Credit card payments to rise

[True_Blue]

SACRAMENTO - If you're one of the 7 million Americans who make minimum payments on their credit card bills each month, watch out.

The smallest amount that consumers can pay on bank-backed credit card debt could double under federal guidelines that take full effect Jan. 1. Meanwhile, new bankruptcy rules that kick in Monday will make it harder for debt-ridden consumers to wipe their financial slates clean.

''It's a double whammy,'' said Sacramento bankruptcy attorney Roman Rector. ''People are going to have higher monthly bills and a harder time dealing with them.''

Under the new rules, cardholders must pay enough each month to reduce the loan's principal by at least 1 percent. Until now, some credit card companies allowed payments so small that the debt would grow each month even if a cardholder paid the minimum and made no purchases.

more....
http://www.montereyherald.com/mld/montereyherald/business/12923145.htm

[Angry Girl]

1. Yeah, like they need the help... Looks at their recent profits:

September 25, 2005
Card Companies Are Filling Up At the Station
So a year ago, when gas prices averaged $1.87, banks involved in credit card processing made about $12.5 million a day on fees. Now, with prices averaging $2.75 nationally, the credit card companies are raking in $18.4 million a day.

That is $183 million more a month, or nearly $2.2 billion dollars on an annual basis in extra money paid to the nation's banking giants just because of rising gasoline prices.

"The credit card processors and banks are reaping enormous profits right now," said Paul Fiore, director of government affairs for the Washington, Maryland, Delaware Service Station & Automotive Repair Association. "That's right out of the dealer's profit."

http://www.washingtonpost.com/wp-dyn/content/article/2005/09/24/AR2005092400255_pf.html

Frontline: The Secret History of the Credit Card
It's one of the most wonderful times of the year for the banking industry's most lucrative business: credit cards. In the coming weeks, millions of Americans will reach into their wallets and use plastic to buy an estimated $100 billion in holiday gifts. But at what cost?

http://www.pbs.org/wgbh/pages/frontline/shows/credit/view/

[The Jacobin]

2. I don't think this is necessarily a bad thing

By forcing the credit card companies to collect more per month on the debts, they will be able to pile up less interest against debtors.

I also think that it will curb predatory lending that lets companies give credit to people on marginal incomes and stretch the debt out to infinity.

[merwin]

3. But you forget that if the consumer misses one payment,

the credit card companies can double or triple your interest rate.

[Media_Lies_Daily]

6. And that will cause even more missed and late payments...

...and finally an outright refusal to pay anything to those greedy bastids.

[FormerOstrich]

22. Yep, but the really obscene thing to watch out for

is when it starts to look like you are in trouble the credit card companies will lower your credit balance (and rightfully so but..)

but they lower your credit balance below the amount you owe them (yes, they did...)

and then they charge you exorbitant OVER CREDIT LIMIT FEES each and every month!!!

[Occulus]

23. That's exactly what I hope people start doing.

As I have said before- this industry needs to either die, or be killed. Of course, something else will take its place; let's hope the next players are smarter and kinder.

I'm NOT going to hold my breath on that last.

[superconnected]

39. a start would be to cap the interest rate and profit ratio.

[ticapnews]

25. And the greedy credit card companies are going to

just say "Ok, don't pay us"?

They are more likely to use their collection agency to hound people and eventually get a court order to attach wages so there will be no choice but to pay them.

They'll get their money. By hook or by crook.

[greygandalf]

34. Credit Cards lawyers come after you if you just stop paying.

They came after a friend of mine when he lost his job for 6 months and could not affort to pay. Luckily he had a girlfriend that could help out.

[Realityhack]

8. True but in the long run...

once people are used to the new system it will mean they can not rack up more debt while paying the min. each month. Probobly less deceptive in the long run.

[merwin]

9. It should not be imposed on people who already have cards at

a specific rate. The system is not designed to help consumers. If that was the truth, they would only apply it to new customers.

[Realityhack]

62. Did they lobby for this?

True that would probobly be better. But I was wondering with all peoples complaints about it... did the CC industry lobby for or against this?

Seems to me this reduces the amount they make. Sure you still would never pay off the debt at the min. payment. But it doesn't actualy grow any more.

I agree that it should stay as is for people with existing cards... or at least have some kind of incremental roll out or something. But in the long run I still don't think it is anti-consumer.

[merwin]

66. The credit card companies wanted this. Yes, it reduces the amount of

interest that the credit card companies take in. However, for people who have credit cards and no ability to pay more than their current minimum payments, they will miss at least one payment, which will cause the interest rate to rise from somewhere around 10% to somewhere around 25%.

That's how they will make their money.

[Media_Lies_Daily]

4. Where are the debtors going to find the cash to pay the higher fees?....

...This is going to result in more bankruptcies, even under the harsh reality of the new bankruptcy laws.

[Deja Q]

5. Laws passed by "Christians" who forget the Bible is far more lenient than

they are.

[fishwax]

36. They'll put more monthly expenses back on the credit card

It'll simply cycle itself out. If they were paying 30 bucks a month and just barely covering the vig but no longer using the card, when the payment is raised to 60 bucks a month they will probably pay it, but have to find the extra thirty bucks by putting, say a tank of gas on the card when they might have paid cash before.

So the balance of debt remains, but with more money running through the credit card each month.

Which benefits the credit card companies, of course, since they get cash for each transaction. People not using their credit cards kills their business, and this is just a way to all but force people close to the margins to start using those cards again.

[99Pancakes]

20. Agree

nt

[truthisfreedom]

7. this reduces the cc companies profits, actually.

i think it's a good thing for discipline. i think a lot more people are going to be cutting up their credit cards.

[Theres-a]

11. I think alot more people are going to be cutting ...

...up their wrists.Debtors prison,anyone?

[Occulus]

24. Good. Excellent.

I already did- almost two years ago. Nonetheless, I'm still being charged finance charges; I've managed to reduce my interest rate to 6.x%, down from the 24.99% rate it was at before.

I'm never playing this industry's game again after this is paid off. Never, never ever. Debit card, yes. CC? Not on your life.

[superconnected]

40. I don't have any and was told that I have to have at least 4 cards

with 5k limits each, to get a good interest rate (6%) loan on a home. I'm going to be a first time home buyer and the idea of getting credit cards scares the heck out of me. I'm dragging my heels because I don't want the cards.

Scary huh. Banks own the cards and they HATE people like me with no debt.

For now I'll stick to my cheaper apt rent and keep putting my money into sharebuilder. 2 of the last 3 ppl that insisted I buy a house went bankrupt in the last 2 years. The 3rd is questionable. But I do like the idea of a very small affordable house - which they did not settle for.

[elsiesummers]

56. Pay off balance each month...

Pay off the entire balance each month if you need to build credit. I don't think you should be afraid of credit cards if you absolutely positively stick to (1)only buying basics you would buy any way (gas,grocery list items) and (2)always pay the entire balance each month, even paying more than you owe (keep a positive balance) so you will owe no fees.

I find credit cards a useful way to manage a budget - every expense is on record - but we always pay the bill in full plus extra each month.

The biggest problem I personally have with using them is a tendency not to pay as much attention to the total spent as I leave a store and the cash register - since you don't have to actually look at the total to pay the bill with a card swipe. But I do add up all the expenses of each type from the bill each month to check my budget.

Always look over the bill each month.

If you think you are the sort of person who can't handle credit (will be tempted and spend money you don't have) you might try only using the card number and exp date to pay bills such as phone and heating and electric by phone while keeping the actual card frozen in a container of water in the freezer.

Get a card that gives you either travel points or cash back - I think citibank (or is it chase?) has one that gives 5% back on gas and groceries and 1% on everything else.

Credit card companies like to take advantage of people. Turn the tables on them and take advantage of the credit card companies.

BTW, if everyone used credit cards this way the industry would collapse.

[patcox2]

57. Thats a bunch of crap.

I just locked a jumbo at 6 1/8th, and I have NO credit cards.

[elsiesummers]

59. I have a friend having this problem (lack of credit history)

She has qualified for a loan but it is at 6.75%. She's never had a car loan (drives old used car) and is qualifying for a loan on the combination of her low but stable income, her mom's alimony and her mom's Soc Sec (they are buying house together).

She doesn't have any bad credit issues, just a lack of credit - with one credit card she rarely uses. I think she'd be able to get a much better rate if either she or her mother had more credit history - but both have lived a subsitence sort of lifestyle for many years.

I think it's unfortunate that a responsible individual such as she is penalized on interest rate for lack of use of credit. But, under the current rules of the game she really doesn't have much choice - using and paying off credit cards will help her improve her credit score and thus improve her loan.

What amazes me is they are willing to loan she and her mother a 200K mortgage (with 50K down). That's crazy. She works two jobs - but how long can she go on this way? She hasn't bought a house yet because she can't find one she wants within her budget. Meanwhile - if she buys - one setback like a broken down car and she'll be forced to take in a border to pay the mortgage.

[patcox2]

60. Oops, forgot, I have had mortgages before.

You do need a credit history, but it does not need to be credit cards.

[superconnected]

61. they suggested it as the best and fastest option to build credit.

I bought my last car with cash - a 4k used honda so I didn't get credit from it.

The realestate firm said the bank would give me a loan without already having credit cards but then my interest rate would jump up to something like 8 percent.

I was okayed for a home loan 3 years ago when I was unemployed and opted out of it. It's like they wouldn't let me out of the realestate company without getting me one and trying to make me take the property they had. Thats how I felt with these people too.

A friend of mine who owns his home insists to me they don't do that and it's hard to buy a home. But they did. IMO it's easy if you're willing to sign at any interest rate they want and you have a job. I don't know why they didn't mind that I didn't have a job, but they didn't and I was approved. ???? I have a job now, they will take no money down for a higher interest rate, and no credit established for a higher interest rate. I'm putting money away to have at least 10 percent down anyway, and I'm going for the lowest rate and the smallest house I can get. I'm single and I really don't want debt, or much of it.

Like I said, somewhere else in this post I hang on financial sites and read financial books all the time. I don't want to join in the glazed over the house is all that race. My friends telling me that are declaring bankruptcy, did second mortgages, or gave up their homes.

Homes have also skyrocked in my area in value- so they say. But I can find plenty of 80k three bedroom homes downtown(not condos) along with the $200-$300 thousand ones. They're older of course. I don't understand why my personal friends didn't go that way first...
I'm happy w/ 2 bdrms. Maybe nobody else will buy them so they're easy to get.

[Realityhack]

64. Not entirely

credit scores are complex and holding credit cards CAN help them. You probobly have a lot of other things working for you but having a credit card and not using it can help some peoples scores.

Same goes for having a car loan even if you are perfectly willing to drive an old beater and its un-necisary... it can help rebuild credit especialy very bad credit.

[cliss]

27. THANK GOD we got rid of our credit cards.

About 8 years ago, it became an intolerable burder. We just cut up the cards, and started paying off the balance. It was incredibly difficult. I remember one Christmas we had hardly anything.

But - we're almost done. The Monkey is off our back. We will NEVER go back to that. Maybe this is ultimately going to be a good thing.

And it's true: the credit card companies won't make very much profit.

[freedom_to_read]

38. I feel the same way

I just refinanced my cc debt through the credit union at my work. Lower interest rates, plus the payments come right out of my paycheck.

[raccoon]

44. How's it good for discipline if you owe thousands for medical

expenses?

[0007]

10. Coming next,

Debtor Prison

[bleedingheart]

13. oh oh...I can't wait for that...

and if we are really good they might send the kids to workhouses...

"can I have some more"....


:sarcasm:

[superconnected]

41. Bet it's full of Republicans with SUV's

[Demobrat]

12. Actually it will save consumers money over time.

It was allowing credit card companies to get away with minimum payments so low that they didn't reduce the principal at all that was the crime. Now people are used to those low, low minimum payments, but when they made them they were just treading water or getting deeper and deeper in debt each month.

[northzax]

14. plus, the average person making minimum payments

every month makes only three in a row before missing one anyway. Yes, current debt should have been grandfathered, this is a good thing for new debt.

people who consistently make their minimum payments, and only their minimum payments can't afford the debt anyway (believe me, I've been there and I know) mimumum payments, on the old system, made a 5 grand debt take 30 years to pay off. now it's more like ten. that is not a bad thing.

nevertheless, there will be a short term spike in defaults, I'm sure. If you are in this situation, call your companies, beg, plead, cajole and use all your wiles to get a deal, I recently settled, without filing for bankruptcy or using legal counsel, 24 grand in debt for 8 grand (in payments over four years, with one percent interest) Yes, it dinged my credit, badly, but so did having overwhelming debt (from school, unemployment and missing many, many payments) it's worth a try, at least.

[Born_A_Truman]

26. Taxes

My GF went to one of those companies that negotiated down the debt (she was injured at work--on WC and couldn't pay bills) and she got a 1099 or something and had to pay taxes on the forgiven debt as income.

[northzax]

31. yes, it is income

i'd rather pay one year's taxes on 12 grand than 29% for a decade at least. It is income, reportable at the end of the fiscal year (but even uncle sam only charges 12-15 percent interest on taxes due, so it still works.

[fishwax]

37. It isn't likely to save the consumers over time, I don't think

At least, not those who are living anywhere near the margins.

Imagine you pay 30 bucks a month, but barely cover the vig and only reduce your balance 5 bucks a month. Still, you manage to scrimp and save and not use your card anymore. You pay more when you can, but most months its thin.

Then the minimum payment raises to 60 a month. Where do you come up with the extra thirty bucks? Well, you're now reducing your principle by 35 bucks a month. So when you have to fill your gas tank, and you don't have any cushion in the checking account thanks to the higher minimum, you put the 25-30 bucks on the card.

The end result is pretty much the same: you've reduced the balance by a very small amount. The difference is, more money has gone through the credit card's system. Net advantage for them.

If people can afford to pay more, this will definitely benefit them, but alas, there are many people who will be having a tough time come january ...

[geekgrrl]

15. anything that forces me to make more than a minimum payment can't be all

that bad :)

BUT this will make it harder for people who are already struggling to make ends meet (which I can barely do most of the time, but at least I don't have a family to support right now).

[WindRavenX]

28. That's the problem

For people barely making ends meet (like my mom who is 20K in CC debt), making minimum payments is the only way to stay afloat.

I'm really scared for my mom now. She's working so hard to make the family run and she's around retirement age...Im so scared I don't know how we're gonna survive :cry:

I only have 400 in CC debt (semester textbooks), and it hurts to make the 15 dollar minimum when I want to pay it all off. I don't have the money, but i don't have money for textbooks. What am I supposed to do?

But what is my mom gonna do..?

[MiniMe]

16. I'm in the process of refinancing my house to get rid of all of my CC debt

I can't wait until I am free of this credit card monster. I can't pay the minimum payments and the high interest, but to add it to the mortgage, plus the fact that I lowered my interest rate, makes the payments more than affordable.

I'm one of the lucky ones that never refinanced and took cash out before, so I have plenty of equity in my house. My total loan will be about 50% of the assessed value, so I feel safe even if house prices fall. Wish me luck getting final approval, so far it looks good.

[CHIMO]

17. Just

Waiting for some long haired teenager to overturn these money changers now.

Everything old is new again.

[sandnsea]

18. Another funny thread

And people wonder why all those Democrats voted for this.

[GetTheRightVote]

19. MIne have already doubled, but they are going to hit us with more

of that I am sure with * in the WH. Must get him and admin out of there to protect the public from corporation.

:kick:

[NVMojo]

21. Don't forget to thank minority leader, Senator Harry Reid, for the

bankruptcy bill. How timely, just as fuel costs go up, heating costs go up, energy costs go up, everything goes up. A real Congressional enema courtesy of the members of congress who took campaign donations from Citibank or who own stock in Citigroup as Reid does ...

[SOS]

54. And a special thank you to Biden

who voted for this bill.
And who is Biden's #1 campaign contributor?
MBNA.

[saigon68]

63. Reid is a big lying sloppy DINO

He cares nothing for anyone below his status.

He does want their votes tho---

What an assclown.

[fortyfeetunder]

29. Well if Bush gets his way on the mortgage interest things

the average homeowner will never get out of debt...

IIRC, the recommendation was to curtail or eliminate mortgage interest deductions...meaning average homeowners pay more in income tax, Then it will be a decision -- pay off credit cards or pay income tax.

Yup, gonna get interesting, folks.

[pinniped]

30. After ( if ) these assholes leave office, every single piece...

of shit bill * signed should be reversed. Everything.

[raccoon]

45. That will be a hard and bitter fight, I'm afraid. nt

[lovuian]

32. Late fees of 85 bucks Rising Interest rates USURY is BACK!!!

:argh:

[raccoon]

46. Late fees $85? Sounds like the MOB! nt

[killbotfactory]

48. No, the mob has better rates

[bleedingheart]

33. I know a young gal that is awfully worried about this....

she doesn't have much debt but she is paying off some stuff and she is really worried that this might really screw her up...and she has managed to pay a lot of her debt off but she has the final bits to go and this could just end up making it worse for her.

[hallc]

35. thats just wonderful -

im already broke, used my credit card for all the supplies i needed for grad school, and i can barely make the minimum payments now. Did i mention i already have over 100,000 in loans? way to kick us in the face...

[superconnected]

42. This is bad for the people who already have cc debt

but the new people getting into it, will see that the fees are a lot higher than they thought so might take out less cards and less money from them.

I know in the end it will profit the CC companies(banks), especially on people who already have the charges.

But, it might help hinder new debtors.

[Rex]

43. Corporate slaves unite!

Nowadays you get PUNISHED for not having a credit card! Want to make a big ticket purchase? Sorry, no credit rating. We borrow a corporations money (plus interest) so that they can enslave us with debt. Just like the company store...you owe until the day you die.

[raccoon]

47. I don't think you can rent a car without one, either. nt

[MagickMuffin]

49. New Campaign: Hit them back and make them pay

Nearly everyday I receive at least two offers from banks letting me know that they "want my service".

Here's something I've started doing and it will cost them money in the long run.

With every offer they send out, they send a return envelope. I have been sending them back with my application just as it was when they sent it to me. I don't fill anything out, just the blank application along with all the other material (the heavier it weighs the more money it will cost them).

I even called the Post Office to ensure that it wasn't against the law to return the application blank. He informed me he didn't think it was against the law. He actually like the idea, because it makes the PO money.

This will cost them money to have their mail returned without costing me anything.

So, unite against the machine and make them pay.

[superconnected]

51. tear out your name and address.

Some peon there could fill it out and say you accepted it.

I have a friend- a republican one none the less, who this happened to when he sent his back with a hate note on it. If they're getting credit for how many customers, you best rip your personal info out of it before you become one.

[MagickMuffin]

55. I like to "Sharpie" out my info

before I resend. I have also considered resending it with the words "Fook Off", although I haven't developed the nerve yet.

:evilgrin:

[lonestarnot]

52. Yes good.

[mn723]

50. Here's an idea

Use fiscal responsibility and pay off your credit card balance each month......whoa what a revolutionary thought.

I have no pity for those who get into credit card debt.....if you can't afford them then don't use them.

[superconnected]

53. I don't have credit cards but I know a little more about them from looking

at offers and info I get from financial sites.

1. They may raise your rates at will to anything they deem reasonable.
2. I read myself on the back of an offer recently (FOR A 45% CARD that I posted about on DU.) that if they raised rates on it, it "could" apply to previous balances.
3. That if you pay ANY bill late that posts on your credit report, they will raise the rate on your credit card.
4. That if your credit card score changes against you so may your car insurance rate. And of course all of your other credit card rates will likely go up too.
5. If you consolidate your debt your credit scores are likely to go to hell because consolidation companies miss a payment - usually the first one by holding your money for an extra month. This raises all of your credit rates, and your car insurance.

People are being pursued endlessly by credit card companies. I ALWAYS have offers in my mail. The credit card companies are notoriously deceptive about fees. It's in the back in writing some lawyers say they cannot even interpret and the writing is small and often not embedded where you expect to find it. Instead you find what looks like the terms but its funky wording of the optimal terms.

People should be pitied for falling into it because they were pursued by a pack of wolves from the beginning and it's a very vicious cycle to break.

Mounting interest is super hard to fight. When a card goes from 8% to 28%, it's no longer the money the person spent that they are paying, it's the terms they never conciously agreed to, that have exponetiated the money owed - not coming close to the money they spent.

Blaming the debtors overlooks the super hostile financial system the US has. The banks practically demand you to be a debtor to them.

I was told I have to go get credit cards - 4 at 5 thousand each, to get an ideal interest rate on a home loan, 2 weeks ago. I have none and don't want them.

One more thing - credit card companies stalk their victims - even on internet. Yahoo even has credit card ads. They come in the email sometimes too but I don't see them anymore with my spam filter. Now take someone who really NEEDS money. Ah, stalker meets victim.

[elsiesummers]

58. Agree with fiscal responsibility but no pity is extremely harsh.

You can see by my post #56 that I agree with your idea that people should use credit cards but should use them responsibly.

But I think it's harsh to have no pity on all credit card debtors. It is impossible to know what any one of us would do at each decision point - such as not eat or buy groceries with a credit card.

I will give you that most people in credit card debt weren't making that tough of a choice and instead chose to get in debt.

I do think that the final outcome of this portion of the law, higher minimum payments, will be a net positive for card holders.

It is ironic that congress and the president are mandating fiscal discipline on credit card holders while they and the president who never signed a veto have zero fiscal discipline when it concerns our own government's house of credit cards.

[superconnected]

67. Plus you have to think of how some people end up in credit card debt.

One person I heard of with cancer that couldn't work anymore and couldn't afford doctors visits or chemo. She didn't have health insurance and she literally started putting that stuff on credit cards.

Then there are all those katrina victims that suddenly needed money after their homes were wiped out.

I have pity for them. Credit card debt scares me. Someone up there said he/she tore up the cards 8 years ago and is just getting it paid off now. That SCAREs me.


family tale -removed. Too lengthy for this thread.

[Hong Kong Cavalier]

68. Riiiight

Everyone who has a debt on their credit card is "fiscally irresponsible"
:eyes:

[Tight_rope]

65. Oh...the American dream. "To Be In Debt"!