Credit Card Companies Profiting from Those Who Can't Pay

A press release today announces some shocking findings that are to be addressed by Congress in a special briefing today. Many argue that there is a problem in the credit card industry, a big problem. Credit card debt in the United States totaled $800 billion in 2005. Lenders profited $30 billion in that same year alone. The federal government has deregulated the industry over the last several decades, eliminating caps on interest rates and penalties. A recent study shows that those who can least afford to pay these increased rates and penalties are the ones paying the price.

Demos, a non-partisan research center, published a study this week that reveals who bears the cost of high credit card penalties. The study, "Who Pays? The Winners and Losers of Credit Card Deregulation", argues that African Americans, Latinos and single females bear a disproportionate amount of the cost to subsidize credit card by paying excessive fees and high interest rates according to the press release.

An increasing amount of credit card companies are offering such things as no-interest for a specified period of time, frequent flyer miles for credit card use, or cash back for making purchases with their credit card. Many consumers aggressively take advantage of those rewards. Those rewards aren't cutting into the credit card companies profits however.

Tamara Draut, co-author of this study and Director of Demos' Economic Opportunity Program said concerning these offers, "Someone has to bear the cost of these promotions, and they are often the families already in financial dire straits. The impact of a deregulated credit card industry on American families is clear."