Americans living in debt has become very common over the past quarter century. In particular, credit card debt is reaching all time highs. In a period of large amounts of disposable income, it is vital that the consumer be informed and aware of basic credit card laws, their credit rights and that they know exactly how a credit card works.
To start simply, a credit card is not a symbol of endless financial possibility. Just like borrowing money from a friend, it is expected that it will be repaid in a timely fashion. All to often, people are not aware of how a credit card works, and before they know it, they find themselves in over their heads. The ability to buy what they want when they want blinds them to the fact that they will soon be expected to hand over the money for their recent acquisitions. Credit card companies try to appeal to the consumer’s impulsive side by allowing them to make a minimum payment each month. This payment is usually a fraction of the total bill, and they then charge interest to the portion of the bill that was not paid off.
For example: if you buy a computer for $1,200, and make only the minimum monthly payment of $50, you then still owe $1150. Then there is the interest. If your credit card interest rate is 15%, the next month you will still owe the $1150 with an additional $172 in interest attached. This then exceeds the original cost of the computer. With a credit system like this, it is very easy to see why many people get pulled in and then need years to get themselves out.
In hopes of educating the public about how exactly credit and credit cards work, the Consumer Credit Protection Act (CCPA) was passed in 1968. It states plainly to the consumer credit card laws in terms of what their rights are as a credit card holder, as well as what they will be held responsible for. The Consumer Credit Protection Act was also created to prevent credit discrimination based on age, sex or income. People over the age of 62, or single women could no longer be denied credit, as well as a the owner of a stolen credit card would not immediately be held liable for purchases made with the card. The new credit card laws outlined in the Consumer Credit Protection Act helped make credit cards safer and more secure, but unfortunately, it still seems that many people are not sure how they are used, and how to do so responsibly. With credit card debts steadily increasing, the field of debt management has become a productive one.