Credit is central to our consumer society. It takes the waiting out of wanting. Today my bank Lloyds/TSB sent me a letter to say that my credit card limit had been extended to £7500. If I ever use a credit card, and being such a dedicated anti-shopper I hardly ever do, I pay the monthly balance off straight away. The bank of course exists to make as much money as possible which they do by people borrowing as much as possible and paying a huge amount in interest. You can’t blame them. Dogs bark, ducks quack and companies try and make a profit. The fact that debt wrecks lives and families is not their concern.
But it is or should be the concern of government who could restrict such lending practices. There are over 70 million credit cards in circulation in the UK. But in Germany they manage with only 2.3million. Different laws and different cultures which we can change and adapt if we want. Our government won’t act because they want us to spend our way out of recession that was built on a credit bubble. It makes obvious sense.
While searching for a credit card image I found this – a Hello Kitty credit card. Erica, my partners daughter who is eleven likes Hello Kitty accessories for her hair. Should I get her the credit card to match?
The recession was built on a credit bubble true.
Yet that credit bubble was overwhelmingly built on top of a real estate bubble… secured debt on land titles as collateral. See here for detail: http://gco2e.blogspot.com/2009/04/what-we-owe-banks.html
The unsecured credit card debt was a small proportion. Surely we shoud be speaking about the big chunks in loans for land. Anything less is a paliative?
Does having less credit cards in Germany make things better?
I generally agree with you about the problems of dependence on unrealistic levels of credit but, now that that’s happened, I’m not sure about the best way to deal with the problem.
It would be a brave government that introduced legislation designed to just turn off the taps of credit. There’s millions of people who’ve grown up with a certain approach to personal finance, they’re unlikely to be happy with a big bang move to a completely different approach.
I agree Robin but its all part of the same conditioning process – to get use used to credit whether its on plastic or bricks. We have to tackle both issues. We used to get pleasure from savings; the savings book was the emblem of delayed gratification. Can we find ways back to such pleasures? It cant be too difficult as David suggests. Compass is looking at taxing house prices increases to make home places to live in and not speculate on. That would be a start in answering Robin’s point.
Taxing house price increases? That will be popular. You can’t become rich by earning money. At some stage, it is unearned, or unjustified, either through bonuses, unrealistic salaries or speculation. For many people, participating in the housing lottery is their only chance to actually ensure financial security. The problem of shopping is not allowing people to get richer – what’s wrong with that? – it’s what they do with their riches. Take away the motor in society for people to decide their own destinies and you will get the motorless, do-nothing societies of the former communist bloc. It makes a lot more sense to pay a mortgage than rent into someone else’s pockets. The shopping problem is well posed, but the solutions need an awful lot of thought.
Re German credit cards – how a population of 90 million survives on 2.3 million credit cards is a mystery. They must never travel and never buy anything on the internet. Once again, what is wrong is having a sheaf of maxed out credit cards. There is nothing wrong with owning one. I have only one, which I use frequently and on which I never pay interest. It’s a handy tool. I think just about anyone should have one. But several? What’s the point, unless you are hopelessly in debt and are struggling with repayments. it is no surprise that banks will want to lend more to the solvent. Where we should worry is when they want to lend to the insolvent.
“Re German credit cards – how a population of 90 million survives on 2.3 million credit cards is a mystery. They must never travel and never buy anything on the internet.”
They could use debit cards for that.
True, David, up to a point. But there are a lot of places that will accept credit cards that won’t accept debit cards. At least, my Swiss debit card only works in Waterstones and a few other places, but is completely rejected at Sainsbury’s and Tesco. Why? I have no idea.
Almost everywhere accepts my debit card – except some websites, not problems at shops. But it’s for a big bank. My ethical debit card is for the Co-op – accepted nowhere. So it goes…
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