The credit card bubble

Buying something now and paying for it later may have seemed like a revolutionary idea when the credit card was first introduced. Now, though, it has grown into one huge mess. The recent housing bubble burst as a result of people living in homes they couldn’t afford. The looming credit card bubble is growing larger because people are living lifestyles they can’t afford.

Looking at some raw data can be scary, especially when it comes to financial crises. The Federal Reserve reported in 2010 that the total US revolving debt was $852.6 billion. The average credit card debt per household was around $16,000. From the 2006 Census Bureau, the average household income in the United States was $46,326. If we take this information, it appears that the average credit card debt is one third the average yearly income. Add one more piece of information, the median personal income for individuals over the age of 25 ($32,140, from 2006), and you can see that credit card debt is a problem.

The main problem is people living beyond their means. This is spurred on by the bandying around of the ideological term “middle class.” Just like politicians use the term “the American people,” the “middle class” is supposedly a group of everyday Joe Schmo people. Cultural influences may make it seem like the middle class is the majority and it’s “where you’re supposed to be.” However, from the culling of the three major academic class models (Gilbert, Thompson & Hickey, and Beeghley), most of America is actually in the working class. Furthermore, there is a wide range as to what exactly the income of a middle class American is, anywhere from $25,000 to $100,000. It doesn’t take a math degree to know that 100 is much larger than 25.

With that said, another factor in the crisis is minimum wage. Minimum wage in the US has been notorious for being not just low, but also stagnant. In the late 1990s, minimum wage was $5.15 an hour, and this amount did not change until 2007. The national minimum wage now sits at $7.25 an hour, and the highest state minimum wage is just $8.67 in Washington. Still, the minimum wage has risen at a rate lower than the rate of inflation. The present rate of $7.25 is the highest ever nominally, but the $1.50 minimum wage in 1968 would equate to $10 today. Yes, making $10 an hour today would be the same as making $1.50 an hour in 1968!

Finally, if you look at prices of goods and services, you’ll see how so many people are living beyond their means. Healthy foods cost much more than fast food, and many people can’t afford to eat nutritionally well. And with the oversaturation of commercials telling us we need to buy the latest technological gadget… well, it’s only a matter of time before the credit bubble bursts.

David Pilley

David Pilley

David Pilley is a May 2010 graduate of the University of North Carolina at Chapel Hill, with a B.A. in communication studies and a creative writing minor. He is a native of Raleigh, North Carolina.

He played clarinet for the Marching Tar Heels in 2005 and 2006. He also volunteered for STV, the student-run television station at UNC-Chapel Hill, in the spring of 2010. He shot video, wrote scripts, and acted for “Off the Cuff,” UNC’s longest running sketch comedy show. He has the rare distinction of having lived in a dorm all four years of his undergraduate college career. He was also on Franklin Street on the night of April 4, 2009. His future plans are to pursue a master’s degree in journalism and to one day work for the media as a sports journalist or broadcaster.

Being one of eight children, David realizes finance is an important topic to everyone, regardless of his/her knowledge of the subject. His interests are in personal finance, budgeting, and savings.

In his spare time, David enjoys watching sports and standup comedy, as well as doing crossword puzzles and writing in the first person. He also thoroughly enjoys trivia and, one day, hopes to participate on the game show Jeopardy!, where he will try to break Ken Jennings’ 74-game win streak.
David Pilley

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