The problem with the "financial education is the answer" argument, says Travis Plunkett, legislative director of the Consumer Federation of America, is that it assumes the problem is with consumers, not with the way credit cards currently work. "Credit card companies have introduced complexity into the way they price their products knowing that consumers won't understand it," he says. He adds that even Harvard law attorneys who teach contract law have said they don't understand their credit card agreements.
In general, Plunkett says, research shows that consumers pay attention to three things when they get a new card: the annual fee, any rewards, and the initial interest rates. But the problems that consumers run into relate to the much more complicated pricing policies, such as late fees, over-the-limit fees, and unexpected interest rate increases. "The best-educated consumers have still fallen victim to the traps and tricks," he says.
Meanwhile, credit card companies are increasingly worried about their own financial situations. Several issuers have reported charge-off rates, the percentage of loans that companies don't expect to get repaid, of over 7 percent. Analysts say that number could get as high as 10 percent by the end of the year.