Credit Card Debt And Predatory Lending.
Updated: Apr 22
The Psychology Of Marketing And Debt
Credit card debt has become essential in experiencing the "American Dream". After all, how can we possibly survive without a little of what credit card issuers constantly bombard us with on T.V. and Social Media? The idea that happiness in our culture is directly tied to how much we own in material possessions. Credit Card companies purposely enable this behavior. Your credit report, credit score and eventually high credit card balances are part of this corporate strategy.
This is where we are as a society, caught in a cycle of high-interest rates and minimum monthly payments. We all must strive for good credit, a high credit limit and pay off credit card debt as soon as possible. However, when this doesn't happen we are shunned and expected to be ashamed of having high balances and bad credit. This again goes into the false notion that self-worth is linked to our credit score.
The reality is that much of this is simply marketing propaganda. A psychological tool that ensures banks have the lowest possible default rates as they charge the highest interest rate and fees. According to U.S. News, the average APR for all cards in the U.S. News database is 16.99%-23.91%. The average credit card debt according to valuepenguin for households carrying a balance forward was $9,333.00 dollars. So making minimum payments towards your auto loans, student loans or simply to pay off your credit card is nearly impossible.
However, whether you are caught up in the consumerism of our current culture or just going through a difficult time, most of us just have too much credit card debt. This is where we get in trouble. By assuming we will be able to pay off the debt and become debt-free any time soon.
Human beings are naturally optimistic, its how we survived and persevered through the challenging times of the past. It's also the definition of a "delusion' in thinking you will be able to pay off these debts in the short term. After all, they are structured to compound and grow, this is how the banks make their money.
If your a movie buff or old enough to remember the 1958 Classic B-movie "The Blob", that's your debt!! Started off as a cute little ball of slime from outer space and (spoiler alert) ends up devouring the entire town. Second were creatures of habit, so we continue to pay, although many times only the minimum which gets us nowhere.
Reality is we add more debt over time and if "life happens", i.e. job loss, medical issues, kids college, or just continued bad spending habits, default and bankruptcy will soon follow. Although we hope for help with our credit card debt, some type of credit card debt forgiveness or debt repayment plan, these are usually not available options. Debt expert Dave Ramsey teaches the "snowball method" but not everyone has that much discipline.
Too Much Debt
There are various programs in the debt relief industry that are sold as cheap and quick fix answers to high-interest rates and overwhelming debt. Debt consolidation, debt management, debt settlement, credit card consolidation and various forms of credit card counseling are touted as the "Medicine" that will make your debt ailment go away. The reality is most Americans are simply burdened with too much-unsecured debt and lack a proper financial education.
Many of the so-called debt management, debt consolidation, credit card consolidation and even the "darling" of the industry, debt settlement programs, are not structured to actually help the consumer. There are people who are unethical and take advantage of your situation by enrolling you in ineffective programs or sometimes even nonexistent ones. That it why it is so important to find a real advocate who is knowledgeable in the industry.
Unreasonable Interest Rates
My research and experience has shown me that there is a perfect storm" of fiduciary irresponsibility along with the entire lender to consumer chain. Starting with the banks who many times give out credit cards at legal but completely "predatory rates". You may listen to their reasoning that since they are "assuming the risk" they can justify 25% and 30%+ APR but that is really just a bankers "pitch" to the uninformed public. Anyone who has ever worked in finance, knows the "float" or interest is where the money is really made. Steady low-risk money allows bankers to sleep peacefully at night.
Chase bank, for example, explained to me that even if a cardholder is in good standing, has 100% on-time payments, and an excellent credit score they will not lower their interest rate any lower than when they originally opened your account. So the rate you received when they had no credit or poor credit is what you are stuck with for life, i.e. 25%, 35% or more.
This is done with the intention of creating a consumer base of cardholders with extremely high APR's. A Highly unethical but legal strategy to lend to consumers at high rates, knowing they will likely not be able to pay off the cards and barely pay their minimums. In essence, shelling out hundreds and sometimes thousands of dollars, year after year. Allowing the banker his dreams of morning golf and afternoon martinis to continue well you suffer extreme financial hardship.
This, of course, is a highly lucrative although clearly unethical business practice that lenders find completely acceptable. Profits and the bottom lines are the only concern for the bank and its shareholders. There is not even the attempt of ethics or good business practices in this method of predatory lending behavior. In my next post, I will explain how with a solid advocate in your corner you can utilize consumer laws and programs that substantially give you the upper hand over the debt collectors. This will include strategies for regaining your financial solvency, rehabilitating your credit and moving past this stressful period in your life. Until then Best Regards,
Revolution Debt Relief LLC
752 South Main Street
Los Angeles, California