Most Americans Should Not Use Credit Cards Essay

Most Americans Should Not Use Credit Cards - Essay Example The credit card industry has evolved so drastically that it is predicted that an average number of credit cards per family is around 3.5 (Nilson Report, 2010). According to another statistics, it is reported that an average American with a credit file is responsible for $16.635 in debt; this amount is reported after excluding the mortgage charges (U.S News and World Report, 2008). Credit cards have had a huge impact on people spending spree and it is only because of this extravagant spending style, credit cards consumers have had to face severe bankruptcy issues. It was reported that the bankruptcy filed during 2009 amounted to $1.4 million dollars; this had increased by 22% compared to the figures of $1.09 million in 2008 (AACER, 2010). This bankruptcy rate usually comprises of young adults and it is reported that young Americans have the 2nd highest rate of bankruptcy. These increase bankruptcies, heavy spending and huge debts are all a result of psychological behaviour. Americans tend to live in an economy where debt has not been given any significant value by many households. Mortgages and other similar loans are a part of almost every American household. Besides that, people tend to have an emotional attachment to paper money, which if spent, is given to the provider of goods/service whilst credit card/plastic money has no sense of emotional feeling attached to it when it is being spent because of the psychological belief that nothing material is being given at the instance of buying. This reason makes people more vulnerable to heavy spending and eventually they end up in critical positions such as bankruptcy (Schor, 1998). Credit card use has overshadowed the entire world economy. According to Federal Reserve G.19 report, the total U.S revolving debt amounted to $793.1 billion as of May 2011 and the total U.S consumer debt as of the same date amounted to $2.43 trillion (Federal Reserve Report, July 2011). The amount of U.S consumer debt increased to 2.45 trillion as reported in the September issue of the G.19 report. Hence it is clearly evident that the expansion of credit led America to severe consumer debts and this debt has not been stopped, the credit is still being offered to the consumers and it is often argued that if this trend continues, the credit card industry would be highly susceptible to downfall and failure that would further lead to another economic collapse. This collapse can be prevented by using credit cards on a minimal level or paying off the dues as they fall due. Credit card companies tend to offer credit cards to customer on increased interest rates in order to reduce its use. This pullback is affecting the creditworthy consumers and it further increases the danger to already endangered banking industry. Credit card companies had to write off $21 billion in 2008 as bad credit card loans, issues like these clearly suggest the credit card industry would definitely affect the economy in a negative manner (Dash, 2008). Finally it is said that the Federal Reserve Bank is also one major factor that can lead to an economic collapse. This is because the Fed has enough power to lend to anyone whom it desires i.e. without the consent of the Barrack Obama’s government; hence only favoured institutions are bailed out when the total economy falls prey to this downfall (The Economic Collapse, 2011). The payment pattern of the credit card debt is such that according to