If a person spends more than he or she can afford, is it really fault of the credit card company?
Credit card companies have been shown in the past to encourage users to enter into overwhelming debt. By using confusing terminology and hidden transaction fees customers are encouraged to think that they are well within their budget to purchase items. It is only later that the customer realizes that they entered into a spiraling debt relationship with the creditor that will cause them to pay far more in interest then the value of the original purchase.
Credit card companies do everything within their power to try to get you to spend more than you can afford. The longer it takes you to pay off a credit card, the more money the company makes off of you. They make money off of all the incurred interest. It also seems that the more you spend, the more often they raise your limit, regardless if you've gone over it or not. Simply put, the more money you spend, the more they make off of you. Again, they encourage such behavior because it's to their benefit.
Credit card companies are in the business to extend credit to people who cannot afford paying them back. In the mean time, they rack up money by charging excruciating interest rates and other fees (late fees, over limit fees, etc).
One good example of this is the targeting of post-secondary students and seniors to take on credit they cannot afford. Credit card companies take advantage of the ignorance of these populations to essentially trick them into accepting credit they cannot afford and under conditions they do not understand. In the meantime, they understand that these populations will probably one day be able to repay them: a university graduate will hopefully one day get a good job and come to terms with their debt, and a senior will hopefully one day die and their estate will pay off their debt. Until then, they have sometimes paid double, even triple of what they owe in interest and bank fees.
In my opinion, I believe that every private entity should take complete responsibility and potential loss for the credit they extend. It is the prerogative of the credit card company to monitor creditworthiness and the ability to repay. If they lend too much to an individual, or an individual defaults on their loan, it demonstrates that the credit card company failed to assess the risk accurately, and they should accept the complete liability. Of course, each individual also carries the responsibility of protecting his own creditworthiness and reputation.
People who have to declare bankruptcy from credit card debt rarely do it because they could not pay back the money they owe. In fact, they usually actually paid it off years ago. What most people get stuck paying for the rest of their lives is the interest on the money they borrowed. Most credit card payment plans have the interest gained every month higher than the amount you pay. This, combined with the fact that credit companies reserve the right to raise your rates at any time they feel like it, causes people to go bankrupt.
People have to be 18 years old to get a credit card. Although many people do not know the exact amount of money in their accounts, they should have a ballpark figure in their head. That way, when they go out or are about to buy something, they will know what they can afford. It is not the responsibility of the credit card company to tell people when their funds are low.
I do not agree with the claim that consumer overspending is the fault or responsibility of the banks and credit card companies that granted the credit. It is, and should be, the responsibility of each person to be accountable for controlling their spending to live within the limits of their income.
One major reason that people overspend is because they are not provided instruction in the basics of personal finance in school. For far too many people the first time they have any dealings with personal finance is when they get their first job out of school and start paying their own bills. We need make personal finance a part of high school education.
It is not the fault of the credit card company. It is the responsibility of the individual to control their spending. If you make $2000 why are you spending $4000 on your credit card. Do not blame the credit card company! I have known many people who have overspent and end up struggling to pay their bills. Totally their fault.
People today seem to feel entitled to things that are beyond their means. No doubt, credit card companies take full advantage of people who cannot manage their finances but ultimately, as informed consumers, individuals need to take responsibility for their own mistakes.
While many credit card companies inundate people with numerous credit card offers, deals and promotions, it is still up to each individual to maintain financial self-discipline when it comes to spending - starting with not spending more than they can afford, no matter how much their credit line is or how tempted they may be to exceed it.
To say that the credit card company is at fault for someone spending more than they can afford is the same thing as saying that obesity is the fault of the company that makes the food. Since you don't have to use the credit card, and you don't have to eat the food, there is no justification in blaming these third party companies for your own problems.
Every person knows how much they make, how much they can spend, and how much they can pay back. That is like saying, "if I go to a restaurant and eat too much, and get a stomach ache, it's the restaurant's fault, because they served me the food, and let me eat it".
As a nation trying to climb out from beneath the debt burden in which it finds itself, the public needs to start taking control of excessive spending. Too many years of living beyond our means has created a financial black hole in our economy. It is time to face the music and stop blaming the creditors for extending the credit. If we cannot keep our own spending in check, we should not be applying for the credit in the first place.
A person has a mind of their own, and credit cards are only granted to adults. A person should be able to monitor their own spending, and not expect the credit card company to parent them. If they can not do it, then eventually their credit will be revoked. So, even though it could be easy to blame the credit card company, the one to blame is the person.
The problem with buying on credit is that you end up paying much more than you would have if you had just bought with money that you already had. In life, there are consequences for our actions, and overspending leads to dire consequences.
Credit cards can be very useful for large purchases or unexpected expenses that need to taken care of immediately, like car repairs. For that reason, credit card companies should provide cards with a reasonably large amount of available credit. However, the person using the card is responsible for understanding what the monthly payment will be and deciding how much they can afford to charge. It's very tempting to buy now and not worry about paying it back.
Credit card responsibility should be taught to students to prevent people from spending more than he or she can afford. While it is not the responsibility of the credit card company to do this, they could play a role in sponsoring more consumer education programs in schools and in communities to prevent a debt crisis like the one the United States currently faces from happening in the future.
If someone spends more than affordability, it is fault of the individual. Though credit card in hand can be described a temptation to spend beyond limits, it is just a facility. It is not the fault of Credit Card Company, it is up to us whether we want to spend that extra or take a decision to postpone the purchase for some time.
The credit card company holds no information on how much money a person can afford to spend, and therefore, when a limit is set, it is down to that individual personally to manage their cash flow. This is how credit card companies make there money, by people going over their limit or being unable to afford to pay the outstanding balance.
Each individual is ultimately responsible for their own actions. The credit card companies offer a service and it is up to the individual to be responsible and to make wise decisions. After all, it is not the fault of Burger King or McDonald's that people are fat-- they simply offer a product and it is up to the consumer to weigh the pros and cons of doing business there. This is not a nanny state-- people should know their own financial state and live within those means.
When I was in my late teens, I got my first credit card. My parents explained to me that I should pay off the balance every month so that my credit rating would improve. So I did, for a while. I found myself in a position where I couldn't afford the things I wanted, or eventually the things I needed. I charged them. I didn't really understand what that small debt would do to my credit rating, but I don't think it's the card company's fault. I decided to buy things I couldn't afford. They only gave me the means by which to do so. In that sense, I suppose one could say the system of credit in general is to blame, but really, I think the card holder is who determines how much they spend.