Credit card minimums to double
August 21, 2005 10:22 PM   Subscribe

A double whammy for the U.S. economy this winter: Bankers have announced credit card minimum payments will double starting in early 2006 as a 10-year payback system is adopted. Meanwhile in October comes the controversial bankruptcy reform. All this on a blanket of spiralling gas prices. That Unahome may be the wave of the future for a lot of Americans.
posted by rolypolyman (37 comments total)
 
Is that the bankruptcy reform that removes protections for circumstances such as illness or divorce?
posted by [expletive deleted] at 10:31 PM on August 21, 2005


What's next on the list of "How To Fuck Over The Consumer Public?"

I myself call for doubling the interest rate and cutting the payback period in half for all student loans. Who's with me?
posted by handshake at 10:43 PM on August 21, 2005


Just repeat after me - "Its the goldilocks economy, its the goldilocks economy..."
posted by H. Roark at 10:55 PM on August 21, 2005


I'm sure glad I paid off all my credit card debt. *WHEW*

So screwed.
posted by zoogleplex at 12:27 AM on August 22, 2005


We must protect our interests. By raising same.
posted by hal9k at 1:22 AM on August 22, 2005


Mmm. Ice cream.
posted by IndigoJones at 4:48 AM on August 22, 2005


I say that the raising of minimum payments is a good thing for the people at large. Yes, those who could barely meet minimum payments as is will get pinched, but by and large this means a faster pay down of debt by the public (does someone want to throw the mind boggling statistics of how many americans are living beyond their means?) and potentially a decrease of revenue towards credit card companies. I wonder how long 'til they jack up interest rates in response (not sure about US, but in Canada they can legally jack interest up to 60%).

The bankruptcy reform part just plain sucks.
posted by furtive at 4:55 AM on August 22, 2005


I'm with furtive. I find it hard to believe, as the first link implies, that people making interest-only payments on consumer debt is good for the economy as a whole, the banks and the consumers themselves. It may temporarily be good for the retail economy, but before long people get tapped out and end up having to put ever larger portions of their income in service of their debt, which results in there being less money available for goods and services, and so on. How can getting people to pay some priniciple down possibly be a bad thing (other than causing some grief initially)?

As far as the bankruptcy reform bill goes, seconded. What's next? The re√ęstablishment of debtors' prison?
posted by psmealey at 5:22 AM on August 22, 2005


I seriously doubt that raising the minimum will do much to decrease credit card debt. Using plastic (and the consequences thereof) is not something Americans, by and large, think twice about. It's become an automatic reflex. Making minimum payments may not be good for the overall economy, but since when have Americans thought that deeply about anything?

What it will do is increase the frequency of penalty charges and, thus, increase profit to the card companies. I seriously doubt that an industry that, almost by definition, is built upon encouraging debt, is going to enact anything that would seriously discourage the accumulation of said debt.

There's gold in them thar penalties!
posted by Thorzdad at 5:36 AM on August 22, 2005


Y'all can make min.payments of only 2%!? $200 a month on a $10,000 balance? That's mad.
posted by dabitch at 5:55 AM on August 22, 2005


If I accumulate debt, why shouldn't I pay it off? Why does that constitute being "screwed over"?

This article on bankrate.com seems pretty down on bankruptcy reform, but even that source acknowledges this you still can be granted bankruptcy if you can prove you're not abusing the system.

We have to remember what the point of bankruptcy is. On the business side, the US economy encourages innovation by allowing bankruptcy for business - if you try to start a business and fail it doesn't wreck your life. On the personal side, someone who gets in over their head because of huge unexpected medical bills, etc, deserves a second chance. In both cases there is a benefit to society at large for allowing bankruptcy to wipe the slate clean.

But if you get in over your head because of consumer spending, there is no reason for society to bail you out.
posted by selfmedicating at 6:06 AM on August 22, 2005


I'm torn between leaving the US as it continues its lurch to the right, or waiting for the economy to tank and finally picking up a cheap(er) house.
posted by carter at 7:37 AM on August 22, 2005


Wow, this is a harsh group.

The problem with increasing the minimum payment isn't a small thing. There are a lot of folks out there who, because the credit card industry has been so generous, that have been sucked into huge amount of debt.

So, for those of you saying "so what", make a suggestion as to what Joe Q. Public is supposed to do. He's been making the minimum payment, just getting by, trying to eliminate debt as best he can....now, all of a sudden, the payment increases, he can't make the payment, something defaults, he's paying more in penalties....

nope, this is not a good thing. Folks should have been given the option to freeze old accounts (no more charges) and continue payments at the old rate if necessary..yes, it's a slower payback, but it IS a payback and they perhaps don't need to declare bankrupt...oops, never mind, can't do that...

hmmmm... Yep, we're going to see a lot of people just plain get screwed....
posted by HuronBob at 7:39 AM on August 22, 2005


Come on Housing Bubble! Please burst the Boston housing market so I can at least afford my very own box that I can call home.
posted by LinemanBear at 7:44 AM on August 22, 2005


There are a lot of folks out there who, because the credit card industry has been so generous, that have been sucked into huge amount of debt.

Alternatively, there are a lot of people out there who, because the credit card industry gave them enough rope, decided to hang themselves. A credit line isn't some inalienable right; if you spend someone else's money and they ask for it back . . . I'm fresh out of sympathy. Honestly, doubling the minimum payments seems like somebody's mom stepping in for all the kids of my generation who never thought through those credit card offers.
posted by yerfatma at 7:57 AM on August 22, 2005


I'm fresh out of sympathy.

This is the same credit card industry who aggressively goes after college student, who has made rules that if you miss one payment on one credit card you have to pay higher rates on all of them, and the same credit card industry that has lost numerous class action suits for their attempts to cause people to get late payments by hanging onto their checks longer than they should. If there's anyone I have no sympathy for, it's the credit card industry. They used to try not to give cards to people who wouldn't be able to pay them back. Now it seems to be their business model.
posted by dial-tone at 8:19 AM on August 22, 2005


I have to agree with dial-tone on this one. Yes, there's personal responsibility out there for these debt issues, but the credit card industry has become a bunch of slime sucking bottom feeders that make their profits on making sure their customer *can't* pay back the money they owe. They deliberately use misleading terms and near fraudulent rate changes to make it hard for anyone who gets even a little bit behind to get caught up again.

Overall, I think a forced rise in minimum payments is a good thing, because it will cut back on overall interest payments, but it should involve grandfathering, because some people who are already up against the wall are going to get killed in this change.
posted by jacquilynne at 8:33 AM on August 22, 2005


This is the same credit card industry who ... has made rules that if you miss one payment on one credit card you have to pay higher rates on all of them.

Actually, it's worse than that. They changed the rules so that if you miss even your water bill they can raise your rates. These people are evil.
posted by JackFlash at 8:43 AM on August 22, 2005


You don't need a credit card to survive. You don't need a credit card to survive. If you do, you're living beyond your means, and boo-fucking-hoo for them raising the minimum rates. Besides, why are you making minimum payments in the first place?

Luxury is not a right.
posted by angry modem at 9:33 AM on August 22, 2005


To everyone out there saying you don't need a credit cards to survive... you've got a serious disconnect with the middle and lower class population. Most people that are lower class live on credit cards because they don't make enough money to do otherwise. The lower end of the middle class spectrum is more than likely in the same boat.

Using that credit card to pay for school clothes and gift for their kids is a blessing. In 'Todays America' where image is so important, parent want to give their kids a chance to not be the bastard of the school.

I'm making about 20k a year, don't have enough money to do much of anything with what's left over after bills and I don't even have to pay rent. Now imagine the rest of the people in America in the same boat trying to pay rent on top of that. Forget it, they wouldn't have enough to eat with. Using a credit card allows them a bit of leeway. Jack that minimum up and they lose that slack, which means cutting back(sell car/house/stuff) or missing other bills. Either choice is going to hurt.
posted by JakeEXTREME at 10:15 AM on August 22, 2005


Wow.

From the comments here, one gets the impression that people are wishing for an economic catastrophe. That is what one calls a myopic and short-sighted view.
posted by dios at 10:24 AM on August 22, 2005


Anyone care to make an argument for a 30 year payback?
posted by IndigoJones at 10:25 AM on August 22, 2005


They used to try not to give cards to people who wouldn't be able to pay them back. Now it seems to be their business model.

THAT hit the nail on the head. simple and plain.

oh, and by the way, a little example of the eurocommie surrender terrahist-appeasing credit card system in my country: if I don't have enough money to balance my credit card account every month, what happens is, my ATM card gets frozen so that I can't get any cash from my (then-in-the-red) bank account, I get a nice FedEx letter that says unless I pay in 2 weeks or something, a nice gentleman is coming to visit and he'll have a court order to start picking valuable stuff from my apartment (except bed-fridge-kitchen utensils-bathtub etc), and that if my computer/stereo/etc isn't worth enough to erase my debt they'll impound my car and start taking money out of my monthly paycheck, with interest and a fee (I guess they can't take more than 25 or 30 per cent).

I am careful not to live above my means.
posted by matteo at 10:40 AM on August 22, 2005


To everyone out there saying you don't need a credit cards to survive... you've got a serious disconnect with the middle and lower class population. Most people that are lower class live on credit cards because they don't make enough money to do otherwise. The lower end of the middle class spectrum is more than likely in the same boat.

I have a friend who for years made around $12k, paid her own way on everything, had a credit card she never used other than to buy an airline ticket online and immediately pay off. She was able not only to live well, she traveled abroad at least once a year.

It's all about what you as an individual consider a priority. Is it a new pair of shoes? or is it a fresh meal on the table. More often than not the people in credit card debt got that way not because of needing to buy groceries, but because they made the decision at some point to buy the $100 Nike shoes.

I know, I've been there. I was the careless spendthrift in my youth and I paid dearly for it. As I've gotten older and move along in my career I have become more cautious about money than ever. I know that at any time I could lose my comfy life, get downsized and not be able to replace the cush income I have right now. Staying out of consumer debt is a high priority for me for a number of reasons.
posted by FlamingBore at 10:57 AM on August 22, 2005


To everyone out there saying you don't need a credit cards to survive... you've got a serious disconnect with the middle and lower class population. Most people that are lower class live on credit cards because they don't make enough money to do otherwise. The lower end of the middle class spectrum is more than likely in the same boat.

The serious disconnect is the people living on their credit cards who do not realize (or are actively avoiding acknowledging) that some day their manner of living is going to come to a crashing halt.

The credit industry, to their immense profit, has successfully convinced "popular wisdom" to consider consumer credit a basic necessity. It isn't true, it is a dubious luxury. If you cannot live without your credit card because you spend too much money, then you must spend less money. If you are slowly sinking in debt, you are almost certainly going going to drown eventually. Doubling the minimums isn't changing that fact.
posted by Invoke at 11:31 AM on August 22, 2005


I'm not hoping for an economic tragedy, but I'd be quite pleased if many of the indirect corporate subsidy mechanisms that I am forced to participate in would implode.

It's damn irksome to look at the bills every month and be reminded of all the jerks who have positioned themselves to benefit at my expense, however minor.

For instance, it is a clever feature of most credit card companies' business models that fraud loss is transformed via penalties and insurance claims into profit. Ultimately, the burden is shuffled onto the public.

That's why they're so interested in a lot of new card tech (like RFID and related ideas) that facilitates ease-of-use: a corresponding rise in fraud is not unprofitable.

I don't like to deal with crooks, and that's why I don't have any credit cards.
posted by sonofsamiam at 11:32 AM on August 22, 2005


"The serious disconnect is the people living on their credit cards who do not realize (or are actively avoiding acknowledging) that some day their manner of living is going to come to a crashing halt. "
Indeed, Invoke.

To those folks who are in the "it's their problem for being weak" party, I'm willing to join you if your for allowing the good ole days of media manipulation to come back. Y'know, like when 'doctors' would come on the t.v. and tell you how good it was for yout throat to smoke Chesterfields. How if you're run down just after lunch you could have a medical problem which could be cured by using Geritol.

Why should snake oil sales be limited to the userers?
And as long as we're acknowleging it's their own damn fault for being stupid and we're sympathizing with the corporations' suffering, why not bring back indentured servatude? Someone has a debt, they have to pay it back. If they're not making enough money too, perhaps the company can find more profitable work for them.

I'd be willing to double the minimum, or triple it, if there are restrictions on usury and consumer protections in place so people don't go into debt simply because a coalition of people who are sharp with money exploits their ignorance on how to handle something almost no one is taught and not one works at without making some mistakes.

In theory, we've outlawed addictive drugs for the negative effect it has on society. Why then allow people to offer something that has similar effects merely because it doesn't involve driving a needle in your arm?
posted by Smedleyman at 12:00 PM on August 22, 2005


In addition - why the hell are politicians allowing this? I like money like the next guy, but it doesn't mean I'd drill holes in my lifeboat for it.
The "they're psychopaths" doesn't cover this level of carelessness. Must be some sort of death urge left unfufilled by doing anything that would require courage otherwise, like serving in the military (or even the peace corps). Why the hell can't they just liquor up and drive fast like any normal repressed adolescent?
posted by Smedleyman at 12:05 PM on August 22, 2005


I always wonder about the new "utilities" that have sprung up in the past 5-20 years:
- cable TV / satellite
- cell phones
- internet service

All that together is running about $200 / month right now. THAT'S $2400 / YEAR!! Insane. Where is all of that disposable incoming coming from, and what was it used for before?

A bit of advice: my wife was mad about paying so much ($80/month) for cable TV, so she called to have it shut off. She said that her parents pay $30 in Birmingham, and she was done with it. So they call a week later and offer us $30/month for 12 months. They're installing a new box today with TIVO.

If you have a problem with credit card companies, call em up. They should work with you to help you out of trouble. If not, stop using credit, and keep shuffling the debt from one 0% card to another.
posted by joecacti at 12:15 PM on August 22, 2005


It looks to me like the slime sucking are preying on the ignorant and foolish. Moot.
posted by blue_beetle at 12:18 PM on August 22, 2005


Damn. I thought the Unahome was an actual product. I guess yurts are still cheap enough ...

I don't like to deal with crooks, and that's why I don't have any credit cards.

Me too. I just wish I could get out of the banks, but I'll be damned if I'm gonna let Gary Coleman and his friends cash my paychecks.

Jesus said usury was a sin. I thought this country was founded on Christian principles?
posted by mrgrimm at 1:00 PM on August 22, 2005


Jesus also said "ask and ye shall receive". Also, by the way, strict Islam forbids collecting interest. Stop using your credit cards and the terrorists win.
posted by telstar at 1:13 PM on August 22, 2005


The credit card companies are staffed by well-educated people with degrees in all sorts of fields from marketing to finance. They are exploiting a knowledge gap.

The fact of the matter is, with a population close to 300 million in this country, and millions more immigrating every year, there is a humongous pool of people who were brought up without any kind of financial education.

The wealthy in this country can ensure their children have good financial educations, or hire financial planners and set up trust accounts to take care of that for them. The middle class is constantly struggling to raise its children with good money sense. The poor in this country have no financial knowledge to begin with, or they probably wouldn't be poor. They certainly can't teach much to their children.

Ultimately, the credit card corporations hire scientists with $100,000+ salaries to plug people into MRI's and view their brain functions as they watch commercials. Every single little advantage they can gain against the consumer to manipulate him will be used.

Meanwhile, all little Johnny has to combat millions of dollars spent on marketing and research and lobbying politicians is the possibility that his parents may or may not tell him, "don't spend money you don't have, son."

FUCK THE CORPORATIONS! VIVA LA REVOLUCION!
posted by PigAlien at 1:32 PM on August 22, 2005


My wife paid off one of our high interest credit cards recently. The big one. She called the credit card service representative and asked what the payoff figure was, then she paid off the card.

Simple, eh ?

Too simple.

A month later, we got another bill in the mail - it was for interest on the principle that we'd paid off midway through the month. The card company had conveniently failed to include a rough calculation of the interest due - on the principal - in the payoff figure cited. Had they done so we would have overpaid and that would have been the end of it. If they had let us. But - it seems - they do not want to release us from credit card debt slavery.

I think they're mad that we paid off the debt and so they've turned to devious and legally dubious strategems, refusing to let us slip from their greedy clutches.....

OK. So, we paid off the secret ( undeclared ) interest charge on the original principal. Fine. Well.....A month later, another bill arrived for about $3.25 : interest on the interest !

Aha, I thought, It's Zeno's Paradox !

So, we're sending off a payment of $4.00 to account for the interest on the interest on the interest, and I assume the credit card company will send back a $.75 refund check.... and then a bill for the interest on the interest on the interest on the interest of the original principal we paid off a few months ago will arrive at our door.

In financial terms that would be an exact expression of Zeno's paradox:

ZENO's PARADOX

Achilles - who is both very fleet of foot and also rather vain - decides to have a foot race with a tortoise ( the tortoise is really beside the point, a prop - Achilles actually wants to showcase his running prowess, perhaps so he can get laid or land an ad contract ) and - because Achilles is so much faster than the tortoise and has an overdeveloped sense of noblesse oblige - he gives the tortoise a healthy head start.

The starting gun fires, and the tortoise scuttles off. Achilles knows the exact length of the course and also how fast the tortoise can run a 5K road race. Which is to say not very fast. So Achilles hangs around. He drinks a caffeinated sports drink and tosses some hoop. The tortoise forges ahead. Hoping for a photo finish, Achilles waits long enough to give the tortoise - scuttling towards the finish line dimly in view - a fighting chance.

At last, Achilles ties on his Reeboks and hits the road. He covers 1/2 the distance between the starting line and the tortoise. Fine, Achilles will soon overtake the tortoise. Right ?

Not so fast : slow down.

In that same period of time the tortoise has advanced a little. Just a wee bit. OK. So, again, Achilles covers one half of the remaining distance. He's closing fast on the tortoise for sure. But - oh no ! - in that same period of time the tortoise has again advanced incrementally and so you can see that, quite logically, Achilles can never beat the frikkin' tortoise despite the fact that he can run at least 10 times as fast. Will the tortoise win the race ? Stay tuned.

______________

In a similar fashion my wife and I will never be able to pay off our credit card. We'll pay off the residual interest on the interest on the interest on the interest,but there will still always be residual interest left !

A year from now we'll still owe some absurdly tiny fraction of a penny in interest and - should we ever miss a payment on that billionth of a penny interest ( or whatever it might be ) we'll get socked with a $35 late payment fee and the cycle will begin anew. And if we should happen to neglect the situation for a sustained period of time Well quickly be - with compounding interest on a ballooning balance fueled by penalties, fees, and a yearly interest rate pushing 30% or %35 - hundreds of thousands of dollars in debt.

All from a fraction of a penny.

What a racket.

I'm assuming, by the way, that the solution to Zeno's Paradox - in terms of physics anyway - lies in the Quantum realm.

The solution to my credit card paradox, however, lies in politics.
posted by troutfishing at 2:54 PM on August 22, 2005


troutfishing gets an A+ for that. Great post!
posted by psmealey at 3:52 PM on August 22, 2005


troutfishing, if you want to get back at the card company, do overpay by a little bit, and then don't cancel the card. So long as your account doesn't have an annual fee and you are still using paper statements, it costs them at least a quarter to send you statements every month saying basically "we owe you a dime."

it's a bit vindictive, i suppose, but hardly more vindictive than charging you interest-on-the-interest when you've clearly stated your intent to close the account.
posted by dkg at 8:08 PM on August 22, 2005


So long as your account doesn't have an annual fee and you are still using paper statements, it costs them at least a quarter to send you statements every month saying basically "we owe you a dime."

trout is a diehard environmentalist. Something tells me that this wouldn't sit particularly well with him.
posted by SeizeTheDay at 9:40 PM on August 22, 2005


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