The Wall Street Journal just produced a great article profiling the historical context to today’s credit crisis for many American households. Basically, federal legislation in the 1970s encouraged the marketing of credit cards and corollary services to more and more Americans. But the easy access to credit allowed many to live beyond their financial means, and commensurate with the deepened economic crisis has been a painful process of household deleveraging.
What the article helped me understand was that a loss of access to credit can be a blessing in disguise for individuals and families that struggle with financial management. As we’ve argued before, there is a certain relief that comes from simply being denied at the point of purchase with a debit card rather than allowing a credit card, loan, or costly overdraft protection service permit a transaction to go through. In these cases, the pain of spending beyond one’s means is not erased, but simply delayed to a later moment.
The credit card industry, faced with new governmental controls and an entirely new consumer environment, is radically reconsidering their target markets and product features. This change is not something to be shunned, but arguably a welcome addition for those with debt. Think of it this way: less access to cheap credit at astronomical interest rates is handy when setting up a debt elimination plan. Let the planning and execution begin!
Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs. DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.
Tags: new credit card restrictions and debt planning, tough credit access, tough credit card access
