Who's at fault for the high level of credit card debt and the high fees that are being charged? The credit card issuers, who make it so easy to borrow, or we American consumers who run up five and six-figure credit card bills we can't afford, until the credit stops?
A blog posted on the Motley Fool web site says that both are at fault. Americans borrow too much, it is made too easy for them, and the implications of their borrowing are not fully understood.
This is a broader perspective on the subprime loan crisis. The predatory subprime lenders focused on housing-secured loans. Predatory credit-card issuers make up in high fees what they may lose in credit-card debt that is not repaid.
What do you think?
Early alerts on longer-term business, economic and public policy issues. Successor to the web site www.cityeconomist.com. Maintained by John Tepper Marlin.
Subscribe to:
Post Comments (Atom)
I believe both parties are at fault.
ReplyDeleteFirst of, consumers who borrow recklessly are definitely at fault because at the end of the day, they are responsible for their own actions. If their debt is not paid off timely, their credit score will weaken and further financing opportunities will be less available.
Lenders, on the other hand, should not be handing debt to consumers irresponsibly. It seems that these days, credit card offers are in the mail every other day. It makes me wonder why these companies think that I need another credit card and what makes them think I will be able to pay off another credit card debt? But what is enough for these credit card companies who try to sign me up every other day? I appears that credit card companies are addicted to lending just the way home lenders were and eventually created the subprime mess through lending irresponsibly. By lending irresponsibly, companies could go out of business and thereby bringing the economy down by increasing unemployment rate which results in more savings and less spending. One may argue that companies who are irresponsible deserve to go out of business. While this will hurt the economy in the short run, in the long run it will only benefit the economy because only responsible ones are "alive".
One last note, because there are people who can't quiet manage their money, personal financial advisers have a job. The only question is, is it better to have a situation like this or responsible companies who will lend to the right people and people who will only borrow if they know they won't default?