A report done by Fox News states that credit card use is on the rise again. Only three years after the United States big recession and credit card use is up by %10 when compared to last year. Fox News speculates that this increase in credit card use is possibly due to banks cancelling their perks and reward points on debit cards and due to lower income families needing to pay for food and gas with credit because they don’t have enough cash on hand. Fox portrays this credit increase in a very positive way that shows none of the problems with the trend. They say that this trend will allow retailers to continue to grow over the holiday season which will in turn boost the economy.
I agree with Fox News in that the increasing credit trend will give the economy a little boost this holiday season, but what about after a year or two, when people are suddenly struggling to pay off their debt accumulated through high interest rates? Will the current credit boom cause another recession later on? There is no way to be sure about anything in the future, but I personally don’t see this as a good thing. There are too many people out there who don’t understand how to properly save and invest their money and who don’t really understand how a credit card works. These are the people who are likely to find themselves all of a sudden in a massive amount of debt because they have only been making minimum payments. As their debt increases, so do their minimum payments, possibly to the point that they struggle just to pay that from month to month while they continue to use their credit cards because now all of their cash is going directly towards paying off the minimum payment. When this happens the card holder eventually cannot pay of their debt, forcing the bank to take action.
When we studied the causes of the recession and the way the world’s economy works in our “Rethinking the American Economy,” section of my Sustainable Development class we saw a similar trend in the housing market. People were buying homes with loans that they didn’t understand and couldn’t pay off. This caused them to default on their loans and the banks to foreclose on them. The loss of so much of the banks money and the foreclosure of so many houses caused the housing market to collapse leading to our recent recession. I can see the same sort of thing happening with credit cards. As people see the economy slowly improving they will become more willing to take risks and buy products that they can’t actually afford. This could lead to a crash in the debit card market very similar to what occurred in the housing market three years ago. Again this is all speculative, but I think, very possible.
Fox News never says any of this. They quickly gloss over the idea that it might be a bad thing in the long run at the very beginning of the news clip then speak exclusively about how much this will benefit large corporate retailers. They even directly state that people are using credit cards because they cannot actually pay for things, and then twist that fact into something positive. This news clip was very obviously made to make the consumer feel confident enough to buy more even if they can’t afford to. It clearly supports large retailers with no regard to the little man.
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