Credit Card Crisis Essay

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Nicole Dzenis Econ 367.02 4 May 2009 Credit Card Debt and The Current Crisis Since the dawn of civilization, people have been performing transactions involving the exchange of goods or services. As the human race has evolved, so has the methods by which people pay for goods and services. In early America, people simply used cash to pay for goods and services. Improvements in technology have also trickled down into improvements to the payments system. Simply using cash to as a means of remuneration has evolved into a variety of means of payment such as checks, automated clearing house (ACH), wire transfers, and most importantly the credit card. The credit card is vital to the success of the American economy as a whole, however the credit card can bring about financial ruin to those who have a dearth of financial acumen. The incredible flaws in the credit card system are rampant. There are a variety of problems. Namely there are high interest rates and late fee traps that will excessively punish the average card holder for payments that are overdue. Recently, a proposal was introduced by President Barack Obama to simplify credit card use for the average American. These proposals will greatly increase the use of credit cards in the economy and could act as a means of stabilizing the current economic situation in America. In modern America, the credit card is increasingly prevalent in American households. According to Liz Pullman Weston, 23.8% of American households do not own credit cards. This percentage would indicate that 76.2% of American households do in fact own at least one credit card. There are some increasingly disturbing trends in the credit card sector of the payments system, however. Pullman Weston further states that the average American household carries an outstanding balance of approximately $8,000. This statistic is incredibly alarming.

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