Credit Cards And Consumerism

by Heather

Consumerism is a subject I’ve been thinking about a lot lately. I suppose the never ending barrage of bad news from banking, lending and credit card companies like Bank Of America, Citigroup and Wells-Fargo made me pause for thought on this subject.

Many of these financing companies lent out money to consumers with very little regard for the Three C’s of Credit – Character, based on history of repaying debts; Capacity, the amount of debt that a consumer can comfortably afford to handle; and Capital, the current assets a consumer has.

If you happened to be a homeowner, you could get even more financing dollars by getting a HELOC – or home equity – loan that allowed you to borrow outrageous amounts of money based on the value of your home, sometimes up to 125% of its estimated value.

With this free flowing credit, consumers gorged on a buffet of spending. Whether it was to finance dream vacations, to purchase the latest electronic device or to pay for a night out on the town, the cash is long gone. Now all that remains of the ‘good time’ is a credit card bill with a high interest rate.

These companies helped facilitate the ability to “live beyond your means” as a lifestyle with no forethought as to what might happen should market conditions change, and now they’re left with a bag of burning poop on their doorstep as the economy has shifted.

They’ve addressed the issue by tightening their belts. They’ve canceled credit cards, decreased credit lines and increased interest rates, even on customers that have paid on time consistently.

It’s another reason people should rethink how they are doing business and about what products they choose to consume. Being an overweight, debt ridden consumer was never the American Dream, but somehow it has become a reality.

Cutting back simply can’t hurt and credit card companies aren’t your friend – they’re like the drug dealer that gives you the first hit for free knowing that you’re going to get hooked and give you enough rope to hang yourself if you aren’t careful.

William Shakespeare artfully said, “Neither a borrower, or a lender be.”

I believe he had things right.

Tags: Borrowing, Consumerism, Credit Cards, Lending