Saturday, May 14, 2005

Financial Literacy and Credit Card Debt

The Consumer Literacy Consortium asked 1,000 people financial questions, to find out how financially literate the average American is. The average score was 53%. That would be a failing score in school. The scoring was pretty even across the board except the affluent and college educated scored about 10% higher than the poor and uneducated. Not much difference. Go here to see how you score.

Credit card companies are taking advantage of this and blaming the victims by saying they had a choice, and no one forced them to open an account. They are right, but the problem is no one is holding them accountable for lending responsibly. Citibank is known for being agressive at marketing to high school and college students, though many credit card companies are guilty. They don't even require the parents to cosign, yet they are more than willing to go after the parents when the teenager defaults. Parents pay out of embarassment, and no one questions the credit card company's tactics. (67% of undergraduate students in college had credit card accounts in 1996 according to a study by Claritas, Inc. ) They will even go so far as to sue the parents. This was revealed in a congressional hearing before the Committee on Banking, Finance, and Urban Affairs on March 10th 1994. Still nothing has been done about it.

In Robert Manning's book, Credit Card Nation, on page 160, he describes a student who committed suicide after getting deep in debt on credit cards. He was a National Merit finalist and a liberal arts "letters" major. He wanted to go to law school, was working two jobs, went to counseling, and moved to a less expensive school. He still couldn't keep up. He had 12 credit cards when he died. After he died, the credit card companies called the parents to collect, and blamed the parents for not holding him responsible for his debts. The parents had left two messages for one collector about his death certificate and got a return call insisting that the parents pay the debt. Chase and other credit card companies still mail preapproved credit card applications is the teenager's name to their home, even while years later the collectors still call.

These are not companies you can do business with and maintain a good reputation. It is wise to heed the warning in Habakkuk 2:6-7 where it warns us against creditors. It is wise to stay away from credit cards and any other form of debt. I think the volume of complaints speak for themselves.

Here are just a few I found in a fast search on consumer sites:
See some complaints against Citibank here and here and here
See some complaints against MBNA here and here and here
Capital One here and here and here
First USA here and here and here and here

Go here for information about why and where you can complain. If you don't hold them accountable, by staying quiet we tell congress that what they are doing is okay. Credit card companies are slipping through new laws in amendments that take away our privacy rights, reduce our rights as debtors in the collection process, and increase their profits through sneaky contractual tactics. What you don't know WILL hurt you! Make an effort to become financially literate.

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