So what caused people with large credit card debts to get into that position in the first place anyway? Instant satisfaction? Shopping temptations? Luxury sportcars and holiday trips? Mortgage repayments? Margin lending? Or was it that the banks did a really good marketing campaign in blurring your own rational eyes and brain system?
This NYTime article was a nice read on what might be coming up next.
Thanks to the subprime mortgage crisis, layoffs are being announced nationwide in the tens of thousands. As people begin to lose their jobs, they will not be able to pay their credit card bills either. And the banks will be back for more handouts.
The banks waive a carrot in front of the consumer and reel them in and encourage them to go deeper and deeper into debt. They do this by prescreening customers through credit reporting agencies, mailing offers to apply, and to transfer balances at teaser rates or zero percent financing. They base it on credit score and not on capacity to repay. A good credit score does not equate to the ability to repay debt.
I wrote something about credit card debt back last year, and I think my position never changed. And BTW, I’m pretty sure (statistically) it’s a culture thing whereby Asians tends to save more compared to a Westerner.
And in times like this, cash is king!