Credit is always a hot-button issue. There are many pundits who fault credit issuers for charging late fees and high interest rates while also blaming them for consumers getting into debt. These people believe that credit is evil, the bane of society, the cause of all that is wrong with the county, etc. While I am being a bit sarcastic in that last statement, I strongly believe that the credit issuers are not at fault.
I have written before that financial competency, like many other things, begins at home. Parents need to teach their children the value of money from a young age. Like drugs, smoking, drinking, sex, etc. if you ignore the subject children will be forced to learn about credit from sources that are not necessarily interested in their best interests. Taking the time and teaching children both the benefits as well as pitfalls of credit, they will be much better prepared to handle it in the future.
Another thing I have noticed over the years is that people like to shift blame, and avoid any accountability for their own actions. I always ask clients who are in debt whether or not they were taken into abusing their credit; if they had a gun to their head to live outside their means, or if life as they knew it was going to end if they did not go out and max out their credit lines. The point is that each and every purchase was a choice . The choice to purchase a fully loaded Mercedes because everyone else they knew had one, the decision to take on a mortgage that would leave them struggling to pay the rest of their monthly bills, the choice to buy a Gucci purse because of the status is brings . Everything we do is by choice . Then, when they start falling behind with the creditors, the fingers point every which way except towards the one person that is really to blame – themselves.
Let's face it, none of us would ever loan out money interest-free, and with an unlimited payback period to a complete stranger. Essentially that is what credit issuers do, although the terms are based upon one's credit worthiness. Those who have shown a lack of worthiness are charged high interest rates – although admittedly some rates are unnecessarily high – and late fees for not making the minimum payments in the agreed-upon time frame. We are not talking about surprise fees or charges, either. Upon issue, lines of credit are accompanied by terms and conditions. If someone chooses to ignore the disclosures which state the repayment terms, interest rates, fees, and credit limits that they have no one else to blame but themselves.
While I do believe that there needs to be more transparency when it comes to any type of credit provider, I am a strong believer in personal accountability. I also believe that this type of situation is a byproduct of the nation's propensity to spend as opposed to save, and the desire to live above one's means which I wrote about in a previous post called "Let's Blog Money – Are your spending habits outpacing your savings? " All in all, while credit issuers should bear part of the blame for the credit and debt problems facing the country, absolutely the brunt of the blame belongs placed on the individuals who misuse their ability to borrow.