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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 311071  
Subject: Re: Credit Card Debt up 53% Date: 9/23/2003 6:09 PM
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You wrote, According to latest studies out, the average American family owes over $4100 in credit card debt, up 53% since the 1990's.

When in the 1990's?

The median and standard deviation might make for a more informative comparison. Who's that average American anyway?

Also, Well, here's an idea. Why can't credit card companies step in to help those who are relying on plastic to survive. Here's my proposal:

Credit card companies should offer people who can provide proof of need the ability to purchase necessities like food, medicine, healthcare and the like on plastic as very low, or 0% interest, as long as payments are always made on time. These companies would still benefit by receiving the amount they always do from the merchant, but would just forgo the added interest income. This would not only create goodwill for the companies, it would be a huge boon to those in need.

How would this address the high cost of prescription drugs? (Of course a simple diuretic isn't very expensive. I take high blood pressure medication myself and it's one of the cheapest prescriptions I have.) The problem here is that prescriptions tend to be recurring expenses for the elderly. Buying them on time doesn't really solve the problem.

And if they're just going to pay the account off, why don't they just apply for a (rewards) card and use that for their groceries?

The problem with asking a company to forgo interest income is that you're ignoring the time-value of money. If a bank lends money to someone and gets nothing in return except the principal back, the bank is actually loosing money because of the effects of inflation. That doesn't even take into account the effect that would have on their stock -- reducing earnings, ROI and shareholder equity. While they could do this if it was a promotional thing that generated a lot of interest in and business for the company, I doubt you could get a company to just give away money without any hope of seeing some kind of return on that investment.

Of course you get a lot of these kind of offers now for general purchases or balance transfers, so it's not like an elderly person couldn't take advantage of some of the same kind of offers to pay off an expensive prescription bill. Even so, the credit card company justifies the expense of these teaser offers as a marketing expense. (They are an effective marketing tool because they tend to generate more business rather than reduce it.) It works because most consumers lack the discipline to pay off the loan given the generous terms offered by most credit card companies.

No, I think for the vast majority it's the lack of discipline that gets people into these positions. And good financial discipline could potentially get them back out. I'm sorry; but I think what most people need isn't more "help" from credit card companies...

Perhaps the credit card companies could start offering people a free implant of brains, discipline and (financial) backbone?

- Joel
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