Monday, July 10, 2006

Personal Responsibility
Though I believe that ultimately, whether it be smoking, drinking, or going too deeply into debt to get out are all up to personal responsibility, Bizzy has a great article on the shady practices of creditors. I am extremely fortunate to only have the debt of my home mortgage. It used to be that I used credit for just about everything, to give myself the "convenience" of only having one bill at the end of each month. What I, and undoubtedly millions have found out is that the ease of having a large line of credit makes it convenient to blow out your pocketbook every month. I find it amusing that despite my lack of debt I receive virtually no credit card offers, while a close friend of mine has some pretty hefty debt issues and they receive credit offers on a nearly daily basis. I have one credit card for emergency purposes. One. While some debt such as mortgages or car payments are to be expected, if you have credit cards and have the ability, pay them off as soon as humanly possible. Some points from The Biz:
The tidal wave of mail offers encourages those who don’t know better to keep applying, which only increases their futility, and certainly in some cases causes them to take a look at really bad borrowing ideas (the consumer-finance sharks, title loans, and payday “advances”).

As to whether card industry approval practices are actually permissive to the the point that they encourage consumers to get further into debt, two points:

1. The card issuers are in many cases owned by the same banks who have, with their “creative” products and the encouragement of mortgage security giants Fannie Mae and Freddie Mac, lowered approval standards for conventional and subprime mortgage loans to the point where almost anyone who can fog a mirror can get a deal. Why should we believe that standards haven’t been similarly lowered in the card business?

2. I know this won’t apply to everyone, but many readers should ask themselves these questions:
– What is the total of all available credit lines on my cards?
– If I maxed every one out, could I afford to pay them back?
– If lending standard are supposedly so rigorous, how has this been allowed to happen?

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