กับดักบัตรเครดิต

Saw this Bob Herbert article and couldn't help thinking this is probably the way Thailand is headed, given the boom in easy credit and Thai consumers' unfamiliarity with credit card and personal financial management.

Caught in the Credit Card Vise

By BOB HERBERT

New York Times, 22 Sept 2003

"I'm still paying for groceries I bought for my family years ago," said Julie Pickett.

She meant it literally. Mrs. Pickett and her husband, Jerry, of Middletown, Ohio, are trapped in the iron grasp of credit card debt. Except for the fact that no one is threatening to damage their kneecaps, they're in the same dismal position as the classic victim of loan-sharking.

People used to get thrown in jail for the very things credit card companies can now do legally. While banks and money markets are paying pittances in interest, it's common for the annual percentage rate on your friendly Visa or Mastercard to approach 30 percent.

This used to be called usury.

Julie Pickett stopped working full time when she had the twins. Jerry Pickett's business hit a downturn at about the same time. The family's credit cards, said Mrs. Pickett, suddenly loomed as "lifelines" to the daily necessities — food, gas, auto repairs, clothing for the children.

Another child was born and the credit card debt eventually reached $40,000 — an amount (with its perpetually increasing interest) that the Picketts are unable to pay off.

"We had one card that had about an $8,000 balance," Ms. Pickett said in an interview. "With interest and late fees it's now $18,000. The interest when we started out was like 18 percent. But after a year of not paying, it jumped to 28 percent."

Families like the Picketts are indeed responsible for the payment of their debts. But the credit card companies are engaged in one of the many big-time legalized rackets that are flourishing in this age of deregulation. The Picketts are profiled in a new report, titled "Borrowing to Make Ends Meet," by a nonpartisan public policy group called Demos: A Network for Ideas and Action.

The economy may have boomed in the last half of the 90's. But over the course of that decade, millions of American families sank deeper and deeper into debt, in large part because of the overuse of credit cards.

"Between 1989 and 2001," the report said, "credit card debt in America almost tripled, from $238 billion to $692 billion. The savings rate steadily declined, and the number of people filing for bankruptcy jumped 125 percent."

Few things are easier than flashing the plastic and saying, "Charge it." And few heads of households, when broke, can resist the urge to use a credit card to buy food for the family or gas up the car to go to work.

In the period studied, the credit card debt of the average family increased by 53 percent. For middle-class families, the increase was 75 percent. For senior citizens, 149 percent. And for very low-income families, with annual incomes below $10,000, the increase was a staggering 184 percent.

The theme of the report is that while credit card use is frequently associated with frivolous consumption, the evidence seems to show that more and more Americans are using credit cards to bridge the difficult gap between household earnings and the cost of essential goods and services. Men and women struggling with such structural problems as job displacement, declining real wages and rising housing and health care costs have been relying on their credit cards as a way of warding off complete disaster.

At the same time the credit card companies have leapt gleefully into an orgy of exploitation. "Late fees," the report said, "have become the fastest growing source of revenue for the industry, jumping from $1.7 billion in 1996 to $7.3 billion in 2002. Late fees now average $29, and most cards have reduced the late payment grace period from 14 days to zero days. In addition to charging late fees, the major credit card companies use the first late payment as an excuse to cancel low, introductory rates — often making a zero percent card jump to between 22 and 29 percent."

How high can interest rates go? According to Tamara Draut, one of the authors of the study, all of the major credit card issuers are located in states that have no limits on the rate of interest they can charge. (The state where the credit-card holder resides is irrelevant.)

And how crazy has the situation become? The Pickett family, which is absolutely unable to pay off the debt it has now, gets offers in the mail to open new credit card accounts every day.