Never mind the national budget deficit: U.S. consumers are $2.56 trillion deep in consumer debt, an increase of 22 percent since 2000. The average household owes over $9,205 on credit cards, and the average college student graduates with $20,000 in tuition loans and other debts to pay off.
Lenders and credit-card companies have grown more aggressive in signing up new customers, soliciting on campus and marketing heavily to make people feel less guilty about debt. Meanwhile, they’ve raised interest rates even to good customers (to over 19% from 17.7% in 2005) and found new ways to make money with higher fees for late payments and exceeding credit limits. CardWeb, a credit-card information website, says such fees have more than doubled in the last dozen years. This revenue allows credit companies to lend more to people less likely to pay, while profits rise to new heights.

1. If you have one or more credit cards, check your credit history for free at www.annualcreditreport.com, what does your history tell you about your spending and borrowing habits? What if anything do you need to change? Why is regularly checking your credit history advisable?
2. What do you think is the real cost of “free” rewards offered on many credit cards? Who pays it? Do you think these rewards are worth the cost? Why or why not?
3. Imagine you’ve applied to a bank for a home mortgage, car loan, or tuition loan (or perhaps you already have such a loan or loans). Now put yourself in the bank’s place for a moment. How do you rate on the five C’s of credit management? Which of these criteria is most affected by your credit-card history?