It is our hope that after a person files and gets back on track, that they do so with an awareness of what led to them contact us. (This goes without saying that many bankruptcies are not at all caused by poor spending choices, but happen as a result of sudden medical emergencies or unexpected financial commitments.)
So we admit to be somewhat nervous by the onset of trends showing credit card use will increase in 2011. Apparently credit card companies are on the marketing attack, having sent over a billion solicitations in the third quarter of 2010. Last year at this time, the number was under 400 million. That’s a significant jump.
It appears that after the CARD Act went into full effect, all the folks at Visa, MasterCard, American Express and Discover needed was a few months to wrap their heads around how they can make money in this environment. Apparently, their respective think tanks came out of their board rooms all smiles.
For the last couple of years, debit card use increased dramatically. This showed that fewer Americans were relying on credit. While it’s never good to spend too much on a checking account, it’s much better than running up a credit card balance. At least there is a limit.
Before the recession, and even during its early days before credit card reform was instituted, lenders sought business from almost every financial demographic. They tracked carefully the spending habits of the the less than monetarily stable and would strike with higher interest rates as soon as a big ticket item showed up on the balance. Extra fees would be tacked on without warning. It was the wild west of consumer credit.
Today, the primary targets are those who managed to remain somewhat in check during the worst economic period of the last 100 years. Using a barrel full of aggressive reward programs, the credit card industry has become focused on those with good credit ratings, trying to nudge their financial ego a little. “Come on, you make smart decisions with your money, check out all the cool features on this card …”
The cost of ownership is going up as well. The consumer credit industry has introduced all kinds of new fees to make up for what’s been lost. But don’t think it isn’t using the presence of those fees to create an “air of exclusivity” around their products, as if having a certain credit card attaches a person to some elite social demographic.
In 2008, only six out of every ten credit cards included a rewards program of some kind. Today, every eight out of ten credit card direct mail solicitations highlights cash back, frequent flier miles or a points system on their envelopes.
Don’t for a moment think that the industry has forgotten about those with lower credit scores. That category will simply be paying more for use of the card and have less access to the reward programs.
Consumer advocates are nervous, as we are, about the return of consumer debt. Whereas 2009 and 2010 saw a significant drop in credit card use and dependence on loans and home equity, 2011 may be the year the lending industry rights its ship.
If you're struggling with credit care debt, contact the Law Offices of John T. Orcutt today to discuss your options in Chapter 13 or Chapter 7 bankruptcy. 1-888-234-4181.