Quibbling: Not smart people... Sprited ones.

The problem is, because of all the credit out there, everything is more expensive than it ought to be. Introducing credit isn't much different from printing tons of money out.

Which means people on the bottom end of the spectrum are kind of trapped. Most credit card debt isn't for plasma TVs, its for food and bills.

Which sucks.

Sadly, I wish I could see a way out of this for them. I don't think it is very useful for me to brag "Well, I don't have any credit card debt because I use my debit card!", since the reason I can use my debit card is, being safely middle class, I have money in my account. This could go away if we lost our jobs.

I wish there was a way to help poor people get back on their feet... en masse.

Amy, off point I know but I wanted to let you know that I got my e-mail from Amazon saying that your book has shipped. Woot!

Nicole - At some point we need to accept that there is a certain percentage of humanity that will always be poor, in spite of any attempt to make them not so. They simply do not have the drive to be successful.

Then we can concentrate on minimizing the amount of money seized from the private sector to fund political graft, and the rest of the problems kinda solve themselves.

"Fancy what a game of chess would be if all the chessman had passions and intellects, more or less small and cunning; if you were not only uncertain about your adversary's men, but a little uncertain also about your own . . . You would be especially likely to be beaten if you depneded arrogantly on your mathemactical imagination, and regarded your passionate pieces with contempt. Yet this imaginary chess is easy compared with a game man has to play against his fellow-men with other fellow-men for instruments."

--George Eliot

Lots of politicians, and more than a few business executives, fail to understand this point about the kind of "chess" that they are playing.

I have mixed feelings about this. Some credit card banks are in a terrible position, because their customers owe more than they'll be able to pay. Recouping those losses will be hard. On the other hand, it's disheartening to be underwater and to have the rules of your debt repayment changed to make it even harder to avoid bankruptcy.

Issuing credit cards is an inherently risky endeavor because the preferred customer is weak enough financially that they carry a balance, but strong enough financially that they won't default completely. This makes me less sympathetic to the banks that issue credit cards. Since more and more people are running up debt and declaring bankruptcy (due to the economy), credit card banks have to somehow increase revenue to offset those losses, or else they'll go bankrupt themselves. A year or so ago there were stories in the news about banks who saw the writing on the wall and were actually offering to pay their high risk customers to leave.

My preferred solution would be for the majority of Americans to be financially sensible and spend less than they have. That's unlikely to happen, but the silver lining on that cloud is that it personally benefits me. People who carry a balance make it possible for credit card banks to profit without charging yearly fees, which benefits those of us who pay our credit cards off every month. Via various % back incentives we actually make money from our credit cards.

The famous line.... I'm from the government and I'm here to help!

"it's your choice: accept the offer or walk away."

If the bank subsequently changes the terms of that offer, unilaterally, without advance warning - yeah it's in the fine print they can do that, but it's still a trick. Even loan sharks don't do that. Or maybe they do... "I'll let you have another week but you'll have to give me another $X... or I can break you now. Your choice."

"the preferred customer is weak enough financially that they carry a balance, but strong enough financially that they won't default completely."

This type of lending is inherently predatory. The credit card companies are betting that their customers won't pay them back... but will pay more when they do. The customer comes to the gaming table with a vague idea that they will find the money somehow, but yes, they do come to the table of their own accord.

But I also think that credit and capital are a necessary part of a modern economy. Other types of lending have fixed rates (except for all those toxic mortagages) and fixed payments, so they're betting that the customer will be financially strong enough to pay it off as promised.

"Most credit card debt isn't for plasma TVs, its for food and bills."

How do you know this? I can look at my own credit card bills and see that this is true, but I also know that I'm more likely to overspend or buy better food on a card than if I've only got $15 in my pocket to last the weekend.

"we need to accept that there is a certain percentage of humanity that will always be poor, in spite of any attempt to make them not so. They simply do not have the drive to be successful."

Agree with first sentence but not second. Poverty has a lot more factors than just laziness.

Sure, Brian, but that doesn't mean we should try to keep them that way, nor should we stop trying to help them. Also, maybe its just because I drive through North Philly so often, but it seems our proportion of poor is way too high.

If the bank subsequently changes the terms of that offer, unilaterally, without advance warning - yeah it's in the fine print

This is the real problem, and the one the government should go after:

1. No contract can be changed without collecting signed agreement from the person affected at least 90 days before such a change is supposed to take effect.

2. The terms of any consumer contract must be written in plain English, must list all interest and fees that can be charged, and must be printed so as to be easily readable (no fine print).

Finally, the usury laws have their place. There are people who are either desperate or just not all that smart. It is reasonable to prevent these people from being exploited by loan sharks. Better not to loan them money at all rather than to loan them money in a way that they can never hope to repay.

I have to thank the government for all their help on this matter.

I am the perfect credit card customer. I usually carry a significant balance and always pay on time. I have an excellent credit rating. The rates credit card companies charge me has always been relatively low. Thanks to the government, the credit card companies are now raising my rates (18% when the COLA is negative?). Fortunately, I'm in a position to pay of my debt so, personally, I'm ok. But now I'm going to spend less in the future. How, exactly, is this helping the economy?

And for those that think "Pay Day" loans are immoral; let's say you're poor and your car needs a $200 repair to let you get to your new job and you don't have the money. Hopefully, you'd be able to get a pay day loan to get your car fixed so that you can continue working.

I guess the upside to outlawing pay day loans is that, while you might lose your job, someone who thinks they know better what's good for you than you do will feel morally superior because they saved you from getting "ripped off".

"we need to accept that there is a certain percentage of humanity that will always be poor, in spite of any attempt to make them not so. They simply do not have the drive to be successful."

Agree with first sentence but not second. Poverty has a lot more factors than just laziness.

vi - I didn't suggest that the 'certain percentage' was exhaustive of all poor people. What I'm saying is that most anti-poverty programs exist with the implied (and sometimes explicit) goal of ending ALL poverty. There are some people who will never be self-sufficient. Very few of those are that way for reasons outside their control, and I have no real problem keeping them at least safe, clean, dry, warm, and fed.

But there is a certain percentage of people who could support themselves, but choose not to because someone else is willing to pick up the tab. That needs to stop. After the ones who can, but opt not to because it's easier are self-sufficient, we'll be left with only the true leeches, the ones who could support themselves, but will not for any reason do so in a legal manner.

I don't know how to solve that problem.

But stupid laws to punish "predatory lending" are not an answer.

In 2005, I went after an employer of mine. I won't go into details but they clearly broke Federal laws and had several rulings in my favor. I handled the case until I reached a point where I was no longer allowed to. I did not have the right college degree to argue my case.
I hired an attorney. We settled for a sum exponentially larger than they offered me. A large percentage of that went to my attorney.
Then, tax time came. I was taxed on the whole portion of the settlement, much of which I never saw. I had little choice but to charge the tax balance to a credit card. At this point, the card had a better interest rate than the IRS.
I don't have the money. I never had the money; my attorney had the money. I didn't buy groceries. I didn't buy a big screen television. All I had was the knowledge that I stood up to a corporation that laughed at the laws, and the IRS won. '
I'm currently paying twenty five percent interest on that particular card.
Anyway, my point is that "because I don't buy what I can't pay for" doesn't fir all situations.

I guess farmers in Montana do not have enough drive. They "earn" more from federal subsidies than from farming.
We have created an entire rural welfare class, knock-kneed, enfeebled, ever in need of more, and more, and more subsidies. Weakings!
Detroit, we bailed out once. Framers, we bail out whens it rains (flooded out), when it doesn't rain (drought), and when it is perfect (bumper cops mean crop prices are no high enough).
American capitalism: Subsidize the risk, privatize the gain.

Funny you should blog about this--I just received a notice from Citicards that they are raising my APR AGAIN from 16.99% to 19.99% on dec 20. I think last year it was 14.99%. I can understand why they need to, but as a good (on-time paying)long-time customer, it's an interesting way to reward loyalty or retain me.

So as soon as I pay the balance next month: I'll be keeping the card, but won't use it again. EVER. Just because they ticked me off. I have other cards I can use.

You might like this poll:
Should the candidates take an IQ test and reveal the results?

Yes - I want smart politicians
No - Street smarts are more important
IQ tests are stupid
I would be happy with complete sentences.

To Cat:

Mark Twain once said, " I went broke two times in my life. The first time was when I lost a law suit. The second time was when I won a Law suit."

"I don't pay any percentage on my credit card -- because I don't buy what I can't pay for. But, if somebody's going to lend you money, why should anybody but that somebody get to tell you what it's going to cost you? And then, it's your choice: accept the offer or walk away."

I agree with you. Actually I've never had a credit card because I pay with everything in cash. If I can't afford something then I don't buy it. I don't need to build up my credit for a home loan because I can get a VA home loan when it comes time to buy a house.

But the government and the credit card industry isn't blameless here either.

No credit card issuer should be able to change the terms of a legal contract unilaterally. They agreed to the line of credit and the terms that come with it; they also agreed to the terms on debt that as already been incurred. They shouldn't be able to penalize you either by lowering your credit score if you refuse the interest rate hike, and tell them that you want to close your account.

The government should act as an impartial referee and enforce legal contracts that both parties agreed to. So far the Federal government has done the opposite. Going as far as to collude with companies issuing credit cards in order to change bankruptcy laws to favor corporate interests. The government needs to punish credit card companies brutally if they try to use fraudulent practices to squeeze more money out of their creditors. Especially because the average credit card debtor doesn't have access to a team of corporate lawyers to battle things out in a courtroom if he or she gets screwed. Just because you take out a line of credit shouldn't mean that Visa & Mastercard own you; they took on legal rights and responsibilities also.

I've found it rather amusing since the gov. has been going after the pay day loan stores (and they aren't a wise choice for long term loans) yet the state/fed gov. will support gambling like crazy.

Well, gambling that benefits the gov. via taxes and whatever group thats bought them out. Go gamble in an Indian Casino to support the local economy! Play the state lottery! Proceeds go to schools! How about we teach those kids in the schools how the lottery is a sucker's bet. Oh, wait the Oregon state lotto ads here do that with small disclaimers on every tv/radio ad that "the lottery is for entertainment purposes only and not to be used for investment purposes".

Payday loan sharks bad... gov. run gambling good. Its for the kids! Spend $20-100 bucks a week on lotto picks! No online gambling though, thats evil and kids can get addicted to it and run up mommy/daddy's credit card.

I keep 2 credit cards.

1 with a 500 limit used only on a military post & for military uniforms and the military shopping website. Mostly christmas/birthday stuff since it is cheaper over that.

1 100 limit card used only for ebay purchases.

Except for those, I have no credit cards, want no credit cards, and will have no other credit cards, because if I can't buy it with cash, I do not need it.

If more people did that, they wouldn't HAVE a financial crisis, they would HAVE some savings, and could afford to take care of themselves and eventually retire, instead of (eventually) sucking up 60 percent of the budget in federal programs for the elderly.

I never buy what I can't afford -- but I put it all on a credit card I pay off every month. I'm in it for the miles, and have gone around the world a few times now on my good credit.

"yet the state/fed gov. will support gambling like crazy"

Here in Iowa, smoking has been banned in all public places ... except casinos!

I once read an article where it mentioned that credit card companies are more likely to go after a college student rather than a non-college student, because of their knowledge about finances. A college student will attend on loans, scholarships, and/or money from their parents. Very few people scrimp and save before entering college and pay for it themselves the entire way through. However, a non-college student has to learn a value of a dollar from day one - no money = no food, no car, no rent.

Along this line, I learned the "lesson" of using credit as a way to get by until I get my big payday of a job after graduation. Although I got a decent job, the credit card bill stayed. I make regular payments and have an excellent payment history. Only one late payment since I first received one 12 years ago. That said, it's inherently unfair for someone to take out credit at a certain rate, then the banks come back and say "uh... we're losing money elsewhere, we'd like to get more from you to cover our losses". How is it my fault that someone else defaulted?

No, I don't have a right to a credit card, and as I pay down my balance, and will pay it off, I probably will not have one. Until then, I get to be the one paying for others' defaults.