Tuesday, March 2, 2010

From The Diners’ Club to Amex Black

clip_image001According to CardRatings.com, the average American has 4 credit cards, with instant access to about $19,000 of credit. From 1996 to 2005, the number of bank credit cards increased 46%.

A provision of the CARD Act of 2009, stating that anyone under the age of 21 must have a  co-signer to open a credit account, just came into effect on February 22. This will be a huge change for college freshman, who are typically bombarded with credit card offers upon their entry to school, and can sometimes get themselves into big debt trouble. Who can blame them, really? I mean, $19,000 is 316 kegs of Keystone! Or, um, like, a lot of books.

On a more serious note, the new age restriction does have some real implications. The government has always been a little sketchy on what it considers to be the age of an “adult.” Though legally the age is 18, the driving age ranges from 15 to 18, and the drinking age is 21. For those falling in between these ages, things can get confusing. Some adult privileges are afforded to you, while others are deemed too dangerous seemingly arbitrarily.

Being an adult, according to Wisegeek.com, “implies being able to make mature decisions, participate in civic matters, have self-control, and be responsible.” Have 18 year-olds demonstrated that they are not adults by getting into debt trouble?

Maybe we are missing the bigger picture here. According to the Labor Research Association, real weekly wages have fallen from a high of $331 in 1972 to $277 in 2004, and no doubt have worsened further during the recession. Average credit card debt for 18- to 24-year-olds is 11 percent higher than for the same age bracket in 1989. For the next age range, credit card debt for 25- to 34-year-olds was 47 percent higher than in 1989.

graph

Graph courtesy of Tommy Buller

Perhaps the financial failings for 18 year-olds have little to do with lack of responsibility, but rather an increase in the demand for credit due to falling wages. Though a lot of kids can get parents to sign for them if they really need the money, consider the options faced by a foster child. At the age of 18, now legally an adult, they are forced out of the foster system and often end up living on their own. Who could co-sign for these kids? If this theory is correct even somewhat, the government has done much more harm then good.

Well, that was depressing. On a much lighter, but still relevant note, credit cards have a fascinating history. The marketing behind them is some of the most creative and innovative of any product in the world.  Take a look at this slideshow by The Big Money to get the full low down. Also, watch Jon Stewarts’ comments on the CARD Bill.

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3 comments:

  1. If you carry a credit card you should be prepared to pay it(in full) as it is billed to you. This is true if you are 18, 30 or 80. If the cardholder will not do thatthey are not responsible enough to be financially mature. I suggest that should be the true definition of a resonsible adult.

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  2. In regard to an 18 year old in school, real wages have nothing to do with credit debt because, in most circumstances, they aren't earning wages. It really is the same story as the mortgage fiasco. You shouldn't lend to someone who does not have consistent available means to repay.

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