Spending more than we make

If you're like most people, you'll be giving your credit cards a healthy workout over the next few weeks. So this is as good a time as any to consider a few harsh realities.

First off, the Center for American Progress, a liberal-minded think tank, has crunched data from the Federal Reserve and found that Americans for the first time owe more money than they make.

According to the center, average household debt levels topped average after-tax income by more than 29 percent as of this summer. Moreover, the average family is now spending 14.4 percent of its disposable income on debt repayments -- the largest share since the Fed began collecting such data in 1980.

"This is an unsustainable trend," said Christian Weller, senior economist at the center. "People simply can't borrow at the same rate they've borrowed in the past."

According to the Fed, total consumer credit debt, excluding mortgages, hit a record $2.4 trillion in September. Factoring in mortgages, outstanding household debt soars to about $12.3 trillion.

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Average credit card interest rates were running about 13 percent last week. But you never know.

That's because credit cards are the only consumer product for which the terms of sale can change after you sign a contract. Virtually all card agreements include language stipulating that the card provider can change the terms of the deal, including interest rates, "at any time for any reason."

And as if that didn't seem sufficiently unfair for consumers, don't forget the universal default provision. This is an element of many card agreements that allows an issuer to jack up your rates if you miss a payment to another creditor -- even if you've never been tardy with payments to the issuer in question.

"I think even a lot of the credit card companies find this indefensible," said Linda Sherry, a spokeswoman for San Francisco's Consumer Action. "They just want to get more money out of you whenever they can."

The American Bankers Association says such "risk-based pricing" allows more people to get credit.

"Outlawing this risk-management tool would have the effect of either restricting credit or raising the cost of credit for everyone, and we would oppose it," the association said in a statement last year.

And then there are fees. Card issuers will ding you for almost anything, from paying by phone to using your plastic overseas. And if you're ever late with a payment, forget it. Late fees can run as high as $39.

The federal Government Accountability Office said in a report last month that late fees averaged almost $34 last year, up more than 160 percent from $13 a decade ago. The fee for exceeding your credit limit averaged about $31 in 2005, up nearly 140 percent from $13 in 1995.

The GAO also warned that mandatory disclosures by card issuers "have serious weaknesses that likely reduced consumers' ability to understand the costs of using credit cards."

It said card issuers' disclosures are often "poorly organized, burying important information in text or scattering information about a single topic in numerous places."

Moreover, "the design of the disclosures often made them hard to read, with large amounts of text in small, condensed typefaces and poor, ineffective headings to distinguish important topics from the surrounding text."

All in all, the world of plastic is an uneven playing field. This is something that should never be far from mind as you spend the next month or so probably running up your biggest credit card bills of the year.

"Every step of the way, the card companies are looking at you," Sherry said. "And they're looking for ways they can charge you."

Shifting gears: AAA mailed copies of its privacy policy this month to about 40,000 members in Northern California, Nevada and Utah. They went to people who don't get the association's monthly magazine, which this summer presented readers with a published version of the policy.

Turns out the two versions are slightly but significantly different.

Both the new brochure and the magazine's privacy policy say AAA routinely collects people's names, addresses and phone numbers when they become members. It also gathers more data, such as your driving record and property info, when you apply for insurance or submit a claim.

Both versions say AAA shares members' data "with companies we have retained to provide services for us" and "as authorized by law." (Troubling as that may sound, the association says it doesn't in fact share any data with marketers.)

The magazine version goes on to say that if you don't want to receive marketing pitches from AAA, you can mail in an attached form or make your preference known online at AAA.com. "This will apply to phone, mail and e-mail," it says.

However, the newer brochure says that if you want to block phone and mail solicitations, you have to send a letter to AAA. Going online will allow you to halt only electronic pitches, it says.

The reality is that it can all be done easily online, and you don't have to send in a letter, which most consumers wouldn't bother doing.

Cynthia Harris, a AAA spokeswoman, acknowledged that all AAA members can opt out online. But she said the association's Web site is undergoing some changes, and no mention of the online opt-out was included in this month's brochure because AAA didn't want there to be any confusion.

"It's possible there might be some downtime when the opt-out feature wouldn't be available," Harris explained.

It's just as likely, though, that the online opt-out will be readily available. Go there first.