How credit cards are becoming the new form of currency—and why this is a bad thing

In the early and mid 2000's, mortgages were the money makers. They were easy to give and easy to get. Fast forward several years later to 2008 and the real estate crisis came to a head, prompting a standstill in the entire mortgage industry.


Lending rules tightened and even perfect contenders ran into hurdles. Interest rates also plummeted. As a result, banks were forced to shift gears and reevaluate their business models.

Today, financial institutions have now switched to pressuring consumers to sign up for credit card offers, rather than mortgages.

The Credit Card Push

And aggressive targeting is the name of the game. Mail offers, televisions commercials, you name it, banks are luring not-so savvy consumers with credit card perks to get them to sign up.

Numerous retail and department stores offer credit cards with 15-20 percent off certain in-store purchases. January of 2013 kicked off the beginning of the push. From January to August, an astonishing 25 million new retail cards were issued.

Gas stations are also jumping on board, offering 5 cents off per gallon with card use. Travel cards are also popular. In some instances, consumers receive a free airline ticket after spending a certain amount.

Other cards are offering perks like free NFL swag, 2 percent cash back or zero percent introductory offers.

The Danger Associated With These Perks

But most have a common denominator-astonishing double-digit interest rates.

Without due diligence, people lured into these perks are now finding themselves paying the same monthly payment on a $30k credit card balance as they are on a $200k mortgage.

In 2010, data from the U.S. Census Bureau and the Federal Reserve show that there was $673 billion in outstanding credit card debt. As of February of this year, that number is now $753.

Why Credit Card Debt Will Likely Continue To Rise

Sadly, this trend will likely continue. Next year, outstanding credit card debt could be in the trillions. But why?

A huge culprit is a lack of income growth for the middle class. Wages simply are not keeping up with the continued rise in cost of living. This creates credit card debt and credit card dependency.

Despite the so-called economic progress, upward mobility is stagnant for everyone. After covering living expenses, like rent, groceries and utilities, there isn't much expendable income left for the average earner to pay down credit card debt. Credit card interest charges complicate and compound the monthly expense problems creating a further need for continued dependence on credit cards.

And those who do have expendable income will still find it hard to make a dent simply because of the high interest rates that go in tandem with these "perks." Sadly, the average American household who pays on time will fork over around $7000 in interest every single year.

Another culprit is American's obsession with maintaining a pristine credit score. This makes credit cards attractive and assures that families will sacrifice their futures on a score that is really a trap door to debt and credit card dependence.

The Need To Think Outside The Box

It's no doubt important for consumers to maintain a good credit score by paying their monthly credit card amount on time. Financial institutions have played an integral part in reiterating this message to Americans.

But, maintaining a perfect credit score is not as important as having money in the bank or preserving retirement funds that took years to build up or taking medications or faltering on your mortgage payments or car loans.

Debt Relief Options

Consumers who feel as though they are spinning their wheels without a real plan to get out from under their credit card balance should understand that options are available.

Unsecured credit card debt is the easiest form of consumer debt to reduce or compromise through settlement or elimination. But, it often takes the help of an experienced professional. In some cases, credit scores are barely affected. In most cases, debt reduction, in the long run, will lead to a higher score and a solid financial foundation.

Find out what options are available for you. Meeting with a specialized debt relief attorney is the first step. There are legal answers to financial problems.

The Law Offices of Neil Crane, LLC, is a debt relief agency with 30+ years of experience helping individuals, families, and businesses find lasting solutions to their credit card debt and other loan obligations.