Lower Minimum Payments Keep Credit Card Users on the Hook Longer

Newhouse News ^ | TERESA DIXON MURRAY

[Optimist]

[let freedom sing]

If it works for you--What's the biggest ticket you buy?

[power2]

But if you are in a financial bind or unemployed, you may have no choice because you cannot afford to pay more

How did people survive before credit cards in such situations? THEY WORKED THEIR ASS OFF AS A FAMILY, OR WENT TO GET HELP FROM CHARITIES!!!! Credit Cards are a recent phenomena, that can be used to get people in trouble. Avoid them if you can't pay them off month to month. If you are are Christian, even the Bible tells us to avoid debt that we can't afford. The "easy" money mentality associated with Credit Cards is what got this nation, as a whole, into trouble.

[John Locke]

Anyone who runs a credit card balance is a moron. Period.

Not so fast. A credit card with a high limit is a good safeguard against a cash emergency. As happened to me a couple of years ago, when a sudden death had the family scrambling to get to the funeral. Six round-trip airline flights is a chunk of change, and we had to book them in 2 days.

But you won't get a high limit if the computers think you're a poor customer, an that's what their idiot programs will think if you always pay off.

A better strategy, in my opinion (as informed by one of the guys who wrote the idiot program in question), is to charge something big about once every couple of years, and take 2 to 3 months to pay it off. Yes, it costs you a little interest (about 2%), but to the computer you now smell like a rose.

[Eugene Tackleberry]

"The latest trend is that senior citizens are running up big debt on cards. What's happened to that generation? "

Actually, I could see how this would make sense from a financial standpoint. Suppose you don't have any assets to leave to heirs. Why not just run up credit cards and buy stuff for your children and grandchildren? If you are going to die without assets, why not die with credit card debt. It's a transfer of wealth from credit card companies to yourself or your kids.

[HiTech RedNeck]

I always pay off during the grace period, and have something like three platinums and 2 golds that have caps of several thousand each. (Not to mention a couple or so home-improvement store credit cards.) Put together they would fly your family to Timbuktu and back if needed. And I still get several offers a month for platinums and golds and "ordinary" cards. I am not exactly filthy rich, either, and have about 20 years of mortgage to go. If I stink creditwise, nobody ever told the computers.

[technochick99]

I run balances ONLY when I get a 'same as cash' deal. For instance, we bought a beautiful bed for about 3K or so. The terms were minimum payments for 12 months, and then if there was a balance at the end, you'd get hit with the full amount.

Each month I'd send in about $100, then put 1/12th of the amount (minus the $100) in my money market in an off-budget account (meaning the amount was removed from my net worth calculations). It is still 3 or 4 months from being due, but I have the balance already to be paid out fully. I've done this for several accounts, but I bet I show up as one of the 'in debt' people.

In addition, all my work expenses are on my personal cards. Therefore, my AmEx bills can run around 6 or 7 K/ month. But I pay it off since I get reimbursed. Heck - I probably skew the results. I think there are a lot of people like me, at least more than what one would think....

[HiTech RedNeck]

It's a transfer of wealth from credit card companies to yourself or your kids.

And what happens if the amount outstanding is greater than what the estate (counting life insurance etc.) is worth? The companies eat the remaining debt; they can't go after the heirs for more.

[leadpenny]

A credit card with a high limit is a good safeguard against a cash emergency.

I agree with that.

. . .an that's what their idiot programs will think if you always pay off.

But not with that. I always, ALWAYS pay off my credit cards and they have never lowered my available credit.

Bottom line is that if more people ran there affairs like those who have posted on this thread . . there wouldn't be any credit cards. That might be a good thing.

[E. Pluribus Unum]

There are three things that are okay to go into debt for: houses, cars (when absolutely neceessary) and family emergencies. Most people who have credit card debt ran it up frivolously, but they will vehemently deny it.

[Wednesday's Child]

Years ago, my husband and I decided to pay off our credit cards. We took advantage of all the low interest offers that came in the mail as well as good deals on balance transfers. We transferred as much of the balances to each card as we could.
Then, we gritted our teeth, tightened our belts and began hitting the payments as hard as we could. To keep track of everything, my husband made a flow chart! No kidding! We just kept paying heavy and transferring balances from card to card.
It took us about a year but we are totally debt free and now use one or two cards and pay them in full each month. We have even had a few credit card companies cancel us because we carry no balances. And, our credit report is just fine and we have never had any problems.

[Wolfie]

Being stupid can definitely get in the way, no way to legislate against that.

[Wolfie]

"That generation" became hooked on entitlements. It just doesn't seem like real money anymore.

[Wolfie]

The companies eat the remaining debt; they can't go after the heirs for more.

I'm not going to feel sorry for credit card companies that don't check out who they're lending money to anymore than I feel sorry for people who use credit cards to spend money they don't have.

[Eugene Tackleberry]

I'm not so sure it is stealing. I don't think there is anything in the fine print that says you have to tell the credit card company when you think you are going to die, and they know how old you are when they give you the card. I'm not saying I would do that, and I'm not someone who argues two wrongs make a right, but doing that is really no worse than what the credit card companies do to cardholders.

[Eugene Tackleberry]

Yes, that's exactly what I am saying. I was throwing out a hypothetical of when it might make economic sense for seniors to run up credit card debt. I'm not arguing the morality of it one way or the other, just that it could be a way to legally transfer wealth from the credit card companies (or their shareholders ultimately).

[SpyderTim]

"How did people survive before credit cards in such situations? THEY WORKED THEIR ASS OFF AS A FAMILY, OR WENT TO GET HELP FROM CHARITIES!!!! Credit Cards are a recent phenomena, that can be used to get people in trouble. Avoid them if you can't pay them off month to month. If you are are Christian, even the Bible tells us to avoid debt that we can't afford. The "easy" money mentality associated with Credit Cards is what got this nation, as a whole, into trouble."

I'm aware of history prior to credit cards and I understand your perspective. Still, I stand by my viewpoint. I can tell you that I wouldn't be able to post this reply had it not been for the ability to cautiously utilize a credit card in the way that I have attempted to describe. If you read my other posts on this discussion, you will find that the scenario I am describing is for very limited, and rare cases. Only truly responsible persons who are nonetheless in the situation I described can make it work. I'm speaking from personal experience.