The Future of Credit Cards
The future of credit cards
all over the world will be heavily determined on the outcomes taken by
the still powerful, but falling, world financial position of the United
States. This will be true for several reasons - chief among them
is how the Fed and its chairman, Ben Bernake, handle the current US
meltdown, and especially how the global elite and national leaders
choose to react in turn. Should they decide to learn from example
the future of credit cards will follow a reversal of the US
deregulation mania of the 1980s-1990s era, leading to a future where
accountability and trust become the guiding wisdom of the market.
The credit card market will be wise to follow suit.
Should the captains of the credit card industry decide to learn a few
lessons from the US credit meltdown, expect tighter accountability
standards. Gone will be the days where credit card markets decide
to expand market share to consumers at risk, with the inability to
adequately save and guard against over consumption. While the US
credit deregulation movement of the 1980s followed the optimism of
equal credit opportunities for all income groups, it ignored the basic
logic surrounding extending credit. That basic logic is the
ability for individuals to uphold their financial obligations when
being issued a credit card. Individuals need to have a strong
enough financial position in order to meet obligations. People
living on the margins of financial safety are at risk for financial
instability. Consequentially the inability to weather a crisis
affects the ability to repay debts. In the US credit card
companies took advantage of deregulation to extend credit to at risk
individuals, and compensated for that risk by charging exorbitant fees
and interest rates to cover the default and bankruptcy rates.
Financial meltdown resulted.
National leaders with an interest in protecting their constituencies
will be wise to guard against any deregulation of the credit card
markets that will create incentives for companies to aggressively
expand into at risk groups. Strong oversight over the credit
markets will be sorely needed. Voters should be keen to avoid
rhetoric from the credit card industry that preys on wishful
thinking. Basic rationality regarding credit should be kept in
mind: accountability and trust still count for much in the 21st
century.
The credit card industry in Australia and much of the world will look
to the credit fiasco in the US in determining its direction.
Should the US wake up to the fact that deregulation destroyed
accountability and trust in the US credit market, expect re-regulation
to resume. Inflated short term profits garnered from irrational
credit market logic should not be taken as a sign of market health.
The future of credit cards in Australia, should the voting public and
national elite be cognizant of US, will be a future where credit cards
will not be as easy to obtain as a letter in the mail. Expect
tight scrutiny when applying for credit cards. Also expect when
applying for credit cards diligent scrutiny into personal and family
finances and consuming patterns. Anything that might cause bad
credit records should be avoided. But most of all, expect a
future where Australians are happy in avoiding the financial hardships
that result from aggressive and irrational credit markets.
For additional information on credit cards or related topics please visit our library of credit card articles.
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