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The Credit Card Trap: How U.S. Credit Card Companies Are Sucking The Financial Life Out Of The American Consumer

There have been very few things more damaging to American consumers over the past couple of decades than credit card debt.  Easy credit has enabled many of us to live absolutely fabulous lifestyles, but outrageously high interest rates, ridiculous penalties and predatory fees have sucked the financial life out of millions of American families.  It is very easy to blame the rapidly exploding debt of the U.S. government for the economic collapse that we are now experiencing, but the truth is that tens of millions of Americans have created their own personal economic disasters by overusing credit cards.  The temptation of easy credit has been too much for millions of Americans to resist, but now all of that easy credit is proving to be incredibly difficult to pay back, and massive debt problems are literally tearing many American families apart.

It is hard to underestimate how devastating credit card debt can be to a family.

According to the credit card repayment calculator, if you owe $6000 on a credit card with a 20 percent interest rate and only pay the minimum payment each time, it will take you 54 years to pay off that credit card.

During that time you will pay $26,168 in interest rate charges in addition to the $6000 in principal that you are required to pay back.

That does not even account for any penalties or fees you may have to pay.

Are you starting to get the picture?

The reality is that credit cards are one of the greatest inventions for sucking the wealth out of middle class American families ever invented.

Just consider the following facts....

*According to the United States Census Bureau, there are approximately 1.5 billion credit cards in use in the United States.

*At the end of 2008, the total credit card debt piled up by American consumers was over 972 billion dollars.  This is an amount that is greater than the GDP of the world's 122 poorest nations combined.

*78 percent of American households had at least one credit card at the end of 2008.

*The top 10 credit card issuers control approximately 88 percent of the credit card market.

*The average U.S. college graduate leaves school with more than $2,000 in credit card debt.

So is Congress doing anything to protect American consumers?

Well, some of the key provisions of The Credit Card Accountability, Responsibility and Disclosure Act, commonly known as the CARD Act, go into full effect for all credit card providers on February 22nd.  In particular, starting on the 22nd limits will be imposed on when credit card issuers can raise rates on existing card balances.

But the truth is that this new law doesn't really do much to protect us.  U.S. credit card companies will continue to be able to engage in highly predatory practices.  The following are just three examples....

#1) According to Pamela Banks of Consumers Union, the nonprofit publisher of Consumer Reports, there are no current federal laws that cap credit card interest rates.  In fact, CNN is reporting that interest rates on some major bank credit cards are now as high as 36 percent.

#2) New laws only address the existing fees charged by credit card companies.  So credit card companies are working hard to invent all kinds of new fees and penalties that will get around the new laws so that they can keep sticking it to American consumers.  For example, Citibank is now charging some consumers with a fee if they put less than $2,400 on their card annually.

#3) In anticipation of the CARD Act going into effect, many credit card companies have been aggressively bumping up the minimum payments for many of their customers.  Chase, one of the biggest credit card providers, recently increased the mandatory minimum payment for many consumers by 150 percent.  MBNA, Citibank and Bank of America have announced that they are doubling minimum monthly payments on credit card balances for many of their customers.  These increases have been absolutely devastating for many families who are on a tight budget.

The bottom line is that we all need to get out of debt and we all need to stop using credit cards.  It is financial insanity to end up paying two, three, four or five times as much for an item as it cost in the store.  We have been making the big banks rich by spending money that we do not have.

So if we are going to accuse the U.S. federal government of horribly wasting our money, we have got to be certain that we are geting our own financial houses in order.

But for many American families it is already too late.  It is hard to pay off debt if you don't have a job and you are about to lose your home.  In fact, many American families find themselves literally being torn apart by financial stress.

Unfortunately, economic times are not going to get any easier.  If you are able, get out of debt while you still can.  Now is the time to tighten our belts and to prepare ourselves and our families for what is ahead.

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  • fred gorsline

    Credit cards are supposed to be used as a convenience when shopping–the CC companies are in business to make money–if everyone paid their balances each month they’d make a heck of a lot less. With that said it is a lack of DISCIPLINE and RESPONSIBILITY among consumers that is the real problem here.

  • ajay

    Credit Card Industry Promotes New Card Based on Slavery to Stem Mounting Criticism

    http://wp.me/pIP1s-34

  • 7towers

    I would just like to point out that since the 1980′s up to the present moment the cost of living for the average american has increased substantially. Each year we have had to endure rising costs in all the essentials. Adding to this the Employee contribution towards health care was subjected to increases in the last 3 to 4 years yet each time covered even less while the out of pocket and deductibles increased.
    The only problem is our annual salaries barely increased. For 30 years I have watched this unfold with each year living costs rising exponetialy.
    For the last 15 years I have been wondering where is all the money going???
    Salaries and what companies offered for benefits decreased in at this time as well.
    These banks and financial institutions have been robbing us since the 1970′s. While its hard to imagine , irrational even, that they would suck the life out of their cash cow middle america but I do believe we are dealing with addiction in the form of greed. Money/Power create an insatiable appetite for more replacing the “reasoning humaness” with an addictive driven insanity.
    http://ampedstatus.com/the-economic-elite-vs-the-people-of-the-united-states-of-america-part-i

  • M2

    Your social security number has a bond number on the back (if you got your card in the last 25 years). When you applied for the SSN, you gave power of attorney to the UNITED STATES corporation to access your bond, trade it, and make its proceeds available to financial institutions.

    Credit card companies offer you access to your OWN credit. How ironic is it that you have to APPLY for a credit card, when you already HAVE the credit used to fund the card? It’s called a blocked credit access system. Think about it: How could credit card companies give all of the those cards and credit to folks a few years back? Remember when you’d get 3-4 offers every day? WHERE did the credit come from? It came from YOU! That’s the scam you should be investigating.

    Your credit is backed by the bond on your SS Card. That bond is used to back Federal Reserve Notes which have serial numbers identical to the bond on the back of your card. Why do you think that the Government wants illegal immigrants to get SSN’s? Their bonds capitalize the Government and fund its operations. Ask your self why Walmart and Blockbuster want you to fill out applications that require a SSN? Yup, they are accessing your exemption account/ssn and using it to fund their business operations.

    Oh Yeah, CHASE offers 100 bucks for you to open a new account. Yup, they just got your SNN and dinged it for at least a million bucks. And you thought you were broke!

    And to think that every pensioner suffereing on $600 a month in social security is worth hundreds of millions on paper. It’s a crime.

    Guess who collapses the SS account and liquidates the bond when that pensioner dies? Yes, its a rhetorical question.

  • http://austinbankruptcyattorney.com Fred Walker

    People begin using credit cards with the best of intentions. They begin using them for the convenince they offer and then life happens. It is difficult for most of us to plan for the future. That is why Social Security was initiated. The government should protect its citizens from corporate greed but instead it has sold out to special interests. The problem is not the banks. They are supposed to look out after their own interests and make the greatest profit they can for their stakeholders. The problem lies with our elected leaders who have failed us. Just look at what they have allowed the peddlers of niccotine to get away with if you have any doubts. Look at the so called Bankruptcy Reform and Consumer Protection Act they allowed the banks to buy in 2005. The fault lies not with Citibank or Phillip Morris. It lies with our legislators. The system is broken. The Dollar is loosing its status as a reserve currency. We will survive; but only after the great day of reckoning has humbled us all.

  • http://findingdebtsolutions.com/ Rex Murphy

    An absolutely chilling read. It’s completely insane the way what was originally designed to be some sort of convenience has turned into a way to increase profits to staggering levels. All at the expense of the taxpayer and consumer, no less.

    http://findingdebtsolutions.com/average-american-credit-card-debt

  • Anonymous

    I’ve always objected to credit cards and so far I’ve been able to get along without them, though sometimes it’s inconvenient when making reservations for airlines or hotels. And yet I still object to the financial insanity of our national financial irresponsibility that mirrors the credit card habits of the majority. Please realize the slavery that you put yourself into when you have to get someone’s authorization to make a purchase! If not, it could be forced on all of us and set us up for the worst kind of tyranny by someone like an Adolf Hitler II on steroids.

  • Anonymous

    Shouldn’t usury be illegal?

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