Posted on 08/11/2007 6:39:42 AM PDT by Hydroshock
WASHINGTON — A "dangerous cycle of debt" is trapping too many credit-card holders, making it increasingly difficult to protect their financial security, according to a report.
About one-third of cardholders pay interest rates in excess of 20 percent, according to a report from New York-based think tank Demos. Also, borrowers with one slip-up can incur a "cascade" of penalties and end up in a "trap" of high-cost debt, the report said.
"The excuse of risk-based pricing is used to justify everything. These prices go far beyond pricing for risk. Some of these interest rates and payment fees seem to not accurately reflect the risk," said Tamara Draut, a co-author of the report.
Draut criticized practices such as card issuers retroactively applying rate increases. The authors also noted that companies can change terms at will, and that there are no legal bounds to the amount of fees and interest that borrowers can be charged.
"As a result, cardholders often borrow money under one set of conditions and end up paying it back under a different set of conditions," according to the authors.
(Excerpt) Read more at foxnews.com ...
BUMP for later reference
Lending is different than borrowing
Personal finance is 80% behavior. You do not build wealth with credit cards. Use common sense. When you play with a multi-billion dollar industry and you think you’re going to win at their game, you are naive. You cannot beat the credit card companies.
They keep writing this stuff as though the people that overextend their debt are the victims of some outside force. They are merely the victims of their own actions.
Simple solution: stop spending, and start paying down your debt.
Drug dealers screwed over the rental car business by renting them to transport drugs.
bttt
My debit card is a Mastercard with an actual Mastercard number, exp date, and a security code on the back as are most debit cards now except it draws right from the bank usually right at the time of purchase some purchases take 3 days or so to clear and I have the same protections that a cc will offer.
That's all fine and dandy wisdom. But, there is a legitimate need and use of credit. What's happening now is nothing short of legalized loan sharking. But, it's OK because the loan sharks have nice upstanding names and make contributions to political campaigns.
I know a hardworking fellow who confided in me that he got caught up in this kind of credit scam. Those smiling faces turned to vampires once he was over the barrel.
Clearly, the American public should be protected from such shenanigans. Sure, you can say "Buyer beware, etc". But, I'd like to know how many of you who have a credit card have actually read the fine print of the agreement you have as a borrower, and read the fine print of every document sent to you by your credit card company that might have hidden in it that the rules have changed.
If congress wants to do something for the American people, it should set a maximum interest rated tied to the prime rate.
But, instead loan sharking is legalized, as long as its done by the right shark.
I think it all boils down to who is right? All the broke people who use and advocate the use of credit cards or credit as a tool; or God when he inspired Solomon to write those words and obviously has a disdain for debt?
Did I say my persoal finance behavior had changed...no.
I buy what I would normally buy, I just put it on a rewards card. Gas, groceries, normal things we buy. I have money in the bank to cover my purchases, so I pay them off at the end of the month...no interest. But because of the rewards points, I don’t have to pay for Christmas presents (I use the points for that)....don’t pay for vacations (use the points for airline tickets, hotels, etc.)
I haven’t spent anymore money using the credit cards, I’ve actually saved money...by getting reward points. If you can control your spending behavior...credit cards can work for you.
Plus as I said, since our credit score is upwards of 800, we get offers all the time for 12 - 18 month no interest CC purchases. We don’t use these for things we don’t have the money for, but buy big ticket items we need (refrigerator or computer comes to mind), keep our money in a place where it’s working for us, and essentially gain 12 months interest on that money for ourselves, at the CC company’s expense because we pay off the balance before the 12 month is up...we used the cc’s money for 12 month with no interest.
Do you have a mortgage? Almost everyone does. That is debt, but having a mortgage is a whole lot less enslaving than having a landlord who has a mortgage - believe me.
Want a college education? Have a spare $160,000 sitting around? Don't give me a lecture about the local community college and State whatever. Do you want a real credential from a real university that will be accepted by a real employer - you have to pay. I am not talking about elite private universities. Elite public universities are just as bad. University of Michigan, UVa and UC (any campus) are at the $40,000 per year level, and no I won't take an engineering degree from the local community college as equivalent in trade when I hire a manger for a large project.
Want a car so that you can get to work reliably and that will last 150,000 miles reliably with a reasonable warranty so that you know that any lemon problems will be taken care of. Have a spare $25,000 - $40,000 sitting around with nothing better to do?
Have job in a major metropolitan area but want to live cheaply? You can commute 2 hrs each way each day and live in an area with a bad school district. People do. That is not a rich life, however.
In a society where the price of everything is inflated by the debt ration the system is designed for, your choice of not debt is enviable if you can pull it off, but you are likely to live a comparatively unsatisfied life as a consequence.
I hate our debt ridden society more than anyone, but the blame is systemic and systematic. It goes to society as a whole, the politicians who created it, the voters who continue to vote for it and the federal reserve board that keeps figuring out new ways to breath life into it. But don't blame its victims who are just trying to get by from day to day. That is immoral.
I apologize if I come off as pious I did not mean to sound that way I just was led after many years of debt. To understand what God meant when he penned those words through Solomon.
Ah, but if you pay off your credit cards in full each month do you have debt...no...the credit card bill would go in the "accounts payable" column. It no more debt than when my exterminator sprays my yard, and since I'm not home at the time, I do owe him the money, but he sends me a bill and I pay it. I am not in debt to that exterminator just because I didn't pay it till the bill came due. Same with CC's...don't carry a balance, pay your bill in full on time...that's not debt.
I look at using the rewards points and free interest more as being a good steward of money...making money work for you...if you want a Biblical example, you could liken it to the parable of the talents, I wouldn't want to bury mine in the ground just to stay on the safe side.
“The average credit card holder does not.”
Anyone that borrows for anything but a home will wind up with nothing.
Out of the hundreds of employees, making good wages theree haven’t been more than 6 that had any assets to speak of because they boought what they wanted or needed on time payments.
What you miss in all of this is that the federal reserve sits on a banking system where 90 some percent of money in circulation is not cash, but debt instruments. You need to save your opporbrium for the folks who created this system, and not its victims who are both the buyers and sellers of goods in the marketplace.
One trip/fall and then what?
One major life event a lost job etc then what?
I will never put my family in that kind of risk again.
You can go on living with risk.
When you play with fire your gonna get burned.
I only know this from experience. And feel led to share it with others when it comes up.
Delayed pleasure is greater pleasure.
We as people think we need things now instead of saving for what we want and then purchasing it. So we borrow to buy. Doesn’t make sense to me. I will never do anything on credit again.
I don’t blame the government on my behavior nor should anyone else. Personal finance is 80% behavior.
“But, I’d like to know how many of you who have a credit card have actually read the fine print of the agreement you have as a borrower, and read the fine print of every document sent to you by your credit card company that might have hidden in it that the rules have changed.”
I’ve always read and understood every word ever given to me by sny company that i’ve ever been involved with.
Anyone that doesn’t desreves whatever befalls them.
Sometimes delayed action is opportunity lost. There is now pleasure in a delayed college education. It is bad enough the first time around, and the only saving grace is that you are young when you go through it.
Second, what you call "saving" is a fiction in an inflational world where after tax risk free rates of return are below the rate of inflation. Of course one can "invest" but as we are starting to learn, investment is not unrisky, depite 30 years of the illusion that it is so.
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