Deep in Debt, Deeper in Denial

[Krispy Kreme]

The problem is not the credit system, or debt per se.
The wise use of credit and a reasonable level of debt can enhance one's life and not cause financial hardship.

The problem is greed by banks and credit  card  companies. They are irresponsible in the distribution of credit cards, either to people  who don't have the means to pay back, or to people  who are entirely too young. It is commonly known that in the US credit card companies target college-age people  for cards, even though these people do not have well-paying jobs (though they might in the future) and may not have the maturity to use cards wisely. Now, there are stories that high school students and even students in junior high (middle school) are being targeted! That is ridiculous.

The problem is that banks and credit card  companies are too lenient. They are willing to hand out cards to virtually anyone, as long you are breathing. We went to a hockey game a couple weeks back. The arena was freezing, and there was a display table that said sign up for a credit card (with the team's logo) and we will give you a free blanket. The line was very long.

The point is, aside from that anecdote,  that credit card companies need to be more strict in distributing to people who can handle the responsibility. How might that work? Well, there could be a law that no one under "x" age (18?) could get a card. Or no one below a certain level on their credit score. Or no one who makes less than XX amount. Period. NO exceptions for credit, although secured cards might be allowed.

But card companies won't restrain their greed; they want everyone to have a card so the sucker who can't pay his  entire balance each month gets hit with 22-26% (or more) interest. And the bankruptcy option as a way out of debt is harder than ever, thanks to Bush (which actually is one of the few good things he has  done).

So I believe in personal responsibility, but the problem is deeper than that. It even goes beyond the artificial needs that are created through advertising.

[SLCPUNK]

Both sides are to blame.

Both are guilty of the same thing: GREED.

Consumers want instant gratification and are told they deserve it from the time they are able to watch tv. The feel a sense of entitlement about these things and are in deep denial about what credit really cost them.

The banks use predator type loans that can change on a whim, sending your interest rate well into 20 percent-hitting you when you are down. They extend credit to those who have no business having any in the first place.

Some people are forced to use credit cards to bridge the gap, and that is unfortunate-but rare. But I also see these same people going out to eat, buying new clothes, buying big screen tvs, while carrying the debt and being "broke" (no savings.)

[The Dog]

Both sides are to blame.

Both are guilty of the same thing: GREED.

Consumers want instant gratification and are told they deserve it from the time they are able to watch tv. The feel a sense of entitlement about these things and are in deep denial about what credit really cost them.

The banks use predator type loans that can change on a whim, sending your interest rate well into 20 percent-hitting you when you are down. They extend credit to those who have no business having any in the first place.

Some people are forced to use credit cards to bridge the gap, and that is unfortunate-but rare. But I also see these same people going out to eat, buying new clothes, buying big screen tvs, while carrying the debt and being "broke" (no savings.)

Excellent post.

I do think the blame should be more on the consumer though.  Ultimately you are responsible for the actions you take.  like i said before, can we blame the tobacco and food industrys for giving us cancer and making us fat? or can we blame ourselves for knowing the dangers and still ingesting that garbage.  Those chubby kids who sued McDonalds for "making them fat" was a farce.  Some older people who can claim they weren't made aware the dangers of smoking have a case, but anyone born in the last 2-3 decades should just know better by now.

I know what you guys are referring to by them targeting people who have trouble paying their bills or have low income and "need" credit - but lets be honest.  is it hard to pay bills on time?  is it hard to know that if you have 100 in the bank and that new ipod you just bought cost 500 that you are going to be in debt?  I don't think so.

i dont think its asking the consumer to much to be their own advocate and ask questions.  if you don't know that credit cards have interest rates and you get a new one without knowing the interest rate, i just can't feel too sorry for people like that....

[D]

Here is what I hate.



My Mom had great credit for almost 30 years. 5 cars over that time period bought and paid for, never missed a payment, Mortage paid off, then a 2nd mortage paid completely off, Credit cards paid completely off, never late on a bill such as utilty,phone,water etc.

Small business loan which she paid back.


BUT YET she co-signed for my brother a car when he was younger and he messed up and got it repossessed.

Her credit is now all but ruined thanks to that.


So what is the point of building up amazing credit and doing great if one small minute thing can absolutely cripple it?

[SLCPUNK]

I can't believe it hurt it that bad. At the same time, if she is debt free, then having a ding on her credit really isn't going to hurt her that much in the long run. What are they going to do to her? She's all cash and carry now!

Lesson is: never co-sign. I would straight up buy my kid a car cash, before co-sign.

[The Dog]

Here is what I hate.



My Mom had great credit for almost 30 years. 5 cars over that time period bought and paid for, never missed a payment, Mortage paid off, then a 2nd mortage paid completely off, Credit cards paid completely off, never late on a bill such as utilty,phone,water etc.

Small business loan which she paid back.


BUT YET she co-signed for my brother a car when he was younger and he messed up and got it repossessed.

Her credit is now all but ruined thanks to that.


So what is the point of building up amazing credit and doing great if one small minute thing can absolutely cripple it?

YES! You are dead on with that one.  Credit rating is such a powerful number and yet most people probaby have NO clue what theirs is. 

In your specific case I wouldn't say thats a "little thing" though.  its not like she was past due on a cell phone bill or something.  A car, i'm assuming it was a big investment, getting repossessed sounds pretty serious as far as paying bills/loans goes.  Whats more fucked up is your brother ruined her credit....

Still, I agree with you completely - i hate how there are only 3 companies who control all of that stuff and access to it costs money (in most states) and is difficult to come by.  cleaning up your report is even more difficult.

i have a friend at work who's college roommate took credit cards in my friends name, maxed them out and fucked up his credit rating so bad that years later, with a successful job and plenty of money in the bank, he can't pass most credit checks to even rent an apt.

[The Dog]

I can't believe it hurt it that bad.

I can.  While i'm far from an expert, the littlest things can have a big effect on your score.  having a car repossessed sounds fairly serious.

it would effect her now if she needed a loan or wanted to buy a house or rent an apt. 

[sandman]

so you agree with me - you call debt a "great thing".

consumers have all the power. unfortunately, many consumers are stupid, careless, greedy, and materialistic.

gambling is another perfect example of a GREAT THING that gets a bad rap cause people overdo it.

without debt we'd all be living in apartments and taking public transportation everywhere.

No, I do not agree with you that our current system is a great thing. Debt in principle is great, but that's not what we got.

And you blaming it on stupid people is ludicris. So that's it then? We have a fucked system in the society and that's ok since it only affects 'stupid' people?

you insist on assuming we have a "fucked system". i disagree.

and don't forget that banks take on a TON of risk when they loan money to high risk consumers. many are getting hit hard now with bad debt due to mortgage forclosures.

[D]

My point is, u borrow and pay off 20 big purchases and then u co-sign and that person messes up and yet all the great things u have done are for not.


Granted her credit probably isnt completely screwed. Im sure she could get a new car or something since she has lots of collateral but that was an example of how one slip up can devastate you.



I was 18 years old and a credit card company sent me a Phone/Credit card.

I told them over the phone that I was a college student with no job and yet they still sent me a card.

Being young and dumb and poor my entire life, it was a marriage made in hell.

Didnt take me long to run up a decent amount of debt that still haunts me till this day.

Im not gonna blame them though, They didnt put a gun to my  head and make me use it but the finance charges and all that absolutely kills u.

Here is what I hate about Credit Cards:

U will call and see how much credit u have available.

They may say 500 dollars.

Catch is, if u charge something 480 dollars, the time they drop the finance charge on u, u are over your credit limit and they then charge u an over the limit fee which is usually like 30 bucks or more on top of the monthly payment.


If they say u have 500, u should have 500.


My brother use to work at a bank and he said that credit cards are automatic debt whether u use them or not. So if u have a card with a 5,000 limit, your credit shows up that u are 5,000 in debt whether u spent a dime on that card or not cause u have the ability at anytime to charge that amount.

That is messed up.

[sandman]

D - i understand what you're saying, and it does suck. and yes, companies try to suck people in so they can make money on them.

but i'm guessing that at that time, you knew you shouldn't be borrowing all that cash. that it seemed too good to be true, and you just said "screw it - i'll deal with it later". especially since it sounds like your mom is smart with money.

i've never paid a penny interest on a credit card. and i have my parents to thank for that, for educating me and for forcing me work and save money my whole life. 

[The Dog]

D - i understand what you're saying, and it does suck. and yes, companies try to suck people in so they can make money on them.

but i'm guessing that at that time, you knew you shouldn't be borrowing all that cash. that it seemed too good to be true, and you just said "screw it - i'll deal with it later". especially since it sounds like your mom is smart with money.

i've never paid a penny interest on a credit card. and i have my parents to thank for that, for educating me and for forcing me work and save money my whole life. 

agreed - i've carried balances but i will never do so anymore.  the time to fuck up IS when you are young and dumb.  some fuck up a lot more then others unfortunately, or worse, never learn their lessons.

my parents were the same sandman, i HAD to get a job and they took 3/4 of EVERY paycheck and put it into a bank acccount so i'd have spending money for college.  Of course I blew most of it my freshman year.....so what happened?  When i called home for more money from good ole mom and dad I was told to get a job at the campus dining hall washing dishes

[The Dog]

Senate panel scrutinizes credit card practices
Wednesday March 7, 5:11 pm ET
By John Poirier

WASHINGTON (Reuters) - With the threat of new regulations looming, some credit card issuers on Wednesday promised lawmakers they would ease penalties and simplify tiny-print disclosures that few consumers read.

At a Senate hearing on credit-card practices, a top executive with JPMorgan Chase & Co.'s (NYSE:JPM - News) Chase Bank USA apologized to a 29-year-old Ohio man who repaid twice the amount of a $3,200 bill because of interest and fees.

"It just seemed like there was no end in sight," Wesley Wannemacher told the Senate Permanent Subcommittee on Investigations.

Wannemacher, director of operations at his family-owned Double A Trailer Sales Inc. in Delphos, Ohio, said he was trapped in a cycle of ever-growing fees and penalties for wedding-related purchases. A few days ago, Chase erased another $4,400 he owed as of February 2007.

"Our policies failed, and we deeply regret it," Richard Srednicki, chief executive of Chase Bank's card services, said.

Democrat Carl Levin, the Senate panel's chairman, said legislation may be needed to stop what he called predatory practices by credit cards, such as when companies charge interest and fees on money that has already been repaid.

"Our investigation found that even accounts in good standing are socked unfairly by little known ... practices that inflate interest charges," Levin said.

The high-profile hearing was held a week after Citigroup (NYSE:C - News), the third-largest card issuer, said it will stop automatically raising rates for people who default on payments not directly related to their credit card. The practice is known as "universal default."

Bank of America Credit Card Services (NYSE:BAC - News) President Bruce Hammonds said his company has never used universal default.

Sen. Norm Coleman of Minnesota, the top Republican on the subcommittee, said he was concerned about some industry practices. Coleman praised Chase for erasing Wannemacher's debts and eliminating a practice known as double-cycle billing, which includes tacking on fees based on two prior months.

Alys Cohen, a consumer advocacy attorney, said credit card practices are predatory because of the payment structures. "They can't pay back the small amount of principal and they're buried by the fees and interest," she said.

Outstanding U.S. credit card debt amounted to more than $750 billion in November 2006, according to estimates based on Federal Reserve figures. The industry has more than 640 million credit cards in circulation.

The Federal Reserve is already working on new requirements for companies to disclose various payment and fee schedules, lawmakers and executives said.

"We believe it should be a priority to shorten and simplify disclosure language and to focus on the most relevant terms and conditions," Bank of America's Hammonds said.

Levin said he would work with the Senate Banking Committee on legislation to protect consumers from overzealous credit card companies.

[freedom78]

The PBS show "Frontline" did an episode on the credit card industry, which was very interesting.  And, of course, can be freely viewed:

http://www.pbs.org/wgbh/pages/frontline/shows/credit/view/

[SLCPUNK]

The PBS show "Frontline" did an episode on the credit card industry, which was very interesting.  And, of course, can be freely viewed:

http://www.pbs.org/wgbh/pages/frontline/shows/credit/view/

I saw that a few months back, it was very good.

They have some great pieces on that website, you can watch for hours.