How the Credit Card Monster Killed Us.

[SoCalDem]

Human nature, being what it is, had no real chance against the "monster".

There was a time, when there were two "types" of consumers.

1) credit-worthy
2) not credit-worthy

Waaaaay back in the olden days (circa 1960's & 1970's), individual stores handled their own charge/credit departments. These were usually quite stern-looking, bun-wearing ladies, seated at desks, up on the mezzanine level.. They literally looked-down-on the sales floor. Credit was not "given" freely, and sometimes, one did not even know what the "limit" was.. The few who had "charging privileges", knew that they had better pay off that entire bill when it came, or their charging privileges would be yanked..in a heartbeat. The most stomach-flipping experience was when one of them picked up the phone and called down to the clerk ringing you up, after she received the pneumatic tube with the sale information.

Charging privileges gained the stores a loyal customer base of customers they could trust, and they treated that "charge customer" very well. Items were often delivered to their homes "on approval", special orders were never a problem, and even "off-hours" shopping was not unheard of. Most people shopped where they had "charging privileges".

These folks were the doctors, lawyers, local politicians... the professional, moneyed-class..Many times, even employees of the stores did not warrant "charging privileges".. I did have them, from age 16, at most stores, because of who my Aunt was. She was a big shot in our town, and I was on her account, but they always called her before they let me charge anything :(

Everyone else paid cash... If you wrote a bad check to one of these stores, it would not be surprising to see all future check-writing at their stores, forbidden. Most registers had lists of "no checks from" customers.

It's not hard to see why when credit cards like BankAmericard and MasterCharge came along in the 1970's, they were immediately embraced by all who could get one. It was the great "equalizer", and it said to all who watched you whip one out.."I am a credit-worthy person..I don't HAVE to pay cash like the rest of you peons"..

Remember when the "color" of the card sent a coded message too.. A Gold card said.."I am REALLY a big shot"...but then came Platinum and Titanium (isn't titanium just another shade of "silver"..:rofl:..)

When we got our BankAmericard in April of 1970 (I remember when, because we had been married a month, and I thought it was very odd that a bank we did not even have an account with, just sent it to us..out of the blue..like a wedding present), I was afraid to even use it, for fear that we would "reach the limit" and be "in trouble"... The limit? $500 :)

When "things people wanted" started to cost more than what the normal credit limits would allow, the only option was to apply for and get MORE cards, or for the card companies to extend the limits upward...and to encourage revolving credit, with higher interest rates as time went along...

Once you OWE a revolving credit balance, you either have to stop using the card for current purchases, and concentrate on paying it off, or you have gotten on a merry-go-round that only goes faster , and never lets you off.

It's no accident, that just as the Boomers were entering adulthood, that the credit industry took off in a big way. Parents-of-Boomers were taught from childhood that debt was "sinful", and to be avoided at all costs, but Boomers were the children-of-plenty, so why would they suddenly start being frugal as they grew up?

When Boomers started buying houses and putting down roots, they had to alter their buying habits somewhat, as they became responsible parents, but if they had those plastic cards, they could at least "feel rich" when they went shopping, and worry about paying for it ...later.

LATER ALWAYS COMES....

and that's where equity loans come in.


Ronald Reagan did away with the deductibility of interest when he took over. Until that time, you could deduct ALL interest paid, on your income taxes..car loans, charge accounts, ALL interest payments. Before that happened, it almost made sense to charge things and to pay them off slowly, since you could deduct the costs of doing that.

Equity loans must have seemed like a Godsend when they arrived on the market in a big way. Here was finally a way to "get rid of those damned cards", and turn that credit card debt into a "deductible expense". Everyone I know, who did this, said "We're cutting those things up and NEVER using them again"...and then they didn't, and they did:(..There's that human nature thing again..

These people had probably put down 20% on their house when they bought it, had a payment they could afford, but that equity they were building, was just too enticing to pass up tapping, if they could "get out of debt". By tapping it, they were only borrowing from themselves..right?? right??..and that extra monthly payment was deductible, so why not just do it?

Multiply that by millions of home-buyers, and you know what happens next..

Credit card companies saw a whole bunch of people who suddenly did not owe them anything, and that just wouldn't do, so knowing human nature, they started offering all kinds of "goodies"...

Some people paid off the cards and never used them again, after the first time, but many more saw their house as the gift that keeps on giving, and turned it into an ATM with 4BR,2BA,2car GAR & a pool.

Eventually, when houses quit appreciating, the banks started saying "no", but the credit card companies still wanted their money.

The only solution then was to get even MORE credit cards to fill the gap..(wages sure weren't keeping pace) and to start the "transfer game". That worked for a while, but as banks started gobbling each other up, transfers stopped "working" too.. Can't transfer that MBNA balance to BofA when BofA buys MBNA..

The Credit Card Industry has been squeezing and squeezing for years now, and now that they have constricted the life out of their customers victims, they are ready to swallow them..

[antigop]

1. Remember when stores had layaway departments? n/t

[CrispyQ]

4. I loved layaway! --nt

[SoCalDem]

6. Lay-away was the ONLY way to get a good swimsuit

pay $2 a week and by May you were ready to go.. same for winter coats & Xmas gifts :)

[antigop]

8. My point was.. you didn't get the merchandise until you had it fully paid for n/t

[SoCalDem]

9. I got your point..

:)

Just took me back to the good old days when I wasn;t afraid to WEAR a swimsuit :rofl:

Layaway was the ONLY way teens shopped back when I was young :)

(except for when my aunt let me charge something special...like lizard skin high heels & matching purse..from Italy )

[Mme. Defarge]

5. I do indeed.

Reminds me of my mama.

[tbyg52]

13. Do *any* stores take layaway anymore?

Back in the 80's I worked on the documentation for a layaway system for K-Mart, using them new-fangled PC's. Ah, the good old days.... ;)

[SoCalDem]

17. I don't know of any...

Even "dime-stores" used to offer layaway for their "pricier" stuff like clock radios & toaster-ovens:rofl:

[onethatcares]

2. I'll agree with that premise because I think it's been twice

that my wife and I refied to pay off credit card debt and get a better rate on our mortgage. Of course, that little bit of 9k or 14k eats up a bit of equity, and you haven't really lost it or dropped it. You just put it on another longer term credit scam.

I'm credit card debt free, my wife has a problem, she likes stuff she sees on tv and without cutting up the cards and possibly causing my own homicide, she keeps on going and going.

[CrispyQ]

3. Whatever payment my sister makes on her credit cards

is how much credit she has available for the next month. I worry about her endless spending.


Years ago I got two American Express applications in the mail on the same day. The green card app was addressed to Ms. CrispyQ & the gold card app was addressed to Mr. CrispyQ. :eyes:

[SoCalDem]

34. We get 3-4 a DAY...and even from WaMu

I guess their credit dept hasn't heard the news yet:(

[madaboutharry]

7. It really has been a scam and the American

people fell for it hook, line, and sinker.

I remember when I was a little kid my father got a Diners' Club card. It was such a big deal back then. I also recall it was rarely used. My parents were really savers and they never bought anything just for the sake of having something. We were probably the last people in the neighborhood to get a color tv.

Credit cards scare me and like my parents, I have to have them paid off all the time. I guess I know where that comes from.

The real issue that I see is that Americans have been brainwashed into believing they need stuff.
I think that is what is really going on. Years ago people bought things they "needed." At some point "needed" got mixed up with "wanted."

[SoCalDem]

11. We didn't even HAVE a tv until I was 12..and didn't get color TV util I was 16

Our first TV when we got married was an old Sylvania from my Mother in law ...B&W.. we couldn't even afford an antenna, so we ran co-ax cable (the old brown flat kind) to our neighbor's chainlink fence for our antenna..and we had tin-foil rabbit ears too:)

It blended nicely with our "boards& bricks" bookcase & our "foot-locker" coffee table:)

[Sadie4629]

10. The only disagreement I have with what you said--

--is calling credit card users 'victims.' Lots of people use their cards responsibly. And--NO ONE is forcing anyone to put that new computer, or HD tv, or hundreds of $$$ in restaurant bills on a credit card.

It isn't easy to say 'no,' but sometimes it is necessary.

[SoCalDem]

12. "victims" from the standpoint of "human nature"

being what it is... and how poorly most people are taught about money & finance in high school.. Lots of people really DON'T understand how it all works, until they get in too deep to get out..

[Sadie4629]

16. Yup.

I agree with you about personal finance courses in schools--and it should be taught starting WELL before high school.

Also, it wouldn't hurt for people--especially young kids--to learn that they don't need to satisfy every little material whim. My sis had a friend who needed to borrow $$ in order to buy her kid expensive athletic shoes (and he wasn't an athlete!!)

[Trajan]

18. The rules were changed in the middle of the game

and the companies now ramp up charges without restraint ....

Yes .... no one is a victim of their own spending, but it is fair to call out the credit industry for their rampant usury ....

[Trajan]

14. I maxed out my cards 5 years ago during a particularly dark period ...

I could not make payments then ....

By the time I could even consider making payments, the penalties increased the tab beyond my reach ....

I have lived cash only ever since ....

Yeah .. It's hard, but it's real ....

[magellan]

15. The credit scam has helped to hide wage suppression

People tend not to notice their wages aren't keeping apace with the economy when lenders make it so easy to borrow.

[Union Thug]

19. Old timer labor activists I know (or have known (RIP))...

insist that credit helped destroy the labor movement.

1. Credit provided a false sense of prosperity, helping to postpone the impact of declining wages and benefits.
2. Credit enthralls workers to their debt, making it less likely that they will strike and more likely to absorb the slow repeals of everything won by previous generations of workers.

They were/are right.

[SoCalDem]

20. Exactly.. if you cannot "afford' to lose a day's pay to go and protest

or you are worried about getting fired for standing up to be counted, you are a more "docile" worker, and will accept lowered expectations on the job..

[Liberal Gramma]

31. Hmmm. Sounds like the thinking behind the "company store."

You can't quit if you owe next week's wages to the store. You are willing to pay more in order not to have to use today's cash. In all, a never-ending downward spiral.

[pitohui]

21. actually i don't see the relevance of your argument

the willingness to accept and to give credit is a vote of confidence in the future, that you will be able to continue to earn and to very likely eventually earn even more

naturally in the 30s (depression) and 40s (war and recovery), yes, there was not much confidence in the uncertain future, and it was natural not to offer so much credit or for people to even want credit, since they were not confident they could repay -- hence snotty and discriminatory "charging privileges" available only to the few

the idea of using credit and extending it to more customers came, not from some evil plot to destroy america, but because we slowly developed faith in the 50s and 60s that the future would be better and that young people could buy things on credit, hold good jobs and gain experience for better ones, and be able to pay off their homes and other purchases

if only the doctors and lawyers could buy on credit, it's sort of a slap in the face of other hard working people to say they are not "credit worthy," don't you think?

unfortunately real wages have not kept up and people really can't expect to be able to pay off debt they accummulated while young -- plus the cost of education is now so high that young people start out with even more debt -- so i can see why people can no longer have faith in the future, hell, i'm one of them, if i don't have cash, i don't buy, but it's precisely because i have no reason to believe that my earning power could ever increase, indeed, i expect it to continue to decline because of inflation

credit cards are just a tool, as is all credit

i think your anger at credit card spending is misplaced, this wasn't caused by credit card spending, it was caused by people borrowing to buy homes in a healthy economy that is a good and decent and reasonable thing to do -- in fact, in any economy it is a good decent and reasonable thing to do, if we can only buy homes when we have the full amount of cash in our pocket, no young person or young family could own a home

[JustAnotherGen]

22. great thread k/r

And I agree with some of the posters who have made a clear point about want vs. need.

I really really want a flat screen t.v. I can afford a flat screen 'tricked' out t.v.

The problem is - an fiance gave me a top of the line t.v. in 1995. No kidding. The thing won't die. So since it works fine - I can't justify going out and buying more stuff - that I don't need. In the meantime - Best Buy keeps offering credit to consumers who really can't afford it.

Check out The Story of Stuff online if you can find it. If you haven't seen it - it really does make one stop and think: Do I really need all of this stuff cluttering up my space?

[SoCalDem]

23. I know what you mean about tvs that won't die.. we still have one of those TALL ones in a cabinet

RCA.. bought it in the 80's.. still works great..but it takes up soooo much space.. we even tried to give it away,..no one wants it :cry:..

so my kitties climb on it, and attack each other from the shelves below the actual tv part.. It's sitting in the corner of the living room now, just waiting for someone to want it :)

[JustAnotherGen]

24. LOL

I'm single - sort of in the city. Most of the men I met prior to my current dear friend (He actually lives in Lyon, FR and comes here twice a month) - they have all LAUGHED at my t.v. :rofl: But a few have also admired it - for it's durability. You like me probably bought a good model that was not by it's very design - designed to die anytime soon. Now I don't know if Magnavox even makes T.V.'s anymore - but I'm 35 and thinking - "They don't make stuff like they used to anymore!" :rofl: But when this one dies - if Magnavox makes them? I buying a Magnavox.

BTW - my CD/Rack system died completely in May. I got a great deal on an LG one - and so far so good. I intend to use THIS one for 10 years too! :rofl:

[pitohui]

26. and yet this crisis was caused by people buying houses, not by people buying teevees

again, the argument is silly, this crisis was caused by mortgage lending and a crisis of confidence in the housing market

it was not caused by buying teevees, electronics are in fact one of the few items that have become cheaper and cheaper in real dollars over the years, buying a teevee once every decade esp. if you buy it during the walmart xmas sales just doesn't put much hurt on people's credit

what is killing people is the price of FOOD and GAS, what caused this crisis is loans for HOUSING, what keeps young people from being free and able to organize is the cost of STUDENT LOANS and debts for education, what puts middle aged people and families on the street is the cost of MEDICAL CARE

all this talk of people buying teevees and tennis shoes is just a 21`st century re-working of the "cadillac welfare queen" story

people are being crushed by the price of necessities not by the price of teevees

[JustAnotherGen]

27. I don't doubt you for one minute

I really don't doubt it's the mortgage 'game'. But at the same time - there are a lot of people buying shit they don't need. To include tricked out houses.

It begs the question - How much do we really need? How much do we need to be happy?

You ask this question of someone on the verge of losing their home - and they most likely would say - a decent place to live. If that lost home is due to a catastrophic illness they'd probably say - Good health.

I stopped over at Bridgewater Commons in NJ today. Went on the side of the street that Borders, TJ Maxx and Best Buy is on. Went in, bought the latest copy of France Magazine and a Peter Mayle book. Dropped it off in my trunk, and went into to Best Buy to get some blank CD's to download music to. . . packed. Just packed. Turned around and walked out.

That's why I'm wondering - how much do we need? Has what is going on REALLY hit people yet? Or are these people so drunk on Bush Co's Kool-Aid that they can't see what's going on? Do they realize that 17 miles down the road - the food bank is packed every time I walk in there? And it wasn't that packed on a Saturday morning just one year ago?

So my point is - you are preaching to the choir. But the crunchy granola justanothergen (it's shortened from Generation Whatever) still says: How much do we really need?

I don't know about you - but I'd rather be a travel writer. Seriously. But I can't afford Health Care. My 'career' has enabled me to get out of my student loans very quickly, and save a lot of cash. But I know that in my country? No such thing for a health 35 year old - and I know the day I leave the job to pursue that writing career? Is the day I'll get in a major car accident or my fibro adenomas start grow out of control.

If I didn't 'need' my company paid for Health Insurance - I'd make less, be happier - But it's a 'need'. Because I see what happens to people who DON'T have coverage.

Cross your fingers that this works out with my french friend. Seriously - we've joked about it - because he's very affluent - but he knows I'm in it for the French Social Security System! :rofl: I so do not want my children to be born Americans with all of the limitations that will be placed on them as Americans. And with this bailout -

Health Care
Affordable housing
Education for all

All those things I hoped could happen in the next 8 years are going to go bye-bye.

[wildflower]

25. Add to this the loss of job and health care

And you end up with even more staggering debt for medical emergencies and basic living expenses.

[JustAnotherGen]

28. Amen

A good friend was out of work - and the scenario above applied - Car Accident. Over $40K in debt due to the hospital stay, PT, etc. etc. He's the one saying - Adrienne - don't bail just yet. Wait and see if we get health insurance. He used his cards for the basics: Food, medicine, gas, etc. etc. Put his utilities on it. Now he's gainfully employed again - but the interest on the cards is killing him.

[NutmegYankee]

29. Real titanium has a grayish white appearance.

The alloys look like regular metal, but lightweight.


Attack of the Nerds :evilgrin: AHHHH

[SoCalDem]

30. We quit the "cards" when Platinum was the big deal

Sears even gave us a "special" card with a super-dooper sticker on it.. I guess when the clerks saw that special logo they were supposed to curtsey or something :rofl:

Now we just use our old drab debit card and no one curtsies:)

[NutmegYankee]

32. I only carry 2 cards. Neither is that special.

I just have them for emergencies, and I do not run balances on them. One time, an ATM machine ate my debit card (inattention) and I had to use my Discover card twice for gas driving back home from the Southeast. Discover called me to make sure it wasn't a fraudulent use. LOL. Guess it shows that I do not use it much.

[OakCliffDem]

33. Kick