NYT: Soaring Interest Compounds Credit Card Pain for Millions

The problem is, unlike the herion addict going through withdrawl, credit addicts cause pain for everyone - when they go bankrupt, they leave you and I holding the bag for their bad debts. Yes, that's right: the banks don't eat the losses themselves, they just pass their losses right along to us in the form of higher rates.

Reply to
Scott en Aztlán
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Prove it.

Reply to
Scott en Aztlán

I have heard that most bankruptcies can be solved if the person had an additional $200 per month. I have also heard that most people that file bankruptcy are less than 30 days behind.

These items I heard in passing, and I don't have sources for them.

What it leads me to belive is that a lot of people are looking for an easy way out. They end up dropping the financial equivalent of a nuclear bomb on what appear to be very fixable problems. I wonder if many of them are simply scared, or are being bullied into filing.

-john-

Reply to
John A. Weeks III

A comparison mentioned by Harvard Law Professor Elizabeth Warren in discussing her extensive research into bankruptcy and consumers showed that interest rates do not differ in states where there are higher write-offs.

Banks make money where they can. Having maxed out efficiencies, they are now increasing fees for minor transgressions (making the cut-off for payment earlier or delaying picking up the mail so that more late fees can be assessed, etc. They are also imposing very high commissions on foreign purchases. So people who live near the Canadian or Mexican border or who travel a lot get hit with 3%+ surcharges and may only realize it when they find that the credit they get for returned merchandise is quite a bit less than what they were charged when they bought it (the bank will try to say it was an exchange rate fluctuation, but it happened that I returned something an hour after buying it, so the bank had to back down on that one.)

The banks have knowingly taken on high-risk credit card business because they find it profitable. Also, consumers generally are so slothful or ignorant that they don't shop around when they could.

I once received a $10,000 check from Fleet Bank (now B of A). Careful examination of this unexpected teller check showed it was an offer for a loan. What if my secretary, in my absence, had deposited it? Or it had been stolen and cashed by the thief? In either case, I wouldn't be responsible (in the first, I'd obviously have to repay the money). But imagine the hassle I'd have to put up with to convince the bank. I wrote the president to complain and he brushed me off with the comment that "his stockholders were happy" with the marketing ploy. Sure: it's like offering a drink to a recovering alcoholic.

Finally: Providian sends out credit card offers to persons recently discharged in bankruptcy. The business is obviously profitable for them. (Of course one can only file Chapter 7 once in seven years, but bankruptcy isn't the only risk that banks have.)

Reply to
Kuacou

A comparison mentioned by Harvard Law Professor Elizabeth Warren in discussing her extensive research into bankruptcy and consumers showed that interest rates do not differ in states where there are higher write-offs.

Banks make money where they can. Having maxed out efficiencies, they are now increasing fees for minor transgressions (making the cut-off for payment earlier or delaying picking up the mail so that more late fees can be assessed, etc. They are also imposing very high commissions on foreign purchases. So people who live near the Canadian or Mexican border or who travel a lot get hit with 3%+ surcharges and may only realize it when they find that the credit they get for returned merchandise is quite a bit less than what they were charged when they bought it (the bank will try to say it was an exchange rate fluctuation, but it happened that I returned something an hour after buying it, so the bank had to back down on that one.)

The banks have knowingly taken on high-risk credit card business because they find it profitable. Also, consumers generally are so slothful or ignorant that they don't shop around when they could.

I once received a $10,000 check from Fleet Bank (now B of A). Careful examination of this unexpected teller check showed it was an offer for a loan. What if my secretary, in my absence, had deposited it? Or it had been stolen and cashed by the thief? In either case, I wouldn't be responsible (in the first, I'd obviously have to repay the money). But imagine the hassle I'd have to put up with to convince the bank. I wrote the president to complain and he brushed me off with the comment that "his stockholders were happy" with the marketing ploy. Sure: it's like offering a drink to a recovering alcoholic.

Finally: Providian sends out credit card offers to persons recently discharged in bankruptcy. The business is obviously profitable for them. (Of course one can only file Chapter 7 once in seven years, but bankruptcy isn't the only risk that banks have.)

Reply to
Kuacou

What good does it do to change lenders when ALL lenders are suffering the same kinds of losses and ALL of them are charging higher rates to compensate?

I agree that they will pass along more of this burden to their higher-risk customers (this was, after all, the subject of the original post) but ALL of us get SOME of it passed on to us. Even if we never carry a balance or pay a penny of interest, we get soaked because the banks charge the merchants higher fees, and the merchants pass those along to us in the form of higher prices. And unless you can find a merchant who offers a discount for paying cash, there is no easy way to avoid paying for the mistakes of others.

Reply to
Scott en Aztlán

You've been living without the basic necessities of life for years, but you have Internet access and USENET news?

Who do you think you are?

Reply to
Scott en Aztlán

I said I believed in personal responsibility, which probably makes me closer to a Libertarian than a Republican. But my point is simply that knowing that you can't just walk away from your massive debts and that you'll end up as Bubba's prison bitch will effect an amazing increase in personal responsibility.

Reply to
Scott en Aztlán

Sounds more like laziness to me.

Either that, or a conscious effort to "work the system" to their own personal benefit. Some people feel no stigma at all in becoming a professional deadbeat; in fact, they're proud of it.

Reply to
Scott en Aztlán

Then I guess I don't have to beleve you. :)

You made the statement; the burden of proof is yours - you know that. So if these studies are as easy to find as you claim, then you'll have no problem posting at least one link. Until then, we'll consider your claims to be unsubstantiated and respond accordingly.

Reply to
Scott en Aztlán

It's all in the books by Elizabeth Warren (Harvard Law professor and expert on bankruptcy law). In your public library. Or at Amazon.com

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Reply to
Sufaud

[snip]

Explain *what* ways those are. I'm not saying you are necessarily wrong, but you *have* to justify bald statements like this.

Define "privation". Living within your means is not privation. Sure, it means you can't buy everything you want immediately, but that's hardly privation.

Predatory credit marketing is defeated by an effort of will, and possibly a letter to the junk mail management authority. If you say to yourself, "No, I will not take another credit card or another loan," every time an offer arrives in the post, you will not become trapped in the debt tar-pit. I do this myself. I open each one, in case someone's getting cute and hiding important letters in a junk-mail-like envelope, and then the junk-mail goes in the shredder. Every single piece of it.

The "threat" of privation? Read what I wrote. An application of will, to look at the gadget and put it off till next month when I can buy it outright. I'm not saying don't buy the gadget. I'm saying buy it when you have *saved* enough to buy it, like we always teach our children.[1]

[1] Well, like people did when I was a child. YMMV these days.

Credit ratings make a poor bullet against the person who won't borrow money. Good credit ratings can be acquired in a number of ways that don't involve taking on masses of debt.

Tsk, tsk. You quoted one of the four paragraphs about Andrew Kahr, and took it out of the context of the rest. I summarised the four paragraphs. The readers are invited to judge my summary against your out-of-context snip.

Not borrowing. The application of will, remember. "Just Say No." It's a far stronger weapon than legislation, volatile contracts, and the like.

Of course we aren't talking about institutional investment. I'm well aware of that.

So what if the lenders are taking the risk without collateral? We're considering the borrowers here.

The personal loan lenders do expect to be paid back, actually. And a

*prudent* borrower will pay it back. A prudent borrower, of course, is one who borrows only when necessary (i.e. rarely), and never more than he can afford to pay back.

Consumers cannot, in the long term, "support" a national economy by borrowing. How long is this long term? I'm not sure, to be honest. It probably depends on a lot of things. But regarding a debt-fuelled recovery as a good thing is, in my opinion, remarkably poor public policy.

"Neither a borrower nor a lender be." He was a pompous old windbag, was Polonius, but he had the right idea here.

So your elected representatives aren't representing your interests. I don't have to tell you the ultimate solution to *that* problem, do I?

Defaulting on a loan is not the act of a revolutionary. These people took on more than they could afford. They wanted all the goodies they could buy with the money, and now too many of them don't want to pay the piper. Defaulting on a loan is just a self-serving act.

Besides, remember my solution, the application of will. The banks are doing these things because they can sell more credit anyway.

Remember that in the old days, people talked about discipline and honouring their commitments.

[snip]
Reply to
SteveR

Wow, dude. The Soviet Union folded with that kind of thinking, but you are welcome to try Cuba....

Reply to
Clark W. Griswold, Jr.

Gladly - right after you post the proof of your own earlier unsubstantiated claims. ;)

Reply to
Scott en Aztlán

Then he was a fool to support his business with his PERSONAL credit. The whole point of incorporating a business is to limit personal liability. He should have obtained credit in the name of the business, not by running up his credit cards. And if, as I suspect, he turned to credit card financing because the lenders refused to loan his business money, that's a pretty big clue as to the soundness of his business management.

Reply to
Scott en Aztlán

Food, clothing, shelter, heat if you live in a cold climate. See also Maslow's Hierarchy:

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Internet access, TV, video games, and the like do not even qualify as "needs," much less "basic necssities."

Reply to
Scott en Aztlán

I doubt it will increase that much. But even if it does, it will be offset by a drop in the costs to society due to losses from deadbeats who rack up huge debts and then just walk away from them.

Of course it does. It just doesn't deter them 100%.

It's only common sense. People who wouldn't think twice about declaring bankruptcy would definitely be given pause by the thought of Bubba reaming them a new one in a 6' x 10' cell.

Reply to
Scott en Aztlán

No, it's over because you refuse to follow the standard rules of debate.

Reply to
Scott en Aztlán

Thank you for the links. The first book looks especially interesting, as it has an entire chapter devoted to "credit card junkies." I'm anxious to read it. ;)

Reply to
Scott en Aztlán

Ah, Elizabeth Warren - a feminist author who advocates furthering the "rescue culture" where so-called victims get help showered on them and nobody's ever responsible for anything.

All that means is that the banks don't distinguish between different states, and that's, perhaps, a consequence of increased centralisation of bank policies.

The banks charge fees for changing currencies, one way or another. Sometimes they call them "commission", and other times, it's just the normal consumer rate spread. 3% commission on credit card transactions is unremarkable. You seem to be expecting that the bank will change the money for the refund and the initial payment on a zero spread with no commission at all. How else will the rates be the same? Don't forget that it costs *them* money to convert currencies like this - why should they shoulder the entire cost?

It sounds like you are trying to defend sloth and ignorance, and their role in recklessness. Are we supposed to look out for people who are too lazy or stupid to take care of themselves?

Do you enjoy playing nanny? Again, you are saying that people are owed a hassle-free life, free from the consequences of their own laziness and wilful ignorance.

The recent ex-bankrupt may well have learned a lesson or two from the experience. And the offer of a card does not equate to the taking on of actual debt. If under the new rules, credit card debts aren't discharged by bankruptcy, the banks won't be so keen to offer credit to newly discharged bankrupts, as they will still have substantial debts to pay off. One way, they don't get the offer, the other way it's only an offer (and they can just not use it), so I don't see that there's a problem.

Reply to
SteveR

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