शैडोइंग अभ्यास: The credit card crisis - YouTube के साथ अंग्रेजी बोलना सीखें

When you think about America's financial capital, you're probably picturing New York City, Chicago, maybe San Francisco, not South Dakota or Delaware.

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When you think about America's financial capital, you're probably picturing New York City, Chicago, maybe San Francisco, not South Dakota or Delaware.

But when it comes to credit cards, that's exactly where the power is.

And the reason why has everything to do with the interest rates you pay.

And those rates right now...

Are at historic highs.

And there's growing concern more and more people will fall into debt.

Average APR for a credit card is now over nineteen percent.

An economic perfect storm.

Altogether, Americans now carry more than a trillion dollars in credit card debt.

Take a second to just let that number sink in.

In twenty twenty four, about eight in ten Americans had at least one credit card, and we used them for virtually everything.

Millions of Americans are using credit cards just to stay alive.

So we're talking about medical bills, car repairs, home repairs, day to day expenses, things like gas and groceries.

So how did we get here and why do these interest rates keep climbing higher and higher?

And maybe more importantly, why have credit cards become so central to how we pay for everyday life.

The modern idea of using credit to make a purchase goes back to the nineteen fifties.

Department stores, car dealers, and more were already letting customers buy now and pay later.

At first it was simple: charge plates or small tokens tied to a single store.

Then in the nineteen fifties, that idea scaled.

Credit cards as we know them started in the nineteen fifties as a restaurant payment method, basically kind of an IOU.

And then pretty quickly evolved into being used much more widely.

Legend has it a businessman named Frank McNamara was out to dinner in New York, and he realized he had forgotten his wallet.

Embarrassed, he had to call his wife to come pay for the bill.

But that moment sparked an idea a card you could carry so you never had to worry about cash again.

That idea became Diners' Club, one of the first charge cards, which you paid off every month.

Then banks took it a step further.

In nineteen fifty eight, Bank of America launched Bankamericard, which would eventually become VISA.

Bankamericard.

Think of it as money.

Unlike Diners' Club cards, this let you carry a balance month to month, and that's where interest enters the picture.

At first, those rates were tied to where you lived, but that all changed in nineteen seventy eight.

Speaking of money, this video is presented by Klarna.

Klarna is an app designed to make everyday spending simpler and more transparent.

It gives you the flexibility to decide how you want to pay, whether that's right now, later, or spreading payments out over time.

Everything is managed within the Klarna app, so you can stay organized.

You can also discover deals when you shop through Klarna app with participating brands.

Klarna says they're all about flexibility and staying in control of how and when you pay.

Download the Klarna app today or go to Klarna dot com to learn more.

Terms apply.

And a quick note, Klarna didn't dictate the editorial content of this video, but their support did make reporting like this possible.

And now back to the video.

There was a Supreme Court case back in the seventies that declared that it's where the bank is based, not the customer.

With respect to these state usury laws.

There's a lot of legalese and laws that happen in between, but what you need to know is that this Supreme Court case transformed the credit card industry, so that incentivized banks to set up shop in places like Delaware, South Dakota, Utah, places that either don't have an interest rate cap or have a very high cap.

This helped make credit cards a key profit source for banks, and their popularity grew pretty quickly.

By nineteen ninety nine, there were more than three hundred and sixty five million open credit accounts in the US, and since then, credit card usage has skyrocketed and so have interest rates.

Back in twenty ten, it was around ten percent.

Now we're looking at almost double that for the average.

These days, the average American carries around six thousand dollars of credit card debt, and more people than ever are charging not just for convenience.

Here's a pretty common example of how debt can pile up pretty fast.

Say your car breaks down.

You don't have the extra cash to pay for it, so you put the repair on your card.

You plan to pay it off.

But life happens and you keep paying just the minimum payment because it's all you can afford.

Seems reasonable.

After all, that's what credit cards are for.

If you have five thousand dollars in credit card debt and you make minimum payments at twenty or twenty five percent.

I mean, you could easily be in debt for a decade or more.

Think about it as walking up the down escalator.

Each step you take, that's your minimum payment.

But the escalator is pulling you down at the same time.

So even though you're moving, you're barely getting anywhere.

And the longer you do that, the faster the escalator gets and the further away you get from climbing your way out of debt.

As long as you're paying the minimum, you're behaving in terms of fulfilling your obligations to the credit card company, but you are becoming more and more indebted.

And that's what then makes it very, very difficult to crawl out of.

And that is by design.

Credit card companies are not charities.

They are trying to make a profit.

About half of cardholders pay in full every month.

The other half that carries expensive debt.

That's a real trap that some people fall into.

In twenty twenty two, major banks collected one hundred and five billion dollars worth of interest payments.

And that interest is based on something called April.

With April, we're talking about annual percentage rate.

Basically the interest rate that you're charged Apr is based in part on the current prime rate, which is influenced by the Federal Reserve and currently sits at six point seven five percent.

So why is your credit card Apr still nearly twenty percent?

It's because April isn't just one number.

It's the prime rate plus a big margin on top.

We have to remember that those credit card companies are trying to make a profit.

A credit card is a loan.

It's not backed by an underlying home or car.

There's no underlying asset on the line for repossession.

They are covering themselves for the risk of the credit card holder.

But the risk has also increased as more and more Americans find themselves living paycheck to paycheck.

It's often because wages have not kept up with inflation, and because health care costs in this in this country are so, so significant, credit card holders are not using their credit cards just because they're in the mood to, to buy a luxury item.

And it's this question of affordability that has some politicians on both sides of the aisle bringing up the idea of capping these interest rates.

I'm asking Congress to cap credit card interest rates at ten percent for one year.

That is the kind of big structural change that will make a big difference to families across America.

The idea that you don't charge outrageous interest rates, not a radical idea.

The idea sounds simple.

Limit how much banks can charge and make borrowing cheaper.

Supporters say that could save Americans billions of dollars in interest.

But the banks are saying something different.

It would be a economic disaster.

There are some kind of doomsday scenarios about what would happen next.

You really run the risk that credit card companies then we'll say, okay, I'm going to put a cap on how much you, John and Mary can charge on your credit card, or they could turn you away because they think you're too much risk.

If they say that more than eighty percent of cardholders could lose access to credit, they say that this would really dramatically reshape the way we pay for things.

Could cause a recession if people have less spending power.

Despite the bipartisan support, a federal interest rate cap is unlikely to come anytime soon.

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But that doesn't mean that the millions of Americans drowning in credit card debt can't take action.

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Here's what the experts I spoke to recommend.

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The best way to use a credit card is to pay it off as quickly as possible.

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You need to be paying down the credit card that has the highest rate, because that is what's getting you into even more debt.

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If you need more time, get a zero percent balance transfer card.

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So that involves opening up a new card, one with a generous zero percent promotion.

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So they say.

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Bring your existing credit card debt over to us.

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We won't charge interest for two years.

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Now, they're not doing this out of the goodness of their heart.

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Frankly, they're hoping that you carry a balance after the term is up, but you can use it to your advantage.

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Experts say people also really need to be careful about the marketing of credit cards.

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Cash back airline miles, points for travel and dining are all ways companies try to lure people into opening new accounts.

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Are you ever really going to use those points?

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Is it going to take millions of points for you to get what the credit card claims it’s offering?

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Credit cards aren't going anywhere.

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Used one way, they're convenient, used another.

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It could be one of the most expensive loans you've ever taken out.

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Can you think of what can politicians do?

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It's not just about the credit cards.

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It's about much, much bigger problems that really can raise the standard of living for everybody who is living here, not just for us.

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You know, a few.

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