Hi All,

Last week, the for profit think tank Innovest Advisors came out with a report on the impact of American credit cards. The report focused on the status of the nations plastic and its potential impact on the economy. While the main point of the report was macroeconomic, it did have some interesting information for consumers.

The report detailed which credit card lenders use businesses practices designed to keep borrowers dependent on debt. One measure of this is repayment rates. The idea is the worst banks have businesses models based on keeping borrowers dependent on card and therefore have lower repayment rates. While Innovest used an indirect method to estimate this, their report is quite clear about which banks attempt keep borrowers hooked on debt:

From worst to best, the lenders with business models advocating keeping borrowers dependent on debt were:

1) Bank Of America
2) Capital One
3) Discover
4) JP Morgan Chase
5) CitiGroup
6) American Express

What does this mean for you? Well, if you have a credit card from a lender emphasising debt dependency you should either 1) consider switching or 2) pay off your credit card balance as soon as possible.

Thanks,

James

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