to Congress, the first bill we’ll co-sponsor will be legislation to outlaw exactly those kinds of practices. 🙂 ---
**Author:** ![Maeglin](https://avatars.discourse-cdn.com/v4/letter/m/8baadc/32.png) [@Maeglin](https://boards.straightdope.com/u/Maeglin)\ **Post date:** [November 30, 2004, 7:35pm UTC](https://boards.straightdope.com/t/are-credit-card-companies-to-blame-for-consumer-debt/277305/26 "2004-11-30T19:35:07Z")
> [@SNenc](#): > > Yes, I do, because I’ve been a good customer for years now, not missing a single payment, paying above the minimum, and they jacked up my interest rate by 5 percent. Wouldn’t this be a great time to take advantage of a 0% APR balance transfer to a new, lower-interest card? ---
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [November 30, 2004, 7:38pm UTC](https://boards.straightdope.com/t/are-credit-card-companies-to-blame-for-consumer-debt/277305/27 "2004-11-30T19:38:23Z")
> [@msmith537](#): > > Yeah…God forbid they actually expect their customers to PAY their bills. Cute. But you missed the point of my post. Credit Card Company (CCC) enters into a contract with John Doe while Bankruptcy Law A is in place. Bankruptcy Law A is an implicit part of the contract (and the implicit justification for CCC’s high interest rates). CCC has John Doe on the dotted line. John Doe runs up a debt, planning to repay it, but understanding that Bankruptcy Law A will allow him a new start if he runs into unforseen difficulty. Now CCC, having made large donations to the campaign funds of various Congressmen, calls in its favors and rewrites Bankruptcy Law A as Bankruptcy Law B, which makes it harder for John Doe to escape credit card debt. CCC continues to charge John Doe the high interest rates which were implicitly justified by the existence of Bankruptcy Law A, even though Bankruptcy Law A is no longer in force. Are you saying you see no moral or ethical problems with this scenario, **msmith537**? ---
**Author:** ![SpartanDC](https://avatars.discourse-cdn.com/v4/letter/s/b2d939/32.png) [@SpartanDC](https://boards.straightdope.com/u/SpartanDC)\ **Post date:** [November 30, 2004, 7:45pm UTC](https://boards.straightdope.com/t/are-credit-card-companies-to-blame-for-consumer-debt/277305/28 "2004-11-30T19:45:03Z")
> [@Maeglin](#): > > Wouldn’t this be a great time to take advantage of a 0% APR balance transfer to a new, lower-interest card? You know, I thought about it. In fact, this card I’m on now is actually the result of a balance transfer. Something about hopping from one credit card to another seems unseemly and somehow risky to me, but that might just be all in my head. Does anyone know if balance transfers have a negative effect on your FICO score? ---
**Author:** ![Inigo\_Montoya](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/inigo_montoya/32/124_2.png) [@Inigo\_Montoya](https://boards.straightdope.com/u/Inigo_Montoya)\ **Post date:** [November 30, 2004, 7:46pm UTC](https://boards.straightdope.com/t/are-credit-card-companies-to-blame-for-consumer-debt/277305/29 "2004-11-30T19:46:59Z")
WARNING: Some or all of the following may contain ignorance. Let’s say **VLCA MaxiCard** owns credit card loans in the amount of $1 billion and collects an average of $120 million annually in interest and an additional $5 million in fees against that debt. Last year, customers bankrupted (Chapter 13 just to keep it simple) $75 million. Is that $75 million considered a loss against gross income for tax purposes? meaning, VLCA MaxiCard could absorb up to $125 million in BK and show a net income of $0 for tax reporting. So they’re not completely out in the cold. And as the CEO of Very Large Corporation of America, I enter each fiscal year with some idea as to what my potential “losses” are to bankruptcies and allocate funds to “nonprofit” organizations who represent themselves as “credit counsellors” and, as the champion of the consumer, smite me until I agree to forgive some or most of the late fees and some interest in exchange for getting my capital back. Growing up we called that “getting beaten nearly to death.” You were dealt all the whuppin you could stand without actualy killin you–because that doesn’t help anyone. VLCA knows full well that a certain %age of customers will get into credit crisis. Another of my duties as CEO is to make sure that I minimize my losses to chapter 13. So I get my actuaries to work in the alchemy lab to come up with an interest rate which will cover the rest of the bad debt. Having found my zero-loss balance, I then proceed to market the hell out of my credit cards (I have to target the non Dopers, of course, because they invariably see right through the American Image I and the merchants create for them on TV, magazines & billboards). I make a vague pretense at underwriting the credit lines, but what matters most is that I get the credit limits up there so the consumers can aspire for the dream I have told them they deserve (_Styx: Grand Illusion_, anyone?). Many will overlook the trap that is revolving credit, others have faith that I would not have extended the credit if I didn’t think they could pay it back. The reality is, I don’t care if they do or not–the numbers say I can’t lose. Last year saw the most bankruptcies ever in the US. Surely, someone of you can tell me the name of one or two banks that were destroyed as a result? ---
**Author:** ![Maeglin](https://avatars.discourse-cdn.com/v4/letter/m/8baadc/32.png) [@Maeglin](https://boards.straightdope.com/u/Maeglin)\ **Post date:** [November 30, 2004, 7:58pm UTC](https://boards.straightdope.com/t/are-credit-card-companies-to-blame-for-consumer-debt/277305/30 "2004-11-30T19:58:41Z")
> [@SNenc](#): > > You know, I thought about it. In fact, this card I’m on now is actually the result of a balance transfer. Something about hopping from one credit card to another seems unseemly and somehow risky to me, but that might just be all in my head. > > Does anyone know if balance transfers have a negative effect on your FICO score? It all depends on other credit factors. You will probably find [this](http://www.myfico.com/myfico/CreditCentral/ScoreConsiders.asp) useful. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [November 30, 2004, 7:59pm UTC](https://boards.straightdope.com/t/are-credit-card-companies-to-blame-for-consumer-debt/277305/31 "2004-11-30T19:59:54Z")
> [@even sven](#): > > The practice of heavy recruiting on college campuses is indefensable. They give away tee shirts and frisbees, play music, have contests- and hand out cards like candy. They are counting on these kids racking up the fees and their parents eventually bailing them out. This is predatory and wrong. Sounds like a great opportunity to score a free T-shirt and a free frisbee-- all you hace to do is NOT take the credit card. Why is that so hard? What I see wrong in your scenario is the kids running up charges they can’t pay, and then expecting their parents bail them out. If their parents co-sign for the card. then I guess the parents have no one else to blame but themselves. If the parents don’t co-sign, the credit card companies have no legal recourse to demand payments from the folks. ---
**Author:** ![scotandrsn](https://avatars.discourse-cdn.com/v4/letter/s/a4c791/32.png) [@scotandrsn](https://boards.straightdope.com/u/scotandrsn)\ **Post date:** [November 30, 2004, 8:02pm UTC](https://boards.straightdope.com/t/are-credit-card-companies-to-blame-for-consumer-debt/277305/32 "2004-11-30T20:02:15Z")
At issue isn’t whether it’s unscrupulous to deliberately take advantage of a consumer’s ignorance or unrealistic expectations of life. Certainly it is. But who is ultimately to blame as the source of that ignorance and unrealistic outlook? ---
**Author:** ![Inigo\_Montoya](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/inigo_montoya/32/124_2.png) [@Inigo\_Montoya](https://boards.straightdope.com/u/Inigo_Montoya)\ **Post date:** [November 30, 2004, 8:44pm UTC](https://boards.straightdope.com/t/are-credit-card-companies-to-blame-for-consumer-debt/277305/33 "2004-11-30T20:44:03Z")
If I truly believed that banks carefully underwrite credt cards and judiciously dispense credit according to one’s ability to pay, and if I thought they were genuinely surprised at the amount of grief people cause themselves by misusing their products, then I would say, “Shame on the consumer.” If I suspected for one second that banks instead make calculations based on anticipated “acceptable losses” and employ a degree of psychology to create demand and distribute their products regardless of the personal consequences to the individual customer, then I would say, “Shame on the bank.” The reality is that merchants and banks have an interest in maintaining a high consumption society, and they have made it their business to make credit all but mandatory for successful participation in everyday life–so much so that your credit score can have an effect on your insurance premium! yeah, credit is being interpreted as so much more than a simple ability to pay. They KNOW the payers have a certain psych profile that manifests itself in other seemingly unrelated characteristics. I don’t really have a problem with changing BK laws, but o do so without making corresponding changes in the way credit is marketed and distributed is predatory. ---
**Author:** ![Hampshire](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hampshire/32/4887_2.png) [@Hampshire](https://boards.straightdope.com/u/Hampshire)\ **Post date:** [November 30, 2004, 9:23pm UTC](https://boards.straightdope.com/t/are-credit-card-companies-to-blame-for-consumer-debt/277305/34 "2004-11-30T21:23:01Z")
Here’s my 2 cents on one of the many sneaky practices of credit card companies: I get one of those cards that offers the 0% interest on balance transfers for 18 months. Read the fine print. You miss or pay any payment late and “zip” the interest rate jumps to 15%. Okay, I can handle that, fair enough. So, I transfer $2000 to this new card. Get the first bill. It asks for $60 minimum payment. I send $200 on time. I then use the new card to make a $300 purchase. New purchases are subject to the cards 13% rate. Okay, no problem. Next bill shows $1800 at 0%. $300 at 13%. Minimum payment due, $63. So, I send in a check for $250. Next bill shows $1800 at **15%.** $50 at 13%. THEY JUMPED UP MY RATE! I call them immediately and ask how this happened. Their answer is that the payment is applied first to the purchased amount of $300 and in effect I made no payment to the $1800. “Well, how does one get the money applied so it covers at least ‘both’ minimum payments due.” “Well sir, you need to send a seperate check each month to P.O. Box 666, attention payments receivable, with a letter designating how you want the payment applied.” Mmmmm, no. I’ll just be transferring it all to one of the other 0% offers I get in the mail tommorow. ---
**Author:** ![dorfl](https://avatars.discourse-cdn.com/v4/letter/d/59ef9b/32.png) [@dorfl](https://boards.straightdope.com/u/dorfl)\ **Post date:** [November 30, 2004, 9:44pm UTC](https://boards.straightdope.com/t/are-credit-card-companies-to-blame-for-consumer-debt/277305/35 "2004-11-30T21:44:39Z")
> [@Hampshire](#): > > I get one of those cards that offers the 0% interest on balance transfers for 18 months. Read the fine print. You miss or pay any payment late and “zip” the interest rate jumps to 15%. Okay, I can handle that, fair enough. > > […and the rest of the scenario] > “Well sir, you need to send a seperate check each month to P.O. Box 666, attention payments receivable, with a letter designating how you want the payment applied.” OK, I admit I have never heard of that one. Although some mortages have similar issues: If you overpay, you have to mention that is is for principal repayment, not prepayment of interest. This practice is indeed sneaky, and completely outrageous. I bet, though, that you find it in the fine print, and hence, what can I say - should have read it. ---
**Author:** ![dorfl](https://avatars.discourse-cdn.com/v4/letter/d/59ef9b/32.png) [@dorfl](https://boards.straightdope.com/u/dorfl)\ **Post date:** [November 30, 2004, 9:52pm UTC](https://boards.straightdope.com/t/are-credit-card-companies-to-blame-for-consumer-debt/277305/36 "2004-11-30T21:52:16Z")
> [@even sven](#): > > The practice of heavy recruiting on college campuses is indefensable. They give away tee shirts and frisbees, play music, have contests- and hand out cards like candy. They are counting on these kids racking up the fees and their parents eventually bailing them out. This is predatory and wrong. The practice of colleges to admit students who are not grown up enough to understand the difference between marketing and a legally signed contract is indefensable. They are counting on the tution from kids who fail math and need their parents to pay the tutor, bailing them out. This is predatory and wrong {/Dorfl ducks/} Get real. Predatory is if somebody forces you to sign something. See how many hats you can pick up and use them as dart targets. ---
**Author:** ![zamboniracer](https://avatars.discourse-cdn.com/v4/letter/z/e9a140/32.png) [@zamboniracer](https://boards.straightdope.com/u/zamboniracer)\ **Post date:** [November 30, 2004, 10:00pm UTC](https://boards.straightdope.com/t/are-credit-card-companies-to-blame-for-consumer-debt/277305/37 "2004-11-30T22:00:16Z")
Credit card companies are in business to make money and there’s nothing inherently evil about that. What’s evil is usurious rates of interest they charge. ---
**Author:** ![gazpacho](https://avatars.discourse-cdn.com/v4/letter/g/6f9a4e/32.png) [@gazpacho](https://boards.straightdope.com/u/gazpacho)\ **Post date:** [November 30, 2004, 10:05pm UTC](https://boards.straightdope.com/t/are-credit-card-companies-to-blame-for-consumer-debt/277305/38 "2004-11-30T22:05:43Z")
When do interest rates become usurious? ---
**Author:** ![dorfl](https://avatars.discourse-cdn.com/v4/letter/d/59ef9b/32.png) [@dorfl](https://boards.straightdope.com/u/dorfl)\ **Post date:** [November 30, 2004, 10:12pm UTC](https://boards.straightdope.com/t/are-credit-card-companies-to-blame-for-consumer-debt/277305/39 "2004-11-30T22:12:17Z")
> [@gazpacho](#): > > When do interest rates become usurious? in the 1960’s. For 20 minutes. ---
**Author:** ![Wesley\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/wesley_clark/32/20581_2.png) [@Wesley\_Clark](https://boards.straightdope.com/u/Wesley_Clark)\ **Post date:** [November 30, 2004, 11:16pm UTC](https://boards.straightdope.com/t/are-credit-card-companies-to-blame-for-consumer-debt/277305/40 "2004-11-30T23:16:20Z")
> [@SNenc](#): > > I’d say about 70 percent of the blame should go to the consumer, but the credit card companies don’t get off scott free. Last week, _Frontline_ on PBS aired a great report the modern credit card industry, and it focused on a few things the credit card companies do that I find pretty indefensible: > [list] > [li]The contracts are written in the most obtuse fashion possible. Even a contract law professor interviewed on the show had a hard time deciphering the terms of the contract.[/li][li]Credit card companies often set the minimum payment so low that paying it faithfully and on time for years will only make a small dent in your overall debt. Such a tactic encourages people to keep their debt around longer.[/li] I saw that episode too it was pretty good. What bothered me were the 2 things listed here, the contracts were vague and unreadable for laypeople and the credit card lobbying groups prevented disclosure of credit card debt on your bill. I have looked at a couple of credit card debt calculators. Assuming 22% interest and you paying the 2% minimum it will take 50 years and about $7 in interest for every $1 spent on goods. If people knew that then they might not charge as much and the CC companies were opposed to it. That is wrong and an attempt to keep people clueless so they won’t understand the consequences of their actions. [Previous page](https://boards.straightdope.com/t/are-credit-card-companies-to-blame-for-consumer-debt/277305.md?page=1) [Next page](https://boards.straightdope.com/t/are-credit-card-companies-to-blame-for-consumer-debt/277305.md?page=3)