by Duncan Creamer

David G. Wood

Image by Center for American Progress
Exploring Issues in and Policy Solutions for Credit Card Markets

During the last three decades, credit cards have transformed the American economy. They have revolutionized the daily mechanisms for payment and borrowing, and in the process, have contributed to the mass consumerism that distinguishes American culture and supports the health of our economy. The days of the “one credit card family” are a thing of the past, with some 1.5 billion cards in circulation today—five for every American man, woman, and child.

Not surprisingly, the rapid growth of the credit card market has been coupled with a dramatic rise in consumer debt (as of September 2006, credit card debt in the U.S. totaled 7 billion) and record profits for the industry. This relationship raises some important questions. For example, why are credit cards so much more common in America than in Japan and the United Kingdom? Why do credit card companies continue to issue cards to customers who are such bad credit risks? What aspects of credit cards most often lead consumers into debt traps? What specifically can policymakers do to solve these problems, and are these solutions politically realistic?

As part of the Center’s ongoing efforts to highlight and address consumer debt issues as a key component of our Economic Mobility Program, CAP assembled a distinguished group of experts who discussed these questions and the policy options for moving forward. First, Sen. Carl Levin of Michigan who commissioned the recently released GAO report entitled "Credit Cards: Increased Complexity in Rates and Fees Heightens Need for More Effective Disclosures to Consumers" delivered opening remarks. This was followed by a panel discussion with Ronald Mann, the author of the book, Charging Ahead: The Growth and Regulation of Payment Card Markets, and David Wood, Director of the aformentioned GAO report on credit cards. Also, the Center’s Director of the Economic Mobility Program, Derek Douglas, discussed a Center report regarding a safety rating system for credit cards.

Article by Wilfred Richards

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