Don't Do Debt.com

Credit Cards & Co-Branding Campaigns

Imagine the college of your child's choice making a profit from your child's debt-load. Can't imagine it? When a person opens a credit card in conjunction with an academic institution, their favorite retailer or otherwise, everyone profits except the cardholder.

An article in the Sunday, 10.19.03 edition of The Charlotte Observer asks, "What's Next? Krispy Creme Credit cards?" Co-branding was all the rage from 1992-99 but proved unprofitable to the banks creating these partnerships/campaigns. The co-branding/partnership is, however, back in style.

Credit Cards & the Big Picture

Here's how credit card debt depletes a paycheck and prevents someone from saving money:

Junior opens a credit card with a 0% introductory rate. He charges $300 to this new credit card and only has to pay $15. He thinks, "Wow, I paid $15 to spend $300. This is easy. A few more credit cards won't hurt." What typically turns out to be a short-lived moment in time, Junior believes he can pay a little extra every month (minimum payments) to buy and do what he otherwise couldn't (by charging it). The real interest rates kick in on his handful of cards.

Good debt vs. bad debt

You've heard debt is good. You've heard debt is bad. Which is it you ask?

Debt is good when it's used to invest or advance one's future. Debt is bad when it harms your future. I've seen and heard too many horror stories about the stress of thousands of dollars on credit cards on one family or individual. It's not right that millions of people share one thing in common: the burden of too much credit card debt.

Debt in an uncertain economy

Recent reports tout credit card debt as a national crisis. With an uncertain economy and an ever-changing job market, living beyond your means on plastic is possibly riskier than ever before. Credit card debt prevents a person or family from saving money and it deprives a person of time with loved ones because in many cases a person has to work twice as hard to maintain their "indebtedness". I think it's fair to say that many people find it extremely difficult to get ahead in life when buried in debt.

Whether you believe you're in debt or not, it's time to take stock of how prepared you would be should a financial emergency arise. Could you afford your basic bills if your income were stopped or cut in half? Could you afford to make your minimum payments in addition to your basic bills?

In a perfect world, jobs and income would be guaranteed and it wouldn't cost an arm and a leg just to live and breathe everyday. But, I believe credit card debt would still be a crisis.