The Credit Card Trap

Following a lunch-table discussion at work, one of my colleagues pointed me to this article from the Columbia Journalism Review. It underlines the gap between much of the business press, which writes breathless articles about the exciting profits of the credit card companies, and (some of) the mainstream press, which recognizes that these profits come from fees, penalties, and high interest rates that were once illegal.

The twin myths of over-consumption and the immoral debtor, to use [Harvard law professor and bankruptcy expert] Elizabeth Warren’s phrases, have been debunked for years. Warren documents that the average American household today actually spends less than in the 1970s on clothing, food, and major appliances, and that, after paying for education, housing, insurance, and health care, it has less disposable income, even though the household now has two wage earners. Research shows, for instance, that nearly 30 percent of low and middle-income people with credit-card debt reported medical expenses to be a major contributor. And in a study cited by Warren, 87 percent of families with children filing for bankruptcy listed one of the “big three” reasons—divorce or separation, job loss, or medical expenses—as the cause.