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A Reformed Fellowship

Credit card debt and a tightening economy

An Associated Press report, “Credit Card Borrowing Limits Reduced for Tens of Thousands of Consumers,” reveals a growing problem for many Americans:

Just as Americans grow more reliant on credit cards to help pay monthly bills, they’re being hit with a one-two punch: Card companies are reducing borrowing limits for tens of thousands of consumers, which then can lead to lower credit scores.

Those facing this predicament might not even know it until they apply for a loan or another credit card, and then get denied because their credit score has dropped.

Credit card companies, concerned about borrowers’ ability to pay, are evidently reducing borrowing limits for those who have substantial credit card debt in order to lower the companies’ risk of loss should the borrower increase his debt and subsequently default.

With the tightening American economy, more people are using credit cards to buy necessities while continuing to finance their desires. The AP article notes:

Such moves come as consumers are increasingly using their credit cards as a source of liquidity, especially since it’s becoming harder to tap their home equity as much to pay for everything from renovations to vacations to trips to the mall.

Frankly, I have little sympathy for the plight of credit card companies. They have made billions off of arguably predatory lending practices. Until recently, getting a credit card has been ridiculously easy. Witness, for instance, the numbers of college students who have amassed large credit card balances. Not having steady employment, many of these students should not have been offered a credit card, let alone approved when they applied. And the credit card companies are culpable in their inundating students with offers of easy credit.

People, though, are responsible for their actions and are also culpable. Tapping home equity or using credit cards to finance “everything from renovations to vacations to trips to the mall” is really not all that smart, and I’m being generous. If you don’t have the money, renovations don’t have to be made, vacations don’t have to be taken, and trips to the mall can be avoided.

Americans today aren’t much for delayed gratification. We’ve lost the concept of saving for things we want. Couple that attitude with a tightening economy where we’re getting squeezed with ever increasing fuel and food prices, and the result of using credit cards to finance it all is a catastrophe waiting to happen.

Unfortunately, Christians are not immune to the “gotta have it now and worry about paying it later” mindset. And many Christians have wrecked their marriages in particular and their lives in general by living according to that unprincipled assumption.

We need to remember that “the rich rules over the poor, and the borrower is the slave of the lender” (Proverbs 22:7, ESV). Most debt problems are avoidable. We do not have to keep up with our neighbors with the vacations we take, the cars we drive, the clothes we wear, the gifts we give our spouses and children, or whatever. When it comes to using a credit card, we need to abide by the rule that we purchase only what we can pay when the monthly statement arrives.

The apostle Paul’s admonition would cure a lot of our credit stress: “But if we have food and clothing, with these we will be content” (1 Timothy 6:8, ESV).