Credit Cards Trap for African-Americans and Other Minorities

The University of Denver Center for African American Policy has conducted a study with disturbing results - credit cards and financial services are almost always inaccessible to African-Americans and other minorities. And the reason for denials lies far not in the race of the applicant or his/her income but in their credit score which is the key factor in the lending decision.

Much time has passed since it was revealed that interest rates on any kind of a loan for minorities were generally higher but nothing has changes so far. It has formed into sort of tradition that banks reserve high interest credit cards as an easily accessible source of a loan for minorities.

There is no point in canceling the fact that African Americans, no matter what economic group they belong to, have got stuck in a vicious trap of subprime lending, low credit scores and predatory policies on the part of banks and credit companies.

Let's admit it that American consumer credit card debt has tightened the purses of many households but it appears that minorities are more liable to damage their finances and credit scores due to poor credit card management.

The lack of proper knowledge on the wise credit card use and difference between good and bad debt play into creditors' hands and the debt minorities accumulate enriches lenders just perfectly well.

However, it is not only the fault of African-American households. It has also been revealed that subprime credit cards and financial services are quite disproportionately distributed among minorities.

What do we mean? Even if a bank is located in an area with the majority of low FICO scores, it still does not provide African-American households the proportional access to credit and other financial services. Equal access is simply impossible in the situation when federal regulations require higher capital reserves when issuing credit to subprime applicants.

Another issue. To be approved for a line of credit, especially if it is a good credit card, a customer is required to demonstrate his or her favorable credit rating. In fact, however, a customer can never do that as his current low credit score attracts subprime loans mostly. Subprime loans damage one's credit score further more. So, we are back at the starting point.

And how can you improve your credit score other than through a new line of credit and improved credit management? It is a vicious cycle and for the time being, African Americans spend most part of their income to pay for disproportionately high interest credit cards rather than think of having their credit extended.

It is very unlikely altogether that they would have it extended. African Americans are an easy prey for credit card companies in their predatory practices of jacking up interest rates and fees and once they are caught, it is near to impossible to break free from the ever lasting credit card debt and predatory lending.

Well, it all sounds quite depressing and pessimistic but there is a way out for minorities. It appears the prime task for them is to avoid being trapped. Avoid being a pray. Avoid taking credit for items depreciating in value - creditors will catch you on that.

Avoid carrying balances on credit cards. Using credit cards is not a bad thing on the whole - the lack of knowledge how to do it right is.

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