As the president and his corporate patrons seek to turn the management of Americans’ retirements—a.k.a., our “golden years”—over to those highly trustworthy, humanitarian types on Wall Street, we should look at another model of how corporate America helps people manage their finances—the credit card companies—to get a glimpse of where we are headed. Here are some of my recent favorite… return to article
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Reader Comments (40)Page 1 of 1 pagesWe cannot let Social Security be compromised by the current corrupt administration.
Posted by pick of the litter on Feb 18, 2005 at 9:46 AM The solution is so very simple. Learn to live within your means. Thus spending 90% of your income will lead to wealth building, spending 100%+ will lead to indentured servitude (is cable worth it? A newer car? A better TV?). CHOOSE.
Blaming others for our own poor financial choices is like the fatties that eat too much and exercise too little. Sure we can blame the tv and advertisers, but why not learn to EAT LESS and EXERCISE MORE? Sure beats all this whining. . .
Posted by liveWIthinYourMeans on Feb 18, 2005 at 10:32 AM liveWIthinYourMeans,
Responsibility is important, but I think you’re dismissing the effect of outside influence. Most people, it seems to me, are too susceptible to advertising and suggestion. Because people want to have the shiny new car, or the giant TV, etc., and that’s what they think is important. So I agree with you, and I believe you’ve made the same point elsewhere on the site, but you should understand that its a double-sided coin.
Taking responsibility is only half the solution, the other half is trying to get rid of the insidious advertising that plagues us. My opinion is that business and corporations have taken control, albeit subtly, of the American conscious. I’m still not sure what to think of the Social Security problem, if in fact there is one, but I do know Bush’s track record for honesty, so my instinct is usually the opposite of a Bush idea is the right way to go.
Posted by WoolOverTheEyes on Feb 18, 2005 at 1:37 PM Actually, there’s an even simpler solution:
Enforce U.S. immigration law by deporting illegals and fining and/or imprisoning the law-breaking employers who use them for cheap labor.
Just imagine if every single person working in the U.S. were a legal citizen. That means every single worker would have Social Security taxes taken out of their paycheck, as opposed to so many illegals in the U.S. being paid off the books, which, of course, means their wages aren’t being taxed. There’d me MORE than enough to fund Social Security benefits, and it would also pull so many legal U.S. citizens out of the unemployment ranks, because they’d be filling jobs occupied by illegals.
So, in a nutshell, by (gosh forbid!) actually enforcing immigration law, the U.S. could fix Social Security and put a heck of a dent in the unemployment figures. But this common-sense solution will never pass, because the unAmerican employers who hire illegals for higher profits and the politicians who bend over for them have got it too good the way it is now.
Posted by Kevin Collins on Feb 18, 2005 at 1:47 PM Learn to live within your means.by liveWIthinYourMeans
Just like those fiscally responsible, self responsibility touting Repubs in Congress and the White House!!
And what is with this unrelenting attack against fat people by obviously the same poster?
Posted by Liberal AND Proud on Feb 18, 2005 at 2:33 PM L&P;wrote: “Just like those fiscally responsible, self responsibility touting Repubs in Congress and the White House!!”
Of course. Their bad behaviour automatically excuses any of our own!
“And what is with this unrelenting attack against fat people by obviously the same poster? “
Saying that the VAST MAJORITY (please distinguish this from ALL or EVERYONE) of fat people are fat due to their own faults is an “unrelenting attack against fat people”?
You know, i really don’t belong here (i hear the cheers now!). Being a physicist requires one to think in a way that is just too unusual for these types of forums, it appears. Logic seems not to be welcome here, rational debate leads to emotional retorts. I really should have known better (again, i hear the cheers!). :)
Anyway, sorry for barging in. Accept my apologies and know that i sincerely hope for the best for you and yours.
Posted by liveWIthinYourMeans on Feb 18, 2005 at 3:56 PM Excellent article! ITT’s going to get my subscription soon if it keeps up this work. Being that I am unemployed that’s a big chunk of a compliment, being that I am a cheapskate and get all my info for free on the web.(almost free… jeesh, DSL’s not cheap!)
Physicist buddy? Don’t go so early.... but then it’s a “chat room” atmosphere and not too many people read what we say. I am guessing you are probably a “Libertarian” (as in ‘let them eat Cake” and “Scrooge"). I don’t own a credit card and can’t get one as I don’t pay every medical bill I’ve been stuck with. If a physician overcharges for services… why should we be compelled to pay? But thus my credit rating’s non existant. So? Livewithinyourmeans is my motto too. But would people own houses, buy houses, etc. w/o credit? If credit cards expect people to use their credit… then they’ve got to please the customer.
I predict many other people will do as I do...throw all credit card applications into recycling and then make do with the ‘debit card’ .. .which I give Visa credit for a good thing. Almost like a credit card (except for renting cars.. and even they’ll rent if you lie a little or give a big deposit..)
Posted by datadave on Feb 18, 2005 at 5:46 PM Seems to me that someone is in love with their own logic and fails to see the logic of others. Perhaps their training as a Physicist (oh my) doesn’t necessarily provide the best training for the inexactness of political discussion. That said, I really don’t think it’s anything for which one needs to feign apology. But that’s just my opinion.
Posted by Matt Harris on Feb 19, 2005 at 2:30 PM Great article. What it doesn’t mention is that another insidious technique used by credit card companies is to sell bad debt to collection agencies. So, not only do you get dinged for the default on the original account, you will have an additional negative report for the second or third account (as it gets resold) for the same debt!
Not only does this make your ability to rectify past mistakes nearly insurmountable, it in essence negates the Fair Debt Reporting Act which states that a debt can not post to your credit report for more than seven years past the last activity (for most of us this is when the debt is written off by the creditor).
As far as social security, the obvious answer is to raise the cap on income eligible for FICA. If Bush want’s a regression on payouts, let the regression be based on the personal holdings of the individual. Those who can afford to pay themselves $100K per year or more in retirement, don’t need social security as much as the janitor at the local elementary school.
Privatize Social Security? Isn’t that what IRA and 401K accounts are for?
Posted by CB on Feb 19, 2005 at 8:46 PM Sure, living within our means is a personal responsibility but what about the social responsibilities? Even if everyone lived within their means China will be wanting a great deal of fossil fuel now and in the near future. The demands on the dollar will be drastic and if China floats its currency against the US’s then it is all over. no, the problem is capitalism and economics. We need to overhaul or social institutions; consuming less is not enough. We are looking at the virtual collapse of industrial capitalism and perhaps the world eco-systems and economy. This is not an individual problem, as Americans are led to believe, this is a social problem that needs to be confronted with individual responsibility and solidarity with others.
Dr. Danny Weil
The Critical Thinking Institute
Posted by Danny Weil on Feb 22, 2005 at 12:30 PM The article supports the contention of abuse by credit card card companies with a combination of facts about the author’s personal credit card and facts drawn from other reports in the mainstream media. However the assertions about abuses we can expect from Bush’s Social Security proposals are unsuported and, IMHO, belong in a different article that analyzes those proposals and offers evidence for conclusions.
I am debt free. I took what personal responsibility could for my own debt. Debting is, for me, an addictive behavior just like compulsive gambling. I got help and I was not only able to pay off my debts, I was able to realize a large measure of abundance by getting at the root causes of my mismatched means and needs.
That does not prevent me from opposing abuses by lenders. In fact, personal responsibility is only the begining of real responsibility. For example, if I do not drive my car when drunk, I still can benefit from not allowing my friends to drive when drunk and I feel a responsibility to do exactly that.
Posted by RW on Feb 23, 2005 at 7:53 AM as a very left wing progressive, my comment is that this article is total BS and whining. Except for a small number of people with medical needs, if u dont like the terms of your card DONT USE IT. So you don’t take that vacation or remodel the house - learn to live within your means, like a normal person. Or use your atm card.
Posted by ezra on Feb 23, 2005 at 10:46 AM Coming to a bookstore near you… Ezra’s new book entitled “Money Management for Dummies”, an incredibly simplistic 2 page book that sums it all up. My personal favorite was Chapter 2 entitled “What to Do When You Lose Your Job”. The text in this section was simply, “Get a new one.” Brilliant stuff really.
Posted by Matt Harris on Feb 23, 2005 at 5:27 PM well,if you are un-employed, then you certainly have sufficient free time to ensure that yourpayment arrives on time, so there is no late fee..oh - not enough money to pay even the minimum on the balance ? well, borrowing at 18 or 21% sounds pretty desparate, but who am i to judge.
Posted by ezra on Feb 23, 2005 at 5:45 PM Yes it does sound pretty desperate. I personally don’t have any credit card debt, but then my household income is nearly 10 times the 2003 determination of the poverty line, which was $14,680 for a family of 3 and $18,810 for a family of 4. 35.9 million Americans lived below this level in 2003 and the figure is rising. 15.3 million Americans live in severe poverty (household income of less than half the poverty line).
You know, I really can’t fuckin’ imagine living on $7,340 per year and if it came down to it, I’d sure as hell take out some 18-21% credit card debt if that’s what it meant to keep my 4 year old daughter in food and clothes. And when I did it I’d hope you’d have some empathy for my situation, that’s all.
Posted by Matt Harris on Feb 23, 2005 at 6:28 PM Its easy to tout personal responsibility as the solution when you don’t have to worry, as el presidente said, about “putting food on your family” with a $150/week paycheck. I applaud anybody who has been able to be successful and get out of this economic pit. But lets face it, the system as we have it now doesn’t help those who need it most, it helps those who really don’t need the help but whose greed eliminated any common sense or decency in regards to those around them
So, despite the need for personal responsibility, we must also look at the policies that are established to increase profit for these credit card companies. Their tactics force people into a situation in which the only way out is to starve or borrow.
Posted by Johnstone on Feb 23, 2005 at 7:44 PM These abuses by corporations will only get worse, as class-action lawsuits are being curtailed by new Bushco legislation. It will become more and more difficult to punish small rip-offs of many consumers.
Posted by Dean Schaff on Feb 28, 2005 at 5:46 PM “The Greatest Generation is now the fastest-growing age group in the bankruptcy courts, having tripled their bankruptcy rate in a decade.”
http://www.demos-usa.org/page252.cfm
Posted by ricochet on Mar 1, 2005 at 9:35 AM Dear Dr. Danny Weil,
Thank goodness there aren’t any hysterics around here.
Sincerely,
Posted by J Craig on Mar 1, 2005 at 3:49 PM Susan Douglas appears to be under the mistaken impression that these creditors are charitable institutions. No, they are commercial enterprises and charge what the market will bear. Nobody is holding a gun to peoples’ heads and forcing them to borrow the money. If you don’t like the terms of a credit arrangement (including the creditors’ ability to charge fees higher than you might prefer and/or change the terms in midstream, which is a provision to which the borrower agrees), don’t borrow the money.
Posted by J Craig on Mar 1, 2005 at 3:54 PM I agree with the basic concept that it is the responsibility of the individual to live within his/her means. However, not everyone is of the same educational or experience level. Banks appeal to the comsuming public in many different tempting and manipulative ways. For some people who are not familiar with the ins and outs of credit, the so-called special “deals” the banks offer are almost too good to pass up. We also have people caught in what seems like a temporary financial bind, and what with credit cards being so easy to get, and the encouragment given by the banks to use them, very often they will be used with every good intention until the damage is done. I am not making excuses for irresponsiblity. But to make a statement such has “No, they are commercial enterprises and charge what the market will bear. Nobody is holding a gun to peoples’ heads and forcing them to borrow the money” as J. Craig does, seems a bit overly simplistic and unfeeling to me.
Posted by Michael Fein on Mar 1, 2005 at 9:20 PM Dear Michael Fein,
That statement isn’t simplistic, but it is appropriately unfeeling: we’re talking about a commercial transaction.
Sincerely,
J Craig
Posted by J Craig on Mar 2, 2005 at 12:11 PM Dear J Craig,
It’s obvious that you and I are coming from two entirely different directions at this argument. You prefer to see it from a cold, hard, bottom-line viewpoint. And to be quite honest, your comments are prefectly apppropriate for that point-of-view. I happen to be one of those so-called bleeding hearts who believes in shared responsiblity, especially when the supplier of the service or product is doing its best to seduce people into using their product or service in a potentially harmful manner. And let us not forget one big factor, many of these banks and credit companies approve applications that should never be approved in the first place. They make so much money on interest and service charges that the cost of a default or bankruptcy is a mere drop in the bucket to them, but the client can be shut out in the cold as far as reasonable credit is concerned for years to come.
Posted by Michael Fein on Mar 2, 2005 at 12:41 PM Dear Michael Fein,
Presumably anyone that borrowed under one of these credit arrangements needed the money. How do you suggest we stop these creditors from “seducing” a person into taking something that person thinks he needs? No more promotional rates? Lower caps on top interest rates?
“They make so much money on interest and service charges that the cost of a default or bankruptcy is a mere drop in the bucket to them,”
That’s how lending works: the lender wants their interest and fee income (revenues) to be greater greater than the losses in their portfolio, interest expense, and other expenses. If it works, then they’re efficiently allocating capital, even though some borrowers go bankrupt.
Sincerely,
J Craig
Posted by J Craig on Mar 2, 2005 at 2:26 PM There is always some idiot who says “It’s your own fault for not living within your means.” As if everyone in debt just carelessly spends too much money.
Here on the planet earth, however, the vast majority of people in debt actually do live within their means until something bad happens. Usually medical problems are the culprit. Once that happens, the credit card companies profit from other peoples hardship.
Victims have every right to stand up for themselves.
Learn the laws that protect you, and fight back
http://www.debt-consolidation-credit-repair-service.com/phpBB2/
Posted by J.K. Norman on Mar 2, 2005 at 3:19 PM I understand how lending works J Craig. But there have always been laws of some sort on the books to protect the borrowers as well as the lenders. Remember, I am NOT suggesting the borrower is devoid of all responsibility for their actions. I am simply stating that the lender share in this responsibility. In many cases people who are not particularly good credit risks receive pre-approved “applications” for credit cards, where all they need do is sign their name. They do not have to report on their employment or any other vital information. Just sign their names because it appears as if all the vital investigating has already been done and there is no doubt the recipient of the pre-approved invitation is qualified to receive this credit line. Many people cannot resist such temptation, and the lenders know this. Do they not have any responsibilty in cases such as this?
Posted by Michael Fein on Mar 2, 2005 at 3:42 PM Dear Michael Fein,
Of course the lender has some responsibility, and it comes in the form of the funds they have lent. They will own up to that responsibility by losing money when the borrower can’t repay the loans. I’m not under the impression that credit card issuers seek to lend money they don’t think can be repaid.
Sincerely,
J Craig
Posted by J Craig on Mar 3, 2005 at 10:04 AM <html>J Craig I think you are being a tad naive if you believe there are no
credit card companies that issue cards to people who they believe may
not be able to repay the debt. Of course, they hope they will
repay it, and they try to limit credit limits as best they can in those
cases. But just check, and you will see the credit cards with the
highest interest rates, are the ones who solicit business from the
highest risks. When people are in trouble, they will grab onto
the nearest object, even if it eventually proves to be an anchor.
For many people the credit card turns from lifeline to anchor, and the
credit care companies who solitcited their business, when doing their
so-called credit check, should have known these people were not good
risks. How is it that people with incomes under 35k have credit
lines on some cards that exceed 20K. And please don’t tell me it
doesn’t happen because I know several people in that position.
They wind up borrowing from Peter to pay Paul until it catches up to
them. And I might add, that most of the credit line increases
were NOT requested. They simply noticed on the bottom of their monthly
invoice a notice saying “Congratulations, your credit line has been
increased to......”</html>
Posted by Michael Fein on Mar 3, 2005 at 1:36 PM Dear Michael Fein,
“I think you are being a tad naive if you believe there are no credit card companies that issue cards to people who they believe may not be able to repay the debt.”
I never said that. Every lender gives credit to people who the lender believes may not be able to repay. Repayment is never certain no matter what type of lending. What I said was “I’m not under the impression that credit card issuers seek to lend money they don’t think can be repaid.” Only a foolish lender goes into a transaction thinking the money can’t be repaid. Do you think they are fools? Credit card issuers lose money on nearly every single transaction that is written off. For example, on a $10,000 balance (for simplicity, let’s assume there are no principal reductions) at 20% interest, if it is ultimately written off, the company would have had to have taken in five years of interest just to break even, and that is not even taking into account the time value of money, the lender’s cost of funds, and the lender’s administrative and legal expenses.
Like all intelligent lenders, credit card lenders make money on a well-managed portfolio of loans.
“But just check, and you will see the credit cards with the highest interest rates, are the ones who solicit business from the highest risks.”
All that demonstrates is the nature of lending: higher return for higher risk. Any lender that chooses to lend in higher risk areas knows that there is a greater chance of bankruptcy.
“…credit care companies who solitcited their business, when doing their so-called credit check, should have known these people were not good risks. How is it that people with incomes under 35k have credit lines on some cards that exceed 20K. ”
Because the lender’s experience has shown that the earnings on the good loans will more than offset the losses on the bad loans. When I got my first credit card, I was making $8 per hour. There was a time when I was making $18,000 per year with no assets but my wreck of a car, and I had $19,000 in debt with another $15,000 available to me on credit cards. That was 16 years ago. Those creditors received every penny of principal and interest. They know the risks and the rewards. They know the vast majority of borrowers, almost regardless of their circumstances, will find a way to repay the debt, and they’ll make enough off those that do to cover the losses on those that don’t.
By the way, if you are going to hold a lender responsible for the mistakes of borrowers, why not hold other commercial enterprises responsible for the mistakes of their customers as well? Should an automobile dealer be held responsible for selling a car to someone who ended up going bankrupt? And the auto dealer is worse than the credit card lender, no? Unless the auto dealer financed the purchase, the auto dealer takes no loss at the time of bankruptcy (unlike the lender that writes off the balance). And what about those home builders? And those furniture retailers? Shouldn’t they be taking a greater interest in stopping people from buying things they can’t afford?
You have an awful lot of sympathy for the people that are walking away from their debts. Some people would call walking away “theft.”
Sincerely,
J Craig
Posted by J Craig on Mar 3, 2005 at 4:21 PM <html>OK J Craig, you win. I realize now that every point I make will
be met by a counter-point. Whereas I have taken pains to agree with
your basic premise overall, I have also tried to present situations in
which the credit-card companies share some of the
responsibilities. You do not wish to acknowledge this fact and
quite frankly I respect your right to feel as you do, and I have no
desire to change your mind, or prolong this conversation when there is
essentially nowhere to go from here. Let’s just agree on the
points we can agree to, and agree to disagree on the others.I wish you well and I hope to see you around for discussion on other interesting issues.
Michael
</html>
Posted by Michael Fein on Mar 3, 2005 at 5:57 PM Dear Michael,
It’s been nice discussing this with you. I appreciate that you agree with my basic premise, but I can’t bring myself to agree with yours. I believe in contracts and the rule of law, and unless the credit card companies are committing some crime such as fraud, I see no reason for them to accept any responsibility whatsoever beyond their economic loss.
Sincerely,
J Craig
Posted by J Craig on Mar 4, 2005 at 10:02 AM The fact that there is a disclosure act is a wonderful thing. It is however a sad case that it is written so heavily laden with legal terminology that even someone college educated like me needs an attorney to decipher it. Let’s face it; with the power these institutions carry, there will be little if any change in their legalized rape of the American working stiff. Perhaps, given that the last estimate I am aware of places the average working class intellect at an 8th grade level, there may be a back door to exposing these pigs through simplification of the disclosure act. I program robots for a living and although 4,682 pages long I can read the entire manual with better understanding then I could the disclosure act written on the credit card agreements. I have, by the way, terminated all these money grubbing creditors from my life 8 years ago. If I don’t have enough for a need, I have friends… Or if need be, loan sharks are more forgiving then these jerk offs.
Posted by Tommy Hahn on Mar 6, 2005 at 6:17 AM “there will be little if any change in their legalized rape of the American working stiff.”
Those horrible rapists! Lending money to people in need and expecting to be repaid. How dare they?!
Posted by J Craig on Mar 6, 2005 at 12:24 PM Is it a woman’s fault if she gets raped because she took a short cut through central park? She could have been smarter about the whole think, true. But I tend to hold the rapist, the person with the power, responsible.
You should not walk in the park after dark and you should avoid using credit cards, but ultimately it is the person getting fucked that is the victim. I can’t feel sorry for a rapist who gets his nuts kicked anymore than I can feel sorry for a usurer who gets stiffed.
The poor credit card companies, whatever will they do.
Usury is evil in every form: loan sharks (lower rates than credit cards, but they break your legs if you can’t pay), credit cards, or the world bank.
By the way credit cards companies do not actually “expect to be repaid”. As a matter or fact that is their greatest fear. They want to string you along for as long as possible, so you accumulate debt. Almost nobody pays back a credit card company.
Furthermore, credit card companies are known for having purposely unintelligible contracts. Even lawyers in the field of contract law will tell you they are almost unreadable. As for the rule of law, Laws are often arbitrary and should be questioned not accepted as fact.
Posted by Disseminator on Mar 7, 2005 at 12:37 PM Dear Disseminator,
I thought you didn’t care what else I wrote? Apparently you cared enough to come over here, read it, and respond. I’m touched.
“Is it a woman’s fault if she gets raped because she took a short cut through central park?”
The better analogous question would be: “Is it rape if a woman voluntarily consents to sex?”
“I can’t feel sorry for a rapist who gets his nuts kicked anymore than I can feel sorry for a usurer who gets stiffed.”
When you refer to usury, are you talking about the legal term or your subjective idea of what usury is?
“By the way credit cards companies do not actually “expect to be repaid”. As a matter or fact that is their greatest fear. They want to string you along for as long as possible, so you accumulate debt. Almost nobody pays back a credit card company. Furthermore, credit card companies are known for having purposely unintelligible contracts. Even lawyers in the field of contract law will tell you they are almost unreadable. “
What experience do you have that you can make these claims?
“As for the rule of law, Laws are often arbitrary and should be questioned not accepted as fact.”
They should be questioned and perhaps changed, but followed as long as they are in place.
Sincerely,
J Craig
Posted by J Craig on Mar 7, 2005 at 1:13 PM Dear J Craig,
Repayment is to be expected. I never said anything to the contrary. It is however immoral how they disguise the rate and amounts for which repayment is expected. You have to admit if you read their disclaimer that they are hiding the amount of control you sign over to them in technical legal terminology. If they were to spell it all out in terms the general public could understand do you really think theirs would be as popular and lucrative an enterprise?
Posted by Tommy Hahn on Mar 7, 2005 at 7:54 PM Dear Tommy,
Most of the important stuff is in the big print table, things like rate, fees and grace period. I suppose they could add a line to that table informing people how important it is that they make at least the minimum payment by the due date. I’ve never had a problem, and I’ve never read the small print. Know the rate, know the fees, pay at least the minimum payment by the due date. That’s all there is to it, right?
Sincerely,
J Craig
Posted by J Craig on Mar 7, 2005 at 8:27 PM Dear J,
Yes it is. However, how many understand that the minimum payment is about 80% intrest and lowers the overall credited amount low enough that it can actually, if the amount is high enough be years before it is paid off? I don’t question that this is a useful service, just that most don’t understand what they are really getting into.
Posted by Tommy Hahn on Mar 7, 2005 at 9:22 PM Dear Tommy,
I agree that many (not most) don’t understand what they are really getting into. But I don’t think it is the credit card company’s responsibility to tell them that if they don’t make big enough payments, the balance won’t go down very fast. For one thing, after they see a few statements, they should be able to figure this out themselves (even knowing nothing of the specific simple math used to calculate interest charges) because the balance isn’t changing much.
Sincerely,
J Craig
Posted by J Craig on Mar 8, 2005 at 11:13 AM Touche’ Mr. Craig… Wouldn’t it be nice if education was a priority?
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