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Is Credit Handed Out Pretty Freely in America?

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There was an interesting comment left by Shay from Australia:

I am always amazed by the freedom of credit given in america…I live in Australia. I have a pretty clear credit history except for one little debt of $699 that was paid nearly 3 years ago. This little debt has caused me no end of trouble in me trying to apply for finance. I am not eligble for personal loans, not eliglble for credit cards let alone a home loan or anything else. Even when I did have a credit card I used it once to show I can use it and pay it off (all in 3 hours LOL) then I cut it up – that doesn’t count…Only what I didn’t pay once because I got into the argument with the telphone company over it…..

One thing I have learned from this blog and several others it seems to me credit is handed out pretty freely in America. Am I wrong? I would love to hear more on this.

Shay, I can’t speak for other countries, but I do feel that credit is handed out pretty freely in America. When I signed up for my first credit card, I was an 18 year-old college freshman. A little while later I had a credit card with a $500 limit. Over the years, my credit limit increased and it ended up higher than my annual income. Even today, our credit limit is higher than our income. It doesn’t add up in my mind.

Before I started blogging about our debt, I thought that we were pretty alone with the debt hole we got ourselves into. Today, it’s a different story. I can’t believe how widespread of a problem debt is. While I don’t usually view the credit card companies as the enemy (I do believe you can use them for “good”), I do think they sometimes give people enough rope to really do some damage. Every time we maxed out our cards, they raised our credit limit so we could charge some more.

It would be interesting to hear everyone’s thoughts on America’s debt problem and whether you think America gives credit too freely. After reading Shay’s comment, if we lived in Australia…it sounds like our financial situation would have taken a very different course.


16 Comments

  • Reply Tom |

    The Bank of Australia is actually a bank that is part of the Australian government so when the Bank of Australia loses money the government loses money.

    Contrast this with the Federal Reserve CORPORATION (The US Central Bank) which is a PRIVATE corporation that stands to lose nothing but the air (credit) it issues out of nothing and you begin to understand why credit is easy to get here vs. there.

  • Reply Dana |

    I wouldn’t want to see the standards for issuing credit become as strict as in Australia, though. I would like to see us aim for a happy medium. There’s no reason a person shouldn’t be able to get credit if he’s had one contested bill that he paid off. On the other hand credit card companies should not be allowed to indiscriminately raise credit limits, either, and should not be allowed to extend more credit than a person earns in income in a year.

    By the way, there was a huge row in the early days of the Republic as to whether there should be a centralized bank. I believe the status of the Federal Reserve was a compromise they reached–it’s a private corporation, but it issues government money, etc.

  • Reply Lazy Man and Money |

    I was doing a live chat the other day and while fielding some questions one asked me about fees for getting a credit card replacement. I thought this was odd. A minute later the person mentioned being from Australia. He/She mentioned quite a few things that I found surprising coming from the US. It really does seem like opposite ends of the spectrum. In the US, they’ll pay you to take a credit card. It seemed the opposite in Australia (if this person was correct).

    Amazing.

  • Reply Early Retirement Extreme |

    Not only is it too easy in the US. It is crazy because it is almost necessary to go into debt to get better mortgage rates, rewards for buying (which can only be had through credit cards). Although I would previously have sworn never to get consumer loans, I applied for a credit card anyway because credit history matters a lot more than the amount of money in your bank account. That’s just nuts! 😛

  • Reply jaye |

    What I find amazing (here in the US) is how the credit card companies are all seemingly linked. As soon as we started paying off our credit cards in full, we started getting 5-6 new credit card offers A DAY from various banks. Those on top of the credit “checks” my existing CC’s send. What a scam. I received one yesterday that had already been filled out in the amount of $10,000. The CC company suggested depositing it into my checking account. How thoughtful. They are masters of fine print…minimum transfer fees, default rates, etc., etc.

    It drives me nuts.

  • Reply Sandra Hamlett |

    Credit is handed out too readily in this country but I don’t believe this is the main problem. It’s the fact that there is all this credit with little or no teaching about finance in this country. When I was growing up (early 70’s) having a credit card was a big deal. People tended to have one major credit card and maybe a store card (but that was pushing it). I never remember hearing my parents or their friends complaining about credit card debt- high prices, yes, but never debt. Owing money was BAD thing. By the time I was in my late teens and early twenties (late 80’s, early 90’s) anyone could get a credit card. I had friends who possessed 5-10 credit cards even though they had no incomes. Now people accept credit card debt as a given. And the credit card companies know this and exploit this fact. Hey it’s easy money for them. The ideas of living within your means is not a pervasive message in our buy now, pay later society. My husband and I have fallen victim to this message and we’re having to get ourselves out of this kind of thinking.

  • Reply Beth |

    I just can’t get on board with discussions that place blame on the credit card industry for people’s debt problems. There are many things that are bad for you — or that can be good or bad depending on whether you abuse them or not — that are easily available, heavily marketed and considered necessary (or actually are necessary, like food) in our society. Each person/couple is responsible for their own choices and the consequences that follow.

  • Reply Da Big D |

    I have to agree with Beth. Its not the companies fault that the consumer over extendends themselves. $500 limit for a college freshman is very reasonable and a good limit for a first card. Who is the company to say you should be frugal and not spend and run up you card? They are in it to make money. Its the individual who is responsible. No one put us into this problem, we did it ourselves because of our actions or lack of.

  • Reply DC Smith |

    It certainly has changed over the years.

    For many years Dad wouldn’t use Shell gas. He was insulted because they refused to give him a credit card (just a gas card, not a Visa/Mcard like they have now) when he was in his 20s, even though he and Mom also worked in good, secure jobs. He bought all his gas at the same independent gas station way across town for over 20 years because when he and mom first got married in the early 70s they let him run a tab.

    There’s still one station in my hometown, an independent (no oil company brand on the station) that takes only cash, but lets long-time regular customers run a tab. It’s all tracked by hand, ink-on-paper. It’s also the last full-service place in town. They do a booming business with the local widow population.

    So if people had to face their creditor every time they shopped at his store would they handle credit differently? If you were the shopkeeper, how much of your own money would you be willing to lend? To whom? Would you charge interest? In places (like Australia apparently) where centralized credit isn’t so easy to get, is local/store credit still alive and well?

  • Reply Trixie |

    Is credit handed out freely here in the US? Oh my, YES! Right now I could run out and get thousands of dollars in credit cards opened. Paying it back, not so easy:)

    Take Care,

    Trixie

  • Reply K |

    Da Big D: How is a $500 credit card reasonable for a college student that has NO JOB?? In the past, you actually had to be credit-worthy to get credit. Now, they issue credit cards to anyone, including people with no income, children, dogs, dead people, etc. By definition, a person cannot pay off their credit card if they have zero income and are probably actively going into other types of debt as a student. Credit card companies know this, which is why they irresponsibly issue cards to young people and get them hooked and drowning in debt early.

    Early Retirement Extreme: None of those excuses are good justifications for credit cards. You can get a competitive mortgage rate with NO credit score. It’s federal law. You just need to show certain other things, like a steady job and a history of making payments (like rent, etc) on time. And the “rewards” aren’t really rewards…most people spend more when they use plastic (cancelling out the benefit of the rewards) and most people never use their rewards.

  • Reply Da Big D |

    K: That would assume that a college kid doesn’t have a job. I had one all through school and didn’t have any problems. No one is forcing ANYONE to take the card. Its how they make money, and well, people don’t learn the more they borrow, the more they owe.

  • Reply Matt |

    I also thought I was an exception with my debt load but as I started talking about my finances and money in general I found that a lot of people struggle with debt and live paycheck to paycheck just like I do. Its the rat race!

  • Reply Amy |

    I also live in Australia and had a debt of $500 that was paid at the beginning of last year and can’t get a credit card either. I think it’s ridiculous that in other countries they offer cards with a $100,000 limit to people on $30,000 and with a bad credit score, but in Australia it is too far the other way.

  • Reply Financial Freak |

    I think the extremes here are interesting. I do think it’s too easy to get credit in the US. I personally don’t believe that credit card companies should be allowed on college campuses.
    My boyfriend still gets credit card applications for his grandmother who died several years ago.

    I also think that there’s a decided lack of education in US about how to handle all things financial.

  • Reply ree |

    i agree with amy i also live in australia and i have a $1000 debt by a telephone company and no one will give me a personal loan or a credit card to pay off my debt. i have tried everyone i can think of and another reason they dont let you get a loan or credit card is because of how much you earn. the government needs to pay more i think. i am supporting 2 kids and i get $300 a week. it is crap.

So, what do you think ?