Why Do We Need Credit Education?

I was thinking about the credit crisis in the US today, and I think the experts are wrong.
When you read about the problem, the concensus seems to be that we use charge cards too much, that the government is encouraging the public to spend through lower interest rates rather than save money for the future. We read of evil banks, dishonest mortgage companies, and credit card companies charging outragous fees, all trying to take your hard-earned money away from you.

Then, as soon as we get in trouble with credit, we have someone bail us out. Credit counseling companies, bankruptcy courts, even the government trying to make sure that your mortgage doesn’t get called in. And as soon as one problem is fixed, we go out and make it worse by charging something else.

Now, don’t get me wrong, I believe in credit. When you are buying a house or car, I think credit is a great thing, as it allows you to extend your earning power to buy something you otherwise wouldn’t be able to get. I also think a credit card is great if used properly. If you are travelling, or have a sudden problem crop up, credit is a wonderful thing to have. But most of us don’t stop there. We buy expendable goods (Food with credit? Yep, GREAT decision!), so that the price of an item is severely inflated. We charge way more than we can possibly pay back in a timely fashion. And then, when we are paying hundreds of dollars a month in interest, we wonder how we got into this position!

Indeed, I think the experts are wrong. They blame financial institutions, or the government, but the real culprit is a lack of credit education.

I’m 42 years old. When I went to high school, they taught me how to balance a check book. I have a kid in high school. He just learned the same thing. Now, honestly, how many people do you know that still write checks? I don’t even know where my check book is! And even if I did, my debit card is just too handy.

So we sit here handing out credit cards to young adults in college, and they have no idea what an interest graph looks like. Or that interest is usually paid first on a loan. Or that a missed payment increases your rates. They don’t get it!

When I was 21, I got married. Prior to that, I lived in a house with an under-the-counter fridge, a pot, a skillet, and a chair. I was pretty well off! Then, my new bride moved in. Wierdly, she wanted cold food and clean clothes! Women…

So, off we went to Sears, where, wonder of wonders, they gave us CREDIT! We got a fridge, a couch, and a washer and dryer. Just 21.99% interest! Only going to take 5 years to pay off! FREE for 90 days!

My credit debt outlived the couch. It nearly outlived the marriage. But, I learned the hard way.

If only our kids didn’t have to do that.