Nearly 40% of California homeowners spend more than the target 30% of their income on housing; 15% spend more than 50% . Therein lies the start of financial instability.

Liz Warren’s book on the Two Income Trap identified the quest for schools in better school districts as the reason that two income middle class families were going broke at record rates. The budget simply had no margin for error, or for illness, job loss, or divorce.

So, while the bankruptcy schedules show credit card debt, its probable those credit cards were used to provide the goods for day to day living in a housing market gone mad.

The arbitrariness of the credit card world is highlighted in a recent Consumer Action study of reasons a credit card issuer can raise the interest rate on your card. Adjacent to “too much debt” as a reason for a rate increase was “too much credit available”! So if you’re a good credit risk in the eyes of other credit grantors, you deserve to pay more on your existing balance? The mere inquiry about a car loan or a mortgage loan will cause 24% of banks to raise the interest rate.

More support for my contention that the consumer is a pawn in the world of credit cards and the safest place is on the sidelines of this madness.

Cathy Moran

Consumer Action’s report