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Your Excuses Aren't Good Enough

Remind me to keep my money complaints to myself. All it will get me is an earful of grief.

Empathy for cash-strapped Americans is in short supply, if the emails I received about my Oct. 13 article on a new credit card debt study are any indication of broader sentiments.

"The Plastic Safety Net" study found that middle- and low-income households were racking up credit card balances just to cover everyday expenses. One-third of the 1,000 survey respondents said that basic living expenses contributed to their current debt level. Illness, job loss, car and home repairs, tuition, and major appliance purchases were other factors cited frequently by those struggling financially.

It seems that readers would rather point fingers at the folks who responded to the survey. "Stop letting these spenders off the hook!" was the general consensus.

One was sick of the entitlement mentality:

"Blaming this behavior on lenders is interesting but misses the point completely. The real problem is a population that largely believes it is their RIGHT to have more than their parents did from the time they move out on their own. The real problem is people who believe it is their RIGHT to drive a new car every two to three years. The real problem is people that believe it is their RIGHT to buy huge homes on big suburban lots and commute 30-plus miles each way to work on wide-open freeways in their gas-guzzling SUVs. I have no sympathy for those that overextend to maintain a lifestyle that is clearly beyond their means, even if they delude themselves into believing that it is their RIGHT."

Another said that the data points were incomplete:

"This study makes folks mired in credit card debt simply look like victims of a predatory industry ... Please don't let your readers assume that folks aren't making enough money to buy food and pay for rent. Please encourage them to read between the lines of this study and understand that Americans are far too focused on today's brand new Chevy Trailblazer than tomorrow's retirement nest egg."

From a landlord:

"I couldn't begin to list the number of times I have heard people tell me they can't pay the rent because ... the cable bill was due; my cell phone was going to get cut off, etc. The cars they drive are more expensive than mine, many of them have big screen TVs, at least one cell phone, cable TV with every channel known to man, designer clothes and shoes. My point is, if they lived within their means they might be able to withstand a financial disaster."

Another offered lifestyle advice:

"Even though the credit card data doesn't show frivolous spending I think many of these households carrying debt could get out of that mode by changing their lifestyle ... and that is something most Americans do not seem to be prepared to do. It can start with small things -- packing lunch instead of eating out, skipping Starbucks (maybe that's a big thing), planning trips so that multiple errands are taken care of to save gas, pay-as-you go cell phones -- and on to larger things. Like what's up with driving an SUV? Why can't you drive the same car for more than three years? Do the kids really need to be in three sports?"

And this one blamed it all on Uncle Sam:

"Nicely done article, but I must take exception. I believe that America is really in debt due to [increased] government spending. Check out this page just to learn just two points: Spending is on the rise (I suspect the rise is even higher for the period date after the period the graph shows); and the government isn't as productive in spending the money as the private sector. Since Federal government is on the rise, and not even including State and local government spending, the money has to come from somewhere. It's us, babe."

Lifestyles of the rich and shameless
There are grains of truth in all of these notes. We can't completely discount shopaholism from the debt equation without a complete financial picture of how these consumers spend their discretionary income.

Don't worry, I'm not letting America slide so easily. I've lambasted the little guy for living large on borrowed dimes to keep up with the neighbors, who are probably buried in debt, too ("The Price of Wow"). I've given America a good talkin'-to about its savings shortfalls ("Let's Play Retirement Hardball") and even confessed to my own fiscal weakness ("Confessions of a Shopaholic"). I've repeatedly pointed out that the real millionaires next door don't dress as well as you or I.

That said, I'm still not letting Providian (NYSE: PVN  ) , MBNA (NYSE: KRB  ) , Capital One (NYSE: COF  ) , and friends off the hook.

Predatory lending practices used to be the sole province of companies that made a mint in fees and interest on consumers who couldn't qualify for a mainstream credit card. Five years ago, we used to gasp at interest rates above 25%. But now consumers who are late with one or two payments commonly find their rate hiked up to 30%.

New programs designed to make lenders look like your pal, like one from Citibank (NYSE: C  ) , advertise the end of the late-payment fee. But the proof is in the interest rate. Citibank knows that it will rake it in from consumers who ignore the fine print that discusses the penalty interest rate slapped on balances after a few late payments. On top of that, it stands to reason that the company will continue to report late payments to the credit reporting agencies. Such slipups will trigger the universal default clause (explained here) that nearly half of all lenders use. Trust me, it'll be a lot uglier than paying $39 for forgetting to put the check in the mail.

No amount of e-harassment will get me to celebrate lending leniency and banks chumming the water with supposed "perks." Today, it's standard operating procedure to reward "good customers" (those who generate regular fee income by carrying balances month to month) with unrequested credit line increases and "convenience" checks that encourage more spending. It's like throwing barbells to someone treading water.

I'll end by excerpting one of the few positive notes I received:

I loved your hard-hitting commentary today! It's too easy for people with good incomes to point their fingers at these "problem consumers" and ignore underlying causes. It will be interesting to see what happens when the new bankruptcy law combines with the delayed hurricane bankruptcies in about a year.

This reader is right. The truth will rear its head in the next year. Get ready to point fingers, everyone.

The Motley Fool has kicked off its ninth annual Foolanthropy campaign! Nominate your favorite charities on ourFoolanthropy discussion boardthrough Nov. 1. For guidelines on what makes a charity Foolish, visitwww.foolanthropy.com.

Dayana Yochim owns none of the companies mentioned in this article, but she does carry an MBNA credit card (which she diligently pays off on time every month). The Motley Fool's disclosure policy is written in normal type size.


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