LatinaLista — Credit cards. Can't live with the interest rates and can't live without the convenience of fast cash -- what's a person to do?
Well, too many families, especially Latinos, are finding they have no choice but to use their credit cards to survive these uneasy times. Unfortunately, usage is rising, along with debt.
From 2005 to 2008, Latino households went from having the lowest rate ($7,091) of credit card debt by race/ethnicity to having the highest rate ($10,002), an increase of 41 percent.
In addition, Latino borrowers have been targeted for costlier credit cards with high fees and interest rates, increasing their probability of accruing additional debt from late fees and penalty interest rate hikes.
When debt increases, it makes it more difficult to pay those bills on time. A National Foundation for Credit Counseling/MSN Money study found that 32 percent of Latinos reported credit scores below 700, "which often translates to less favorable loan terms on major purchases from automobiles to homes."
It doesn't help that credit card companies are suddenly targeting users and upping the interest rates to unbelievable levels. Just recently, I received a statement notice, from a credit card company that I've done business with for over 15 years and with whom I've had a 22% interest rate, now inform me that my interest rate will be 29% come the first of the year.
My decision - to pay off the account and use that card for extremely small purchases. Yet for low-income families, just trying to keep up with the accrued interest on those monthly bills is going to be tough.
Just like the country blamed the subprime mortgage fiasco on the backs of minority and low-income consumers, this trend of raising interest rates on those who can least afford it has the potential to be just as damaging for our economy and communities of color.
Today, Senate Banking Committee Chairman Christopher Dodd announced he was introducing legislation to call for a temporary freeze on credit card interest rates on existing balances.
It seems Sen. Dodd and his colleagues have noticed "some credit card issuers have jacked up fees to try to maximize their revenues before new rules kick in."
This is Wall Street greed that isn't just hitting Main Street U.S.A. but right into the heart of households everywhere. Because of what the credit card companies are doing, Congress is shedding their glacial practice of passing legislation and reacting:
Dodd's bill arrived just days before an expected vote by the House of Representatives, possibly on Thursday, on a bill to advance by almost three months to Dec. 1 the effective date for strict new rules on credit card fees and interest rates.
The new rules can't go into effect soon enough. It's bad enough to have to make ends meet on less money but to have to pay increased fees and interest for nothing more than having the card, is nothing short of abuse of power and trust between that company and its consumers.