Credit Cards and our state of emergency
 

The Secret History Of The Credit Card
http://www.pbs.org/wgbh/pages/frontline/shows/credit/

I just watched Frontline on PBS and was pretty amazed at what I saw. The episode was a documentary on the credit card industry and all the trouble that it causes. They interviewed consumers, senators, bank officials, federal regulations officials, the BBB, and even the guy who started it all.

The message, or at least the general feeling that you get from it all is that the credit card industry is based around getting people into debt, then trapping them into perpetual payments. They do not provide enough information for people to get out of debt quickly, nor do they inform consumers about their 'rights' to rate hikes and fees.

Furthermore, they alluded to a very scarey fact about our nation's government. You'd think that there are legislators who are committed to fighting the greed of the banks, and there are, but every bill they've proposed has been shot down - by what, though? To the common person, these bills would seem like a necessary and logical step in controlling the banks and reducing debt. However, the banks are paying off YOUR representatives to vote on their behalf.

Credit card debt is a huge problem today. It's easy to look the other way and say, "We'll I'm a responsible consumer. If you got yourself into debt, it's your problem." Getting into debt is easy if you're not careful, but the way credit card companies work, they are committed to making it impossible to get out of debt. They want you to keep making payments for the rest of your life.

Yeah...they got me for at least another five years, bastards.
I will admit to my mistakes....and have cancelled all credit cards....everyhting is debit now, but I will be paying the banks for imaginary money for awhile yet.

Yep, in fact a lot of our financial institutions work with this principle in mind. Loan/mortgage companies that specialize in "at-risk" customers? Keep 'em on minimum payment. Credit card banks? Minimum payment. 0% financing on cars and rental property? Smack down city when the rate gets yanked, and you're paying bookoos of $$$ for a six-month vehicle that has already depreciated significantly. It's good $$$ if you can do it - ethics may be a little shaky, in my opinion.

If you make the minimum payment, apparently, it will take you 35 years to pay it off.

I believe that it is our education system. I have yet to see a program in a high school that deals with this aspect of life any more than for "balancing a checkbook".

I have since learned:

How escro works.

What an amoritization schedule is.

The rule of 78.

That those who know money will take it from those who don't.

How to live a better life through planning.

To never buy a car (etc) that you cannot hot sell the next day and at least break even.

Huge payments for a short duration make the cost of ownership much less.

I only wish I would not have had to learn the hard way.

Boo, you are soooooo right. We don't teach kids much of anything about life. And the cycle of poverty is tough to break once you're in it. It takes some real tenacity and emotional maturity to get out of the cycle, something that most people starting that cycle don't have.

I was fortunate to learn about credit problems through a friend. My gf had a gf that got married to an Air Force dude with two stripes. He bought a car and then tons of furniture on a cc. We would visit and have fun. I always wondered how he did it. The next thing you know, everything is gone - repossed. And they later end up divorced.

A student of mine is an employee of a local electronics chain store. He said the employees are trained and ordered to talk poor people into buying high-ticket items with store credit, because it works this way:
1) Customer buys $6000 TV with store credit.
2) Customer cannot possibly makes payments and falls behind.
3) Rates and fees spike upwards as customer falls behind.
4) Eventually, customer can't make payments and defaults on agreement (this is what the company has been shooting for all along).
5) Debt is turned over to collection agency, and store gets tax write-off for a defaulted account receivable.
6) Collection agency agrees to settle with hapless customer for a fraction of remaining debt.
7) Store still collects a percentage of whatever is collected, even though the debt was written off.
8) Store makes about $15000 on what was originally a $6000 TV.

The wife and I are a cash-purchase ONLY family. We own no credit cards at all, and will not pay for anything on credit except a house or car. If we can't buy something else outright, then we determine that we can't afford it and move on.

I haven't seen this program yet but I have it set on the TiVo. (I have the other two Frontline episodes saved - the one on marketing and the one on WalMart.) I feel lucky that I've always been able to handle my credit card bills - I always pay it in full every month. I've come close a few months. My wife has about $1500 in debt on her card and I'm hoping we can get rid of that soon.

About 2 years ago, a financial advisor came to our workplace and stressed to us the importance of getting out of credit card debt. My officemate, who at the time was putting money away for retirement and was about $4000 in credit card debt, cancelled the money going into his retirement and concentrated solely on the credit card. It took him about a year and a half, but he got out of the credit card debt. I have a lot of respect for him, because he consciously worked hard at escaping their grip.

Yeah, I could not agree more, it's sad that I know how to bisect a right angle but when I went to buy a house last year I had no idea what I was doing. Granted I'm 32 and long out of highschool, maybe some of them are teaching "life skills" now for all I know, but I doubt it.

A brilliant plan, because his retirement was only growing at 5% or so, while his debt was rising at 15-20%. I've never understood people who are so excited about their stock portfolios and retirement packages while credit card debt was simultaneously eating away everything they had (or were going to have).

I practiced bankruptcy law for years. I was constantly amazed at the number of credit cards and debts my clients incurred. One married couple came in a few years ago with over $260,000 in credit card debt alone!. $12,000 was just from the Disney Store. They got discharged and everything was fine. Two years later, they came back with another $100,000 in credit card debt. Unfuckingbelievable. They wanted to file another Ch. 7. I had to tell them you can file only once every 7 years. Some people never learn.

I have one emergency credit card ad that's ONLY for an emergency. The rest are debit cards or prepaid credit cards.

BE CAREFUL ABOUT CREDIT CARDS. THEY ARE DEATH TRAPS IF YOU CANT PAY THEM OFF EACH AND EVERY MONTH.

I'm working on getting out of debt- and after 5 yrs I'm nearly there, they seem so harmless to begin with because they are so ubiquitous - I couldn't agree more with the fact that finance should be taught in school it is one of the most important live skills, makes you wonder why it's not. (and don't get me started on student loans, no way my education was worth that much)

Its true, the credit card companies would rather see you go bankrupt and not pay the debt so they can write it off than work something out with you. I got myself into trouble with crdit cards. I'd made payments for almost 8 years, never late. I paid off some cards and canceled them. Then I got hit with some big expenses, moving to another city, some major car repairs, dental bills and the like. I was already tight from foolish spending and these things put me over the edge. I started getting behind on payments. With late charges and over limit fees on multiple cards my total monthly payments were more than I made in a month. I sold some things to try to catch up but it was just bricks in the Grand Canyon. I got more behind. I called all my creditors and tried to cut some sort of deal where the card was canceled or frozen and I could get a lower rate. Still paying the bill, just not such heavy interest. No go, they would not deal. OK, I then asked if they could cancel the cards and at least wave the over limit and late fees so I could physically make the payment. Again, no go. It was all or nothing. All they could do was refer me to a credit counseling service. I WANTED to pay the debt. I was doing my best but I couldn't pay them more than I made in a month at a full time job. I went to a reputable credit counseling company. The best payment plan they could come up with left me ten dollars a month after BASIC living expenses and making the credit payments. This would go on for five years. This left no money for car repairs, clothing, any medical bills, emergencies, anything. I thought about it and knew that living that tight in five years something would come up that would blow the budget and payment plan. I then decided to declare bankruptcy. I didn't want to, I wanted to pay the debts but I was left with no choice. Do I feel guilty? I'm a little bothered by it but at 20 to 21% interest on my credit cards they easily got their principle back and them some, I just defaulted on their interest. I made some mistakes and learned from them. I will never have more than possibly a small gas credit card again. Funny thing, shortly after my bankruptcy was completed I started getting offers for credit. They specifically target bankrupticies since they know your salary and know you now have no debt. Once you get out they try to pull you back in. Never again though, never again.

I used to have a problem with credit cards (the devil in disguise). I was about $3000 down which is a ton for a guy who used to make $6 per hour. I was very nervous and put the card in a baggie and put it in a bowl of water and froze it. So, if I wanted something I couldn't pay cash for, I had to go home and thaw out the card and by that time I usually said "forget about it".

Took a year but it was paid off and now I only have one for emergencies. I hate them but sometimes you need them. Got to be bloody careful with them. Jeez.

To a responsible and informed user, a credit card can be a wonderful tool. However, they are too easy to abuse and get carried away with frivilous purchases( I got caught up in it myself). If you have the information(easily obtained by asking questions) and the self control, you can reap the benifits of credit card use, especially now with the rewards programs associated with individual cards. I agree the CC companies are counting on us running up our debt, that is their business. But ultimately we are aware of the potential consequences and are responsible for our own actions.

Financial education in the US is horrible.

I too fell into the intrest rate trap, and FINALLY at 34 got out of it. It took a hell of a lot of disapline.

Yeah, I saw it too. Notice how he refused to speak to them unless his location and his client were kept secret? My Dad suggested that's because if people knew where to find him, they'd kill him. Probably true.


All true. It's a form of slavery. Get out of debt, and you're free.

I'm a deadbeat credit card user...I pay it off every month. I haven't paid interest on over 11 years. The trick is to not spend more than you can afford to pay off at the end of the month...it's no more complicated than that.
I think cards are given out too easily to anyone that asks.

It doesn't stop with credit cards either. Look at how these payday loan and check cashing places work. When people are so bad off that they can't get a credit card, these places will step in to rob them.

credit..... ok so im 26 and have had "credit" for 5 years....

im about to pay off my first loan... but have easilly racked up another 7000 in debt.. i am also a compulsinve buyer.. so it really really is easy for me... my wife is verry good at paying hers down.. not evreymonth but she pays on it verry responsibly... she tries to pay mine off but..to no avail...


i recnelty talked to my dad about my 19 yr old brother who realy didnt even compreheand the idea of how much a 200 cell phone bill was.. and really didnt couldnt even think about a creitd card or what a credit score was.. or what it meant to pay your stuff on time..

all of wich led me to think about this..... i fought and fought to get credit period. wether it was a card or a loan or a gift hell at one point in time i woulda paid ony of ur bills justso i coulda said i was.. now here i have so much im actually refusing or cutting up what comes in the mail....

wich leads me to think how many people are like i was... dying to get credit and then realize why the hell did i want this...

anyway.. i think we really need to teach our kids... anything would be better than nothing.....

The saddest part of all is the fact that it's not just the credit card companies. Anyone who's ever had a cell phone, leased/bought a car on installments....

These companies are waiting for you to slip up because they know that they only see a real amount of money when they can add on late fees and interest and if they're lucky they'll disconnect/reposess their services so that they can continue to charge you without any cost on their part because you're no longer utilizing their services - and it's even better if they can charge you into collections.

It's a shame that these companies don't want to build relationships with their customers and are so easy to do whatever it takes to get as much from them as quickly as possible. I've been caught by a few of their games before and it's been all cash in the begining since.

And now to end that rant and be on topic, I read their "8 things you should know" section and it was pretty interesting. At 10 o'clock tonight I'll be watching the show online.

I would love to see a required course given to all high school seniors that outlines all of the points that Boo noted. I think people need to learn how to do their taxes in school.

I could answer most debt questions. I have practiced bk and debt relief law for 18 years. I'd be happy answer any questions anybody has.

I was made privy of these two facts when I was around 12 years old, lucky for me. I can only laugh at people who get into debt.
I'd love to see this too, but I'm sure you and I both understand why this will never happen.

I feel lucky to have had a relatively minor cell phone debt that is now old news. I feel sort of innoculated against a lifetime of credit card misery. Kind of like getting cowpox instead of smallpox.

I am currently debt free and payment free. My spiffy mobile is prepaid and I own my lovely computer and mountain bike outright. Everything else is incidental.

What I want to know is. How FEW contracts can a young person be bound by in their day to day life. Rent? Internet? Gas? Electricity? Education? What else?

I'll have to see that special. I knew that credit card companies in recent years had been offering cards to people who had marginal credit. I just thought it was stupid greed on the part of the credit industry. I didn't realize that they actually found a way to _make money_ on bankruptcies and defaults.

I have never had a credit card. My folks grew up in the Great Depression, and didn't like debt; they saved up in advance for things they wanted. I've followed along with that. The only loans I've ever taken were for houses.

When I was a kid, a _very_ long time ago, we spend some time in middle school math classes learning about interest rates and compound interest. They taught us how to calculate what the long term price and "real" interest rate of anything was. Don't schools do this anymore?

Fortunatly my dad taught me about loans and credit. If i wanted a big ticket item such as a new bike he would loan me the money interest free. Taught me how to make payments. I didnt get a credit card until I was 24 and havent paid a bit of interest. When I purchase something I know i'm going to have the cash for it to pay it as soon as the bill comes in. Unfortunatly we live in a "now" society. It amazes me to find out how much some people owe on there cradit cards.

Personal, corporate, and governement debts are at all time highs. If we were to have a recession today, it would dwarf what we saw after the 1929 stock market crash. It's not likely but possible.

I have not had a paying job since I retired 14 years ago....but I just ordered a new Dell 4700 PC on my credit card...our rule is---never charge more than what you can payoff at the first of the month...

which means...

plan ahead...invest and save...don't depend on anyone except your SO....

I was lucky as my parents sat me down at 12 and explained that credit cards were evil things invented by people who had invented a new form of slavery....many of my friends did not have that luxury

I don't know what it is, but i've always been paranoid with money. I only spend less than what i know i'll make, i always keep a fairly hefty cushion of money in case something bad happens, and i try not to spend too much, considering how much i go out...

With that said, I am still extremely worried about having to add more bills into my budget...like..i keep my monthly expenses to a minimum, rent, power/water/trash/whatever the city calls it, cable internet, insurance every 6 months, car taxes every year, food...so to add a fairly hefty (yes, $50+ a month for a phone is hefty to me) cell phone bill every month drives me insane..then add entertainment, cable tv, etc and it really starts to add up to too much money that is constantly going out, which makes it harder and harder to save...

so i dunno..there are always two approaches, make more money or spend less money..rightnow, it's the spend less money for me, which has worked well in the past, but with moving, travelling, etc, it gets a bit...difficult..

at any rate, credit cards are like religions..they aren't inherently bad..it's just what people do with them that is bad...

Hubby and I have learned the hard way but from the sound of it we learned faster than some people do. About 3 years ago hubby was injured, hospitalized, and out of work for 6 months. At that time we had 3 credit cards and really racked up the charges because of course we needed gas and groceries and I was working as much as I possibly could. We also had 2 car loans at that time as well. NOW we have paid off both car loans, only have one credit card that is closed and we're just paying it off, and we have a home mortgage. Yes the mortgage is huge in comparison to what we had in total debt before but a mortgage is designed to be paid off in a set amount of time while the credit card could take so much longer if we only pay the minimum. We're also building equity instead of just paying rent to someone else. We will get everything paid off eventually. We are getting better at it and we're not incurring MORE debt than we can handle. I hope I can teach my daughter how some of these things work and arm her against getting into big debt herself.

My grandma (a financial genius in my book)always said "Live within your means." If I did that all the time I would be as rich as she was.

I'm a couple years out of high school, yes they still teach those things in math class. I also took a course in economics with a finance savvy teacher but it wasn't required. I think everyone forgets these things, I barely remember most of it myself, but I do remember the key points. Once real life kicks in I can see how many people would forget, and yes I think we should devote way more education time to finance. The other problem with HS is that many kids just don't see it as useful, they have no real life experience and just don't care.

I have always disliked being in debt. It is just me. I have a credit card, but rarely use it. I paid cash for my cars and the only thing I owe for is the house, and we are making extra payments on the mortgage to get it paid off sooner. I have seen other people get in trouble with credit and I am determined it isn't going to happen to me.

A mortgate you kinda need to have, thats an acceptible debt as no way can most people save that kinda cash up front.

Most people would also say a car also but I'd argue that - I bought a 5-year old car in great condition for 1/7th of the new price. I put it on my c/c. Theres an interesting phenomenon here in the UK where the c/c operators are giving 0% balance transfers for 6 months. Its a 'moth and candle' game I guess - theyre betting I wont pay my car off in 6 months, I bet I will.

Time will tell :-D

I'm still holding out on getting a credit card. I can see myself eventually getting one as a way to help build credit, though my plan is to pay everything off at the end of each month. However, I know those plans don't always work, as evidenced by the fact that I have had trouble remembering to pay my monthly student loan payments. I've always had the money, but through some trouble getting the mail sent here to my college address (despite filling out the change of address part every single damn time I send in a payment) and my forgetful nature, I've gone past due a few times. One time it was bad enough that they sent a letter threatening to report me to a credit agency since they couldn't get in contact with me about the overdue charges. Again, would've been easier to get in touch with me if they sent stuff to the updated address or called the updated phone number, but I digress.

The point is, I've already shown myself how hard it can be to follow plans of making regular payments, so the idea of a credit card scares the bejesus out of me. If I was to get one, I think for the first half year or so I would only allow myself to use it for gas so I couldn't run up charges on it, and try my damnedest to get it paid at the end of each month. Besides, I've still got another year and a half of undergraduate college loans to help with my 'get in debt' itch.

I used to have problems remembering when all the credit card bills are due, but online bill payment helps out a lot. Like i said before, i never run a balance and pay the cards off monthly, but the due dates are about a week apart, so i just have a small reminder near the 18th to just pay all the bills online.


and yeah, being in debt SUCKS totally...totally..toootttaaalllyyy sucks, which is why i avoid it at all costs.

car debt or house debt isn't too bad and serves a purpose, credit card debt really kills your score, though

Argh, this is one of the few disadvantages of not watching TV....

wow....
I feel pretty lucky that I learned most of those things described by Boo in my economics class last year. [It was an elective]. What especially hurts is that none of my friends out of my school seem to know much about the topic, and I end up having to educate them on the topic...

Hmm, the topic about bisecting angles....Makes you think about what the hell are high school students [including me] being taught these days.
[Reminds me of an idea I've always had - cut school for the day and then infiltrate into other schools, with video-camera, just to show the status of the american education system and the students' ignorance.]

[as i type this, my sister,22, is walking out the door, struggling to pay for her car insurance, meanwhile erasing away my mom's good credit, as she co-signed for her daughter]

Some people use credit as a last resort, to keep money flowing when jobs fail or medical bills overwhelm them. And I can't blame them, but unless money starts flowing again soon they're making their situation much worse, long-term.

That said, I don't see a pressing reason why a young person with an income would ever need a credit card. If you don't need credit, building a credit history in that way is irrelevant. Just save your money and pay your bills on time, and when it comes time to buy a house or something, the mortgage company will still be happy to see you provided that you have a good job and the required down payment.

I bought a house once and the mortgage company brought up the fact that the credit companies had _no_ record on me, and it made them nervous. They never said why; I speculate they worried I might be some credit scammer who owed money under multiple identities. In any case, all I had to do is sign a letter stating that the reason I had no credit history was that I didn't believe in credit cards. Then I got the loan.

I'm fortunate in that I've learned a lot of important lessons from my parents. My dad has several credit cards, each with thousands of dollars worth of credit limit. Why? Because he always makes his payments on time and in full. It's not really a reward--they're just trying to get him to spend more money, which he will never do. He won't buy something if he can't pay it off on time and in full. Sure, he'll charge up the credit cards all he wants, but he always has enough in the savings account to pay it off.

My mother, on the other hand, cannot seem to grasp how credit and credit cards function, which is somewhat understandable as she is seriously technologically retarded. The woman is resistant to technology of any kind, and thus the modern system of credit is entirely beyond her. She has gotten my family into debt several times--the last time for about $10,000 on a line of credit from the bank that my father hadn't approved. As the account was in his name as well, he was able to get the majority of it cancelled since it was the bank's fault for not checking with him. He has had to pay back about $15,000 in debt that my mother has incurred over the years. Needless to say she is no longer allowed to use credit cards and has limited access to the family debit card.

Thus I have no desire to get a credit card except perhaps for emergencies. I will probably end up getting a card this spring as I plan on using it when I go abroad this summer in tandem with my debit card. My parents will pay the bill on the credit card as a graduation gift. But I probably will only use it for the trip expenses and then chop it up--I won't be able to afford it afterwards. It really isn't worth the cost.