You, too, are to blame for your credit-card debt

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I’m already getting hate mail for having suggested that Americans’ epic struggle with credit-card debt isn’t entirely the fault of big, bad credit card companies. Guess that’s not what we’re in the mood to hear.

The irony is that if you actually read my story past the headline (which I didn’t write), you’ll see that I’m giving credit-card users something of a free pass. It’s not lack of will power that’s the issue, but our own faulty cognitive wiring. Here, it will be easier to excerpt and link:

The problem with the credit-card industry isn’t just credit-card companies — it’s you too. This week the Senate takes up a bill that would seriously clamp down on some of the industry’s most unsavory practices, a piece of legislation that President Obama has said he wants on his desk by the end of the month…

Credit-card companies, though, may not be the only ones we need to be protected from. Every penny of Americans’ nearly $1 trillion in revolving debt started with someone — some individual person — whipping out a piece of plastic and making a decision to use it. We could consider that free will and just call it a day, but there’s plenty of reason to believe the story isn’t so simple. There are piles of evidence that people are bad decision makers when it comes to how they use credit cards. Even when presented with full and fair information, they often make decisions that are not in their own economic best interest — a reality only partly taken into account by the new rules and pending legislation…

The solution I get to, after documenting some of the economically irrational ways we use credit cards, is disclosure that makes the cost of credit real to people. Not real as in telling them, but real as in telling them so that they understand. It’s an idea I stole from these guys. One of whom now works for the President. Hm.

You can read the rest of the story here.