The average U.S. household carries more than $10,000 in credit card debt. Many consumers have complained about the high-fees of credit card companies and the U.S. House has approved a bill that would stop credit card issuers from imposing arbitrary interest rate increases and penalties, while halting certain billing practices.
In 2001, 59 percent of African American families had credit cards, compared to 82 percent of White families. Although African American households have lower rates of credit card ownership, African American cardholders are more likely than Whites to have credit card debt. Credit card debt has caused African American families to use critical financial resources to pay mounting monthly interest payments instead of saving or acquiring assets.
Unfortunately, most of the debt African Americans have accumulated is used for items that depreciate in value, such as cars, furniture, electronics, and appliances. This is an indication that Blacks use credit inappropriately - to stretch their incomes. Historic redlining by traditional banks has left high-interest credit cards as one of the few easily accessible sources of loans for minorities.
The high levels of un-banked and under-banked Blacks have spawn affinity and co-branded prepaid cards marketed primarily to them. One example is record industry mogul Russell Simmonsâ€™ Visa RushCard. Though Simmons wasnâ€™t in the White House meeting on credit cards, his company is a symptom of the problem. He claims to be solving problems for under-banked communities, which often lack access top a bank account, but complaints are mounting about the fee structure of his prepaid Visa RushCard. To utilize Simmonsâ€™ RushCard and â€œlive the American Dreamâ€ requires an activation fee of $19.95, a daily convenience fee of $1 (capped at $10 a month) and a $1.95 ATM cash withdrawal fee.
Good financial management for African Americans requires actively tracking credit card usage and considering it a portion of overall net worth. When the economy is good, people do not worry because they know they can pay in one month when the credit card company sends them a bill. But now the economy is so bad, many people can not pay for the total amount and pay just the minimum which puts them in a 19 percent to 24 percent high interest rate category.
A rule of thumb for credit card use in todayâ€™s economic times - if you canâ€™t afford it, donâ€™t buy it.