Cardholders Caught In Credit 'Trap': Report

http://www.foxnews.com/story/0,2933,292872,00.html ^ | 8-10-07

[Moonman62]

A chapter 13 restructures debt. A chapter 7 wipes it out. That’s unsecured debt like credit cards and medical bills. Secured debt like a mortgage still has to be paid back.

[Moonman62]

You're right. Bad stuff happens even to those who are prepared. But far too many people are too shortsighted to prepare at all. A buddy of mine recently had to take out a payday loan to cope with a $150 doctor bill for his daughter.

Just in case anybody wants to know, most doctors will cut the fee and accept $10 a month.

[GregoryFul]

A few years ago, one of my credit cards offered 0% (+$75 fee) for 9 months - couldn't beat that, so I borrowed $50,000 at 0%, threw it into stocks, and nearly doubled it. Now this same CC is offering 4.9%. I'm thinking about it, considerably less than margin loan.

I'm sure they are trying to lure people who cannot repay, or keep up with monthly payments into making a poor choice. My situation is quite different. I feel like I'm cheating them at their game.

[BearCub]

A chapter 13 restructures debt. A chapter 7 wipes it out. That’s unsecured debt like credit cards and medical bills. Secured debt like a mortgage still has to be paid back.

I understand the difference. My point was that few people qualify for an outright Chapter 7 discharge of debt anymore. The bankruptcy reform legislation forces most people to pay back at least some of their debt, including unsecured debt.

[BearCub]

A few years ago, one of my credit cards offered 0% (+$75 fee) for 9 months - couldn't beat that, so I borrowed $50,000 at 0%, threw it into stocks, and nearly doubled it. Now this same CC is offering 4.9%. I'm thinking about it, considerably less than margin loan.

IMO that's a fool's game.

[Trailerpark Badass]

What if I need to borrow money to buy or fix a car to get to a job?

That would eb classified as a "rainy day," the kind of time we used to be taught to save for.

Of course, now we are taught to "have it all," NOW, so the concept of "saving" is hopelessly quaint and old-fashioned.

[GregoryFul]

It is if you are not in the position to cover the loan 10x over. I agree. My situation was different from most.

[Trailerpark Badass]

Until you have been mugged. Then you will be glad you carry plastic and no more than forty bucks in cash in your wallet.

"Credit" cards are wonderful tools when used as "charge" cards. They're far better than cash, as you point out. Many even pay you for using them.

[BearCub]

It is if you are not in the position to cover the loan 10x over. I agree. My situation was different from most.

Gotcha. I was imagining the late 90s, when people were getting cash advances on their cards and taking out home equity loans to invest (because they had no other source of cash).

[Dianna]

One simple rule to follow. If you can’t afford it don’t buy it. That would eliminate most credit card debts. It would probably go a long way to eliminating credit card companies.

I certainly understand that people create many of their own problems with credit cards. However, when CC companies are loaning money to people without jobs, and people whom they know are a poor risk, they ought to bear the brunt of that bad business decision.

[Hydroshock]

With my wife still working we could go 4 to 5 months, and in the mean time I would sudstitute teach and look hard for work.

[ItisaReligionofPeace]

I’ve done similar things, though not quite the doubling in stocks! Way to go. There are some risky buys out there right now, but the upside potential is also enormous. Good luck to you!

[been_lurking]

There are many valid reasons (medical expenses, auto repair, unforseen emergencies) that people have to put on credit cards. Save your sanctimonious crap dude. Credit card companies suck.

Without the credit card companies, where are you going to get the money for your "many valid reasons"?

Perhaps they should just give money away, so long as there are "many valid reasons.

And this is supposed to be a conservative site?

[RockinRight]

Never said there was.

[RockinRight]

OK, well it makes sense put that way.

[ErnBatavia]

I might do the same if I weren't 60 and now into the 'cash is king' mode...

[RockinRight]

For twenty years I have never had a problem because I save the receipts. What’s so hard about that?

Depends on the situation. I know that if you were applying for a mortgage and we needed rental verification, it would be tough to use reciepts. The reason being, anyone can fake a reciept, it's a lot harder to fake a cancelled check. Of course, you sound like someone with more than sufficient credit to not even need any conclusive proof of rent, but that's another story.

[RockinRight]

I’d only do that if I had more than enough cash to cover that and then some.

[Shooter 2.5]

The receipt provides the number of the missing money order. If it doesn’t show up to the seller, the product doesn’t get shipped, I check with the bank to see if it was returned and I’m issued another since it was lost. I don’t know how much easier that is.

I can’t see the advantage of someone trying to steal a filled in money order especially after I scripple all the information needed for the transaction.

[GregoryFul]

There is certainly luck involved. Put it into the oil service sector as it was shooting up at the time. I'm persuaded by the peak oil scenario, so barring demand destruction from world wide recession, the energy sector will continue in a long term up trend. (Take a look at the returns from energy sector mutual funds - something big has happened in the past 4 years). So I've been overweight in this sector (25-30%).

These stocks get knocked around a lot with the price of oil. I play a portion of my positions around the movements in the price of oil. If oil price goes to < $70, I'll pick up some more RIG, DO, MRO, MDR, OXY, CVX, FTO, HAL, NE, NOV, TSO, VLO, WNR, etc. Gets back up to $80 or so, I'll take some profits. That strategy has worked pretty good over the years. I might buy or sell too early in the cycle, but the oil price excursions have been trending very much up. I invite my FRiends to join the party! The mutual specialty energy funds have done very well for 4 years now too.

I only once went over 20% margin, with cash buyouts in the portfolio, usually stay less than 5%.

The $50K 0% CC offer was simply an offer I could not refuse. It replaced some of my 8.5% margin debt at the time. I put the minimum monthly payment on autopay with the CC company to eliminate the chance of going to the default usury rate. It worked out fine.