Credit card industry and drug dealers have a great deal in common, the business models are similar. Strategically targeting young people in college, credit card industry throws many risky credit card applications into student’s mailboxes. Think about this, how can a student afford any credit at all, and turn down what appears as free money? The enticement, the hook is easy, young inexperienced and unprepared to combat predatory lenders. 76 percent of undergraduates have credit cards, and the average undergrad has $2,200 in credit card debt. Having no means to pay off what you borrow begins a lifetime of indentured servitude. Never-ending, simply paying the minimum payment, pure interest, a predatory lenders delight. Real moneymakers for the credit card industry, they make back their money many-times over. The average outstanding credit card debt for households was $10,679 at the end of 2008. (Source: Nilson Report, April 2009)
The credit card industry in the United States with annual earnings in the $30 billion range is the most profitable industry. This industry started to become profitable as a result of deregulation, then the Supreme Court decision in the Smiley v. Citibank case lifted fees on what credit card banks could charge, and fees went from a modest $5 to $10 to today’s $29 to $39 fee for paying late or simply going over your credit limit. Credit card banks also use specific marketing tactics to increase their profits. The first is zero percent introductory interest rate offers, when this period ends the interest rate increases to 17 or 19% overnight. The second tactic used is to require a minimum monthly payment of only 2% to encourage cardholders to endlessly carry a balance so they can rake in more interest profit. (Source: Wall Street Journal, Apr 13, 2009)
There are those who can pay-off their cards every month. However, the credit card industry is banking on you not doing so. The credit card industry today a guaranteed moneymaking business model, they are banking on most of the credit cardholders not paying off their balance every month. Interest rates from 5% to 29%, anyone’s guess, the credit card industry forced organized crime’s moneylenders out of business; it is difficult to compete in a market legitimized by the government. That explains why credit card company profits are so high and their executives receive some of the largest salaries and bonuses in the corporate world. (Source: Wall Street Journal, Apr 13, 2009)
So what is the pay-off for credit card consumers, no pay-off exist; the only guarantee is a lifetime of paying back on a never-ending credit card balance? Since the United States Senate and United States Congress let this happen. Simply follow the lobbyists and the large sums of political donations directly to Washington politicians, the solution then becomes obvious, we need term limits for anyone in political office!