Criticising banks is a popular pastime. We love to point fingers of blame, to say that they bleed consumers dry, to question their sense of ethics. It feels good to take to task organisations that earn billions of euros, or sterling or dollars in profit each year. We feel cheated by them and we need to vent that frustration.
However, by behaving in this way we refuse to acknowledge that we are responsible for our choices. If banks offer us money and we take it then we accept their rules, as foolish as they are sometimes.
When we contract for a mortgage, we determine our downpayment and agree the repayment period. But we cannot predict interest rate changes over the 25 years or so of a mortgage and it is hard to insure against hikes in the interest rates if our downpayment is less than 20% of the value of the house.
This is where problems begin - for both banks and borrowers. Banks use unrealistic methods of calculation to determine the amount of mortgages they can offer their customers. Borrowers overstate their capacity to pay such loans. The song is well known.
I applied for a mortgage once and the amount that I was told I could borrow was four times more than I'd anticipated. I was thrilled. Worse - I was proud to be told that my financial worth was considered good enough to secure such a high loan. I felt as though my social status had risen. My ego was flattered, I almost asked where I had to sign. But then my ego fluttered - something didn't seem quite right.
I asked for a print-out of the loan offer. Back home, after making some calculations, I reconnected with the reality of my finances. To repay the loan the sacrifices would have been enormous. I refocused my research and finally chose a smaller house.
Loans offered by banks are unduly high. They are traps. How many people fall into them? Tens of thousands probably. Many families here in Europe, in the US and no doubt in other countries find themselves in untenable financial situations.
When it comes to credit, it seems that people lose their heads. Another example of this madness is the prevalence of credit cards. They are easy to acquire - how many people do you know who have two, three, four credit cards? Often all their cards are used to their credit limit. How can they possibly benefit when interest rates are 18%? Legally, these rates are not usurious, but in reality ... credit cards are akin to loan sharks.
Over-indebtedness of consumers is very profitable for banks, department stores and companies who issue credit cards. We should be suspicious that they roll out the proverbial red carpet for us potential customers with constant mail-outs offering "no repayments for 3 months" or similar tempting offers. These are publicly trading companies. Their shareholders are reaping great profits.
However, the choice to own credit cards and spend on credit without control is the sole responsibility of us - the consumers. Nobody twists our arms - all it takes is great marketing from the credit companies.