Does anyone have a strong feeling if the credit available to american consumers should be significantly reduce

Question

it's for debate, i need some idea here, whether or not credit should or shouldn't be reduced, and why

Answer 1

Thanks for asking!

I wish that credit were more difficult to obtain in the absence of sufficient education. Make personal finance education mandatory; there's a universal crying need for it.

Think analogously of driver education, classroom and practical, for which we reward the successful student with a lower age of licensure. Moreover, we make a year of US History mandatory in high school, yet we don't mandate education for something as universally American as credit card use. Right now, in high school, trigonometry is more important than (the arithmetic of) proper handling of one's personal finances. (And I'm not knocking trigonometry: it exercises the mind in abstract thinking and disciplined, logical argument. But what is its relevance compared to handling money?)

How about a mandatory year of personal finance education for those in high school, and a similar year for those applying for US citizenship, or those applying for a marriage license? How about forcing divorce attorneys to re-write separate loan contracts for every about-to-be-ex spouse going through divorce so that the parties can't punish each other's credit report afterward? Imagine how much less misery and enslavement to debt there would be!

I'd like to see the young go out in the world and learn to be self-sufficient while making hard choices and sacrifices. Having to pay cash at all times until one were 24 would be a practical vehicle to teach such choice-making. That skill learned, only then would someone be ready for the comfort and luxury of a credit card. In some states, we put the young in high-risk auto insurance pools until they are 25. Why don't we do that with credit, given all the horror stories of the young's misuse of credit?

When I was in college, there was a 30-day post-New Year's break between the fall semester and the spring semester. That would've been an ideal time to teach an intensive seminar on personal finance. And imagine the university's employees and alumni/alumnae being allowed to enroll in the seminar along with the students. What a cultural mix: grownups sharing wisdom, life experience and common sense with the young!

Look at history: in the early 1970s, teenagers were old enough to vote and old enough to drink. By the early 1980s there was enough DWI carnage to raise the drinking age to 21. And we've been lowering the BAC threshold ever since. Isn't it time we do something similar around credit abuse? Lesson learned yet?

Answer 2

I keep predicting the next Great Depression which would make the one in the 30s look like child's play.

Thanks to wealthy Europeans, Asians and Arabs, trillions in credit have been extended to the US. Remember that these nice Asians and Arabs did not exist 7 decades ago. This Depression is long overdue and should have happened when the tech bubble burst and 9/11 occurred.

Of course, the Fed Reserve would not end the credit party because their assets are owned by the rest of the world. If the rest of the world foreclosed - we would wind up like the people on the CBS show, "Jericho."

Lesson is to save money and use credit judiciously, not pay your bills with it and then feign ignorance when the bill is due. Bankruptcy is an honorable way out but you only get that once every 8 years. Cash is king and credit should be used only to purchase real estate or a new car.

Answer 3

My credit availability was reduced when I quit paying my bills!

But seriously, I wonder why I was able to get over $30,000.00 in credit when I worked in a dead end job making $7-8 an hour. I felt horrible letting those cards go, but I know I could not have paid them off in my lifetime making the wages I made. I would also never have been able to continue my education while working 80+ hours a week to make my minimum payments. AND, continuing my education was the only hope to make more money to pay the bills, SO, the creditors didn't get paid. I wish I had known then what I know now. I was never motivated to better myself because I didn't want for anything. I even went to Europe for a month while working at my $7-8 an hour job.

Answer 4

It seems sad, but apparently it is true that Americans are not too bright when it comes to credit. This is evident in the recent hearings about credit in congress. Our government sets a terrible example by passing budgets for money our country doesn't have and every finance program in college gives intellectual reasons for using debt. But, since we are human, not machines, we don't use debt ,rather it enslaves us.

Credit has been extended to people who are bad risks and our culture tells us we need more and more; an ever increasing standard of living. If you ask the majority of people in America if cable televison or internet access are luxuries or neccesities, they will say they are neccessary. These are the same people who take loans for cars that are more expensive than what they make in a year and they finance them for 5 years or more instead of driving something they can pay for and trading up as their financial position increases!

We have been told to go into debt for everything, cars, houses, even dinner out, by advertising, our peers and credit card companies; you deserve it. If we were more smart about our behavior, we would not be taking home equity loans to pay off a credit card that was a loan for dinners, clothing and gasoline; thereby financing something with no lasting value for 30 or more years.

So, unfortunately, since our behavior is so bad, we need to have credit less accessible. This would be better for the country in many ways, such as reduced foreclosures and increased savings.

Sorry to rant but the credit addiction has got to go!

We need to realize that delayed gratification, saving for something you want is okay, even an admirable trait.

Answer 5

As a macroeconomics concept:

Restricting credit can either occur one of two ways: raising the cost of credit by raising the borrowing rate, discouraging consumers from borrowing; or by restricing the amount of capital available to borrow.

The fear many economists have in restricting credit is that, if we're in an economic slowdown (as demonstrated by the slowdown in housing starts and sales), removing available capital in the system would cause a even bigger slowdown or recession or depression. Capital is the fuel for growth, it is reasoned, and restricting access to it would force companies to cut back on improvements either in capital or in raising workers' salaries.

Salaries don't go up as quickly, workers get worried, consumers don't buy as much, companies don't make as much money on the stuff they offer, so they cut back again, and you see how this could spiral downward pretty quickly.

So while I see the point of those who see the microeconomic concept of limiting credit as a good thing, restricting credit at a macro level may be problematic, esp for a nation addicted to credit, both corporate and government. Responsible use of credit, however, is always a good thing, at all levels.

Answer 6

I got along fine before credit was made so readily available.
Had to save to buy things I needed or wanted. Now I use credit (cards) to obtain free use of money. I pay the cards off monthly. I firmly believe that all credit cards should be abolished and creditors be given 5 years to pay off their debts! Too many people in the US have refinanced their homes to buy that boat or SUV or something else they don't really need. Then I hear them complain about their high mortgage payments, etc. Bought my house for cash, never borrowed more than I couldn't pay back in six months. Now I can buy whatever I want but find I don't need that many toys to be happy.

Answer 7

You want to learn all about credit & debt? Go to your public library & get a copy of Dave Ramsey's "Total Money Makeover" &/or go on his website (below) & listen to some of his podcasts. He will give you ALL the ammo you could want for this little debate. You will come away with a crystal clear understanding of why debt SUCKS! (Like my strong opinion?) : ) Btw, if you want to hear about what happens when you get into debt, email me & I'll tell you all about how much fun it is to have to dig out of a $100k+ hole. Oy! : [