17. March 2010 09:18
In 2009, it looked like consumers were paying down their credit card debt, despite the poor job market and economic woes. Financial literacy advocates were encouraged by this initial data and waiting to see if the trend would continue. Apparently, it wasn't the good news we were hoping for. The Federal Reserve released a report showing that the reduction in credit card debt decreased because banks wrote off a larger amount of debt- a record $83.27 billion to be exact. A study by CardHub.com found that accounts for the bulk of the of $93.2 billion drop in consumer card balances reported by the Federal Reserve for last year. There is more work to be done around the use of credit and accruing debt. To read more about this, click here for a piece by KIRO TV.
Speaking of credit- have you heard of Kwedit.com? It was recently featured on the Colbert Report as a way to hook kids on credit and help them create debt. The way the website works by allowing people without debit or credit cards to pay for services or goods in two ways: Kwedit Promise and Kwedit Direct. Kwedit Promise allows the account holder to promise to pay for a service later. A Kwedit Score is given based on how you use your credit and how you pay it back. Kwedit Direct allows people to pay for an online service with cash. You would print out a slip from Kwedit with the amount you owe and pay the bill at a 7-11 or USPS. It also allows you to Pass the Duck. You can ask a friend or family member to cover your bill. Some of the criticism of the website is that it allows teens to buy services and then pass the bill on to their parents. The concern is that they are not learning how to use credit wisely or how to take care of the bills they create. Others say the website teaches kids to how to be responsible and the basics of credit without serious consequences. Both sides have some valid points. We’ll have to see what actually happens with the website and how the service is used.