The "shock box": Discovering the cost of credit

Sometimes, the most dramatic consumer trend observations come not from publications, research or sales records… but from real life.

My wife and I were at a social function this weekend, where one hot topic was the new rules for credit card companies that went into effect a week ago today. One person—in his early twenties—explained that he received a credit card statement last week that now included something he referred to as a “shock box.”

He was referring to the now-mandated “payment information” disclosure: It indicated that if he made only the minimum payments on his $2,967 balance, it would take roughly 23 years to retire the debt.

He was shocked to learn that paying-off the charge card—if paying what the bank required as minimum—would take the equivalent of his lifetime.

He was astounded enough by this epiphany that he pulled-out a copy of the statement to share with the group, and began warning friends of the hazards of credit.

Implications: The Great Recession has held many epiphanies for people from all walks of life. Consumers have had a crash course in mortgage mechanics, investment practices and monetary policy.

But for some people, the most dramatic lesson of the past few years will be arriving in their mailboxes over the next few weeks: Their credit card statement, featuring the new “shock box.” The press has been talking this up (as you can see from one sample video below). But now, get ready for consumers to talk it up amongst themselves. Theoretically, people know that the minimum payment will stretch-out a balance for far longer than necessary. But now, the reality is setting in.

Count on it to influence the way people use (or avoid) credit in the future. That’s not to say they won’t charge or finance a purchase. But they will be more deliberate and careful about it. They’ll consider the length of the burden, and the other things they may have to give up over that time frame. And they might be more demanding… expecting the product (or satisfaction) to last as long as the debt does.

If you’ve been out of touch on the credit card rules issue, review the video from CNN News immediately below, or visit their website to read the text version.

Mike Anderson