Households and student credit cards
For instance, at the beginning of 2000, approximately 78 million households had at least one bank student credit cards. Together, they had amassed a seasonally adjusted total of about $603 billion in revolving consumer debt. After the calculation is modified by compensating for delayed consumer payments and other U.S. Federal Reserve accounting adjustments, the average student credit cards debt for these households was about $6,648. Such a computation is a commonly used measure of aggregate consumer indebtedness, but the estimate is fundamentally flawed and increasingly inaccurate because it combines convenience users with revolvers. To the chagrin of the banking industry, the proportion of convenience users increased sharply during the economic expansion of the 1990s–from 29 percent in 1991 to about 43 percent in 2000.
A more precise estimate requires the separate examination of the approximately 33.5 million convenience households (zero student credit cards debt) and the nearly 44.5 million revolver households. In early 2000, revolver households averaged $11,575 in outstanding revolving debt. This is a significant increase (6.7 percent) from the average of $10,845 only one year earlier-especially considering the favorable economic conditions in the United States. And it is nearly double the aggregate household estimate ($6,648). This Dickensian "Tale of Two Cities" is obscured when estimates are based only on aggregate student credit cards debt patterns and robust economic indicators during the prosperous 1990s. For these reasons, most Americans were shocked to learn that the nation recorded an ignominious milestone in the fall of 1998: a negative national savings rate.
Although the names have changed (remember BankAmericard, Interbank Card, Midwest Bank Card, Town & Country, Everything Card?), the goals of the student credit cards industry remain the same: penetrate and expand into new markets, "revolve" people into debt, and thereby maximize profits. The irony is that the deluge of student credit cards applications, with their seductive message of simply "charge it" (the marketing precursor to Nike’s mantra "Just do it"), masks the social undercurrents of financial entrapment, indebtedness, and confusion. As one professional woman confided, "I was spending money that I hadn’t earned yet for things that I had already used." The central question is why? The answer requires a clearer understanding of the social causes of personal and household indebtedness as distinct from their consequences. For instance, how is the personal "problem" of debt, such as competitive consumption, distinguished from the broader societal and life-cycle trends that contribute to rising household debt, such as illness, divorce, employment disruptions, declining earnings, escalating college costs, soaring home mortgages, family emergencies, or unexpected auto and home repairs? These opposing issues are paramount in explaining skyrocketing household indebtedness in the United States.