Tomorrow's crisis: Credit cards
Filed under: Banks, Borrowing, Credit, Debt, Ripoffs and Scams, Relationships
As the foreclosure crisis continues to drag down the economy, it might be worth taking a moment to consider the next step in our ongoing tale of economic misery. As Joe Nocera pointed out in the December 1 New York Times, credit cards, which are easier to get (and easier to screw up) than mortgages, are headed for the same sort of meltdown. With cardholders facing unemployment or reduced salaries, it seems likely that they will also have problems making their minimum monthly payments. This will probably translate into serious problems for card companies.
In many ways, the excesses of the mortgage market are mirrored in the credit card industry. For example, the tendency of some borrowers to exaggerate their income and downplay their expenditures has been blamed for a large percentage of the bad mortgages out there.By comparison, credit card forms allow applicants to claim household income as a grounds for repayment. Thus, applicants can legally pretend that their roommates' or parents' incomes influence their ability to pay a debt. Furthermore, most of the information on a credit card application is unverified. The applicant can claim any rent or salary that he or she wishes, comfortable in the knowledge that the company will not be able to check it out.
Perhaps the biggest danger lies in the way that the credit card companies' have tried to manipulate their consumers. Using flashy balance-transfer offers to draw customers in, many subsequently raise rates or use a variety of questionable methods to levy fees. Added to this, many companies base credit limits on credit score, which means that some customers find themselves with credit limits that far outstrip their resources. This, in turn, encourages a sort of "Peter Principle" of credit: customers are promoted until they reach their level of insolvency.
Hopefully, credit card companies will recognize that a little leniency goes a long way, especially in the middle of an economic crisis. If you find yourself slipping behind on your credit card payments, try talking to your card issuer. While many take a hard line, some are willing to help you work through your tough times by lowering payments or removing fees. Regardless, it never hurts to ask!
Bruce Watson is a freelance writer, blogger, and all-around cheapskate. He has become a big fan of credit-free living.
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Reader Comments (Page 1 of 1)
12-04-2008 @ 12:14AM
L. Borja said...
the credit card companies are going under and it can't be soon enough. they created artifical guide lines to judge who will pay their bills and it is back firing on them. bye bye creeps!
Reply
12-04-2008 @ 7:57AM
betty said...
the credit card companies are raiseing they finance rates and
giving people late fees when they haven,t been late and they
also are changeing people due dates to make sure you are
late .Some late fees are $39 dollar a wop .people check your statement very careful they are coming up with all kind of thing
pay attention to every bill .and the New Media is telling people
to go out and shop like they are paiding your bills .If most companies are failing what do you think they care about me
and you.hold on to your money because it,s going to get even
harder. companies hirer ECO thieves .how people come ask for
company bail out in a big JET and some of us can,t take a cab
or scamming to get on a train or bus to work even finding it hard to paid rent or buy food to feed your family ,but we work every day and get paid every two week not many people get
paid weekly any more.Wake UP People.
Reply
12-04-2008 @ 3:24PM
Cindy Brey said...
The credit card companies don't want to talk to you when you call them and ask them to work with you, I tried that and failed. I did the only thing I could do and went to one of the debt relief programs and the ramifications are huge, I since have been sued and my credit score is in the toilet, but the bottom line is that they are still not being paid, if they would have worked with me they would atleast be getting something, they need to consider that when people call, atlest look at their history and give them a chance, mine did nothing, now we all are suffering.
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12-07-2008 @ 2:19AM
Sharri said...
It is this readers opinion that if something is broken, the people responsible just got another silver spoon in thier mouths. It has been said , that if," Our for the people By the people Demoratic Republic for which it stands" was partly the Parents in this and the banks were thier baby. , then they, like the rest of Americans own these institutions since we will flipping the bill for the rest of lives and our childrens and thiers alike., when the tilted the cradle and the baby started to fall the tree limbs got out from the pressure of all the people involved. The ones in wash-ing-ton keep hoping they can even the scales of justice with thier war games and restitutions to Foriegn countries, not letting anyone be held accountable. What about this PMI I paid on for 10yrs or more to protect who? even the mortgage company couldn't answer ,then to have to bail out the ones who were suppose to protect us Like these big wig lobbist., meaning insurance waho's that jumpped on the band wagon, then blame the litlle middle class& poor (who have to wait 45 days for benefits before a social worker even sees you wheather you've lost everthing or not then back to drugs and alcohol because you've lost hope. ,has time come where they automatically think your a drug addict just because you need benefits. by submitting you to med test that probably is going to get your kids taken away then the vicioius circle starts all over. STOP this visous circle, more than the paper you continually have to fill out till you get it right or your rejected again while the kids starve and your homeless because your 26 wks of disability ran out, which is less than unemployment who's says you can work becouse you left out on comp and don't have proof of your medical because you did'nt get the dr paid the first time................and that's just the way it is not when you see internationals walk in and out with a family of 12 getting taken care of with my tax dollars while I loose everything because I have worked 10 yrs and got injured. GOD BLESS AMERICA. Where's the justice. I f every American in this country would have gotten one million we would still have a reason to get out of bed, to support our productions of actuallyenjoying this buying and spending in the USA could have been a stipulation along with still working to produce LIVING THE LIFESTYLES ACCUSTOMED INSTEAD OF PAYING BACK FORIEN LOANS THEY WOULD GET PAID FROM OUR TRAVEL AND BARTER SYSTEM IN PLACE FOR MEDICAL WOULD WORK FOR THERE ARE MANY AMERICANS WITH THE PRECIOUS SKILLS WE SO BRAVELY OUTSOURSE WITHOUT A THOUGHT, This all would of been cheaper than letting the nuckleheads that caused the problem fix it, without any accountability. Come on get the skull & bones club out of the white house the bush wack is over let the people cause revalution against the very ones that are spending up pursuit of HAPPINESS.
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12-11-2008 @ 11:11PM
June said...
Some of the card companies also penalize us for using credit wisely. I have only one credit card--WAMU. For the first year or so the APR was 8.75. Thankfully, I did not rack up a lot of purchases. However, they came back and raised my rate to 23.75%. When I questioned this, they said (in essence) that they did not like the way I handled my credit--the type of purchases that I made were not consistent with THEIR MODEL credit user--that my purchases were mostly gas stations, grocery stores, and drug stores--that I didn't have any department store purchases, etc.
To me, they are penalizing me for doing what I have always thought was the right thing to do--pay for what I can pay for and when money is short and I have NEEDS, then and only then use the card.
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1-31-2009 @ 12:11PM
ssmith94015 said...
I have had a Citibank credit card for year and rarely had a balance larger than $2,000 and often paid it off immediatley. So, last November I notice my rate went from 6.99 to over 10%! I called and was told my account was up for "Periodic" review, next month it was down again. Then, January comes and therate is 14.99! I called again and was told effective Jan 1 everyone's rate when up and I got the "Best" rate. The rates were 14.99, 19.99 and 23.99! That is just going to push margin customers over the line and, yep, the next big crisis is going to be credit cards. And the banks will just go back and ask for more "bailout" money! Other than slapping good customers in teh face, they are taking our tax dollars as well. So, I moved the balance to a Schwab card at 6.99%. Citibank can keep their rates and card - unfortuantely, I can't stop my tax dollars from supporting their greedy butts.
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