Ouch BabyBelle it sounds like you've had some painful times.

I'm no fan of the credit industry (nor the insurance industry for that matter). I too see them as vile, greedy opportunists. And after a dust-up with credit card nightmares while in college, I went many years without them. But I found that the way the entire system is wired that in doing so I actually did myself a disservice.

I may be mistaken here but it's my understanding that your credit rating (a worth index of sorts) is largely based on how much debt you are allowed to carry. And without playing their game, you are excluded from many aspects of life unless you are willing to endure great hardships and have large sums of actual cash in hand. I must say again, I may be mistaken in this. But that's how I put the pieces together. But without any credit cards and other such viewable debt, my credit did not improve. This seems wrong to me on several levels.

Credit cards seem to be one more example of what happens when you remove strict regulation and allow "the market" to make the rules. Besides, hasn't banking in general been viewed as a generally evil and corrupt institution essentially since it's inception? I seem to remember several great minds in the past warning us about the dangers that banking could reap on society (now I need to go read up on that again!)

"My reward is being debt free! I will never go back to debtors prison!"

way to go! I use my credit card for cash management; i.e., I keep almost every single penny in interest earning CD's. Since I typically charge about $1500 a month (includes phone, groceries, gas, etc..) that comes out to about $75 in extra interest and about $200 via "cash back."

I tend to prefer your approach-- over policy, since guns can only kill you if the trigger is pulled and prohibition doesn't work.

To boldly go...

The first thing is to convince you that you can't live without them.

based on my experience, this isn't necessarily how people would get snared. I bought a keyboard on an interest free, 12 month credit card and have to pay it off ($2300) by october 13th.

I continually remind myself of this because, since then, I wanted another keyboard, another bike, etc... and it took a lot of discipline to say no!

if I wasn't so vigilant, I would have broken down, comprised and rationalized minimum payments.

The only policy I'd make, if I ran the world, would be to mandate a "personal finance" class for those who pay two or more minimum payments a year. i.e. something similar to the defensive driving classes.

since people claim ignorance about ARMS and option ARMS, I'd probably mandate a defensive driving like financial course before you could sign one too!

I know you're stunned that I would recommend classwork! but my defensive driving instructor made it clear that "being right" is "sometimes wrong" if it puts your life at risk and you're "margin of safety" is all that matters.

To boldly go...

that was a great video! I have my "ron paul for president sign" right next to my "kucinich for president sign"!

if you hadn't replied, I was going to add to my post and suggest that if people don't attend a "defensive personal finance class," the ability to make "minimum payments" would go away. of course, the credit industry would balk at this since I've heard that it packages up credit card debt, just like mortgages, and sells it!

perhaps my policy should really be: "in order to get a credit card, you have to take a 'defensive personal finance course.'

should there be a "borrowing license" that is similar to a driver's license?

BTW: when my cash flow got squeezed last year, I borrowed against one of my CD's and paid off this "self-made-loan" within 2 weeks and it cost me about $2 in interest.

To boldly go...

Indentured servitude anyone?

This is how they do it now.

I think a finance course is a great idea!
I filed BK under the old law, but understand with the new law people have to take classes.
I watch a show called Moneywise on PBS every weeknight.
I missed the first half of the show last night but caught the end where they showed a class. They talked with students at the end who now have hope they can manage their finances and
get out of bad situations.

I recommend Moneywise. It's the best finance show on TV. It's down to earth with some great guests and it always features real people in real situations who tell what they are doing to improve their financial lives

Bonnie
http://pupart.1hwy.com/

Okay...
You've been warned. If you want to submit yourself to a contractual relationship with a financial and legal predator, that is up to you. Some people have to be burned before they learn. I did, and I learned my lesson well.

Jim Anderson

The Truth About Credit

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This is *supposed* to be a free country
and everyone *should* be able to establish decent credit without having to play games with predators. Paying your essentials & having saving should say enough!

Credit cards offered to people out of bankruptcy all have yearly fees. They all have Universal Default. Just what someone fresh out of bankruptcy needs!! Ha!
These co's are not out to help anyone but themself!
Some of them say in the fine print you need to make at least 12 thousand a year to qualify for one of their cards! 12 GRAND A YEAR!!! How can anyone living in America even get by on such a low amount? Issuing a credit card to them is a cruel joke and an invitation for disaster!
Our society has to get away from this idea that *everyone* needs a credit card! Just as some people should never touch alcohol, some should never have a credit card.

We can agree that financial education is necessary .

Bonnie
http://pupart.1hwy.com/

though I hope you have a friend or relative from whom you could borrow money in a true emergency.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
I'm not depending on anyone but my own emergency fund.

What she is saying is that the willingness of lenders to extend such credit is proof that people who go financially bankrupt aren't morally bankrupt, as was contended 2 years ago when the banruptcy laws were reformed.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Oh, I thought she was saying that CC Co's who solicit the newly bankrupt are looking for easy targets. I still believe that.
One of the Vice Presidents of Capital One has me convinced after giving his shameful interview about the newly bankrupt being eager to get their mitts on plastic and will swallow punishingly high interest.

http://pupart.1hwy.com/

Re: One of the Vice Presidents of Capital One has me convinced after giving his shameful interview about the newly bankrupt being eager to get their mitts on plastic and will swallow punishingly high interest.

You only pay that punishingly high interest if you doi not pay off your balance each month. Now, the credit card companise may well hope that people who have been through bankruptcy are such credit junkies that they will immediately charge themselves up to hilts and so pay those interest rates, but a sensible person would not do this, but rather would use the card very sparingly, if at all.

Finance courses, maybe. But, perhaps, also "plastic anonymous" meetings?

I haven't had any finance courses and, until I landed here (from Poland) in '73, I had never even seen a check, much less a credit card. But it seemed self-evident, from the second month I had the card (with it's credit line of $300, in '73), that the "minimum payment" was but so much hogwash. You either paid in full, or you were in debt permanently, because of all the fees, interest, penalties, etc.

I've been one of those "deadbeats" that Drt50 talks about at 11:51AM, ever since. My card is issued by my bank and I pay in full, *at my bank*; I wouldn't put it past the cc management to claim they didn't get my check in time and slap me with a late fee and interest on purchases I haven't even made yet. This way, I have a time stamp to *prove* when I paid, in case there's a dispute. Besides, it saves on postage :)

Plastic is a great convenience but it's a tool; it's your servant, not your master. I never, ever, charge more than what I can put my hands on at the end of the month (ie what's in my savings account, working *for me*). Granted, I've never yet had to use my Visa for absolute essentials and/or emergency (healthcare); it's always been something I wanted rather than needed.

"to be used sparingly in urgent matters only when cash is unavailable, or cannot be used at all (e.g., renting a car)."

This is a recipe for disaster. If you borrow money when you have money problems, it is like throwing gas on a fire. This is part of the trap that credit card companies set ON PURPOSE. They know everyone has a financial crisis sooner or later, usually once every ten years. Instead of using debt for emergencies, you plan ahead and have an emergency fund of at least 3 to 6 months of expenses.

As far as rental cars and other travel expenses, debit card work just as well as credit cards. There are a few rental car companies that won't do debit, but sometimes they can't tell the difference. Just go to the rental company that will accept the debit card if they refuse you. You are the customer, and they have competition. Credit cards are NOT a requirement. That is just what they want you to think.

Jim Anderson

The Truth About Credit

Facebook Profile

Yes, that is true. I am sure they do hope that. They make a whole lotta dough from those who
are not wise with CC use or fall into hard times and don't have emergency funds to pay .
I still agree with Travis Plunkette of the Consumer Federation of America who called them diabolical.

Bonnie
http://pupart.1hwy.com/

Well, whatever...
Professor Warren is not complaining about the posts here. :)

Bonnie
http://pupart.1hwy.com/

All these stories are about the "dark side of the force." There is, howver, another side to credit cards. I usually have over $5000 in credit card debt and have not paid interest on this for years. Because of my excellent credit rating, I keep getting offers for credit cards with "teaser" rates of 0% interest for periods of about 1 year. As the end of any such period is beginning to approach, I replace such cards with new cards with the same 0% interest rate, use those and pay off the cards on which the 0% offer is expiring. Therefore I have been able to borrow over $5000 for several years at 0% interest. I have enough money in my saving account to pay this debt off, but since I earn about 5% interest on the money in the savings account, this would obviously be a mistake. Of course, with the universal default trap, I do have to keep very close track of my payments to make sure I get them in on time, or the jig will be up.

The moral is that if one has the will power to pay off the credit card debt during the grace period, so that one does not have to pay interest on it, and can get a card without an annual fee, one definitely should use credit cards to make one's payments and not debit cards. By doing so one builds up one's credit rating, and gets credit cards on more and more favorable terms may be able to get to the 0% interest level (I am not sure how easy or difficult this is.)

Of course people who are addicted to getting into serious credit card debt should not use them, just as alcoholics should never take a drink.

"to be used sparingly in urgent matters only when cash is unavailable,"

If one has built up one's credit rating by using and paying off the cards during the grace period, and has several cards with high credit limits, they can be used as a TEMPORARY buffer to help one through a period of TEMPORARY financial problems, which is not available to people who do not have this available.

I really think that people who have problems with credit card debt will get much more useful advice listening to the Susi Orman show than listening to your paranoid warnings.

You see, the "temporary" problem becomes more permanent when things get out of hand, which they tend to do in many cases. You take on significant risk when you go into debt to cover expenses. You are assuming you will do better than you did before you got into debt. That doesn' happen too often, especially if it was an emergency. Especially when you start juggling accounts and get caught with a lower FICO score and universal default kicks in. You need to see the documentary movie, Maxed Out

Jim Anderson

The Truth About Credit

Facebook Profile

Re:: If you borrow money when you have money problems, it is like throwing gas on a fire.

I am not talking about catastrophes I am talking about situations where you may need to bridge brief cash flow deficiencies. I keep my savings in a mutual fund. It takes three business days to access the money (a good idea since it prevents me from spending it on a whim). A couple months ago one of our cats got sick and ran up a unpleasant vet bill. I paid with my credit card, and (in this case) covered the debt by cutting back on some other anticipated expenses; at need, I could also have withdrawn money from my savings. As long as you pay off the card within the grace period, it IS a good deal (%0 interest for crying out loud!). Or another example: I just charged $370 in dental expsenses, but I am going to be paid back for that by my FSA at work. Again, no risk. Now obviously some people may not be disciplined enough to do this, they may use their credit card foolishly. But though I am certainly not ignorant of the sorts of racaiouspractices Elizabeth Warren highlights here, it is possible to work aroudn them by careful behavior, and a fairly large fraction of peopel do exactky that (40% of credit card holders have no revolving debt).

Re: As far as rental cars and other travel expenses, debit card work just as well as credit cards.

No they don't. Several companies will not take them at all (and that means you may not be able to get the best price). And many that do charge a large deposit against your checking account that may not clear until a week or so later-- which can lead to bounced checks and high bounced check fees.

I assure you the banks didn't get stiffed. They charged high interest, significant fees, etc. Then by the time they get into bankruptcy and settle for 50%, they still made a tidy profit.

Jim Anderson

The Truth About Credit

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"As long as you pay off the card within the grace period, it IS a good deal (%0 interest for crying out loud!). Or another example: I just charged $370 in dental expsenses, but I am going to be paid back for that by my FSA at work."

That is how it starts... next time its bigger, and the next bigger. Until it becomes a problem.

"No they don't. Several companies will not take them at all (and that means you may not be able to get the best price). "

I used to buy $20,000 a month in travel in my business for hundreds of travelers. I have dealt with this. I have to disagree with your assessment. The hotels want a card to reserve your room. Often, you will find that prepaying a room gives you a big discount if you negotiate it. Rental car companies want to rent you cars. You are the customer. You have the power. Some wont take debit cards if they know they are debit cards. They will take a deposit, yes, but do you blame them? If you use your card, you will get it back immediately when you turn in your car.

Jim Anderson

The Truth About Credit

Facebook Profile

Some of them got stiffed so bad they are actually sending offers to people who have listed them in their BK and telling them:
WE WANT YOU BACK!!!!
Now tell me, if these co's were "stiffed" then why on earth do they want someone back who has "stiffed" them? Are they gluttons for punishment, stupid, or what???
I know the answer!!! So do they!!!

Bonnie
http://pupart.1hwy.com/

Since I have enough money in my savings account to pay the credit cards off if push comes to shove, how is my financial plan built on a house of cards?

I just recently replaced my old American Express credit card on which the 0% interest option had expired with a new 0% credit card which will give me the 0% rate for a year. This is one of 3 0% credit cards I currently have. For the other 2, the 0% offer will expire by the end of the year, so I am currently paying them off and using the new American Express card.

If I ever buy a house, I will be able to borrow at a very favorable rate of interest.

If you do not have the money to pay for essential expenses, taking on the risk of using a credit card is preferrable to not being able to afford neccessities.

If you cannot see a doctor when you are sick, taking the risk of using a credit card is preferable to doing without medical care.

If you do not have the money to pay your rent, taking on the risk of using a credit card is preferable to being evicted from your apartment.

If you are hungry and cannot pay for food, taking the risk of using a credit card is preferable to going hungry.

All life involves taking risk. Rational behavior involves balancing the banefits and risks against each other.

The bankrupcy reforms were a sell out to the credit card companies. I strongly opposed them. The rules clearly need to be changed so that they are no longer stacked in favor of the credit card companies. But it does not follow that people who can handle credit should not use them.

Good for you Capt Video.
I have never said that others will run into serious problems. I know many people who use cards responsibly.
Those who can't shouldn't have them, period! Seems the message in our society is that we all "need" at least one to establish credit or re establish credit.
Thats's what bothers me.
And CC co's that flood the mailboxes of the newly bankrupt are disgusting. There are some who are just too weak , desperate or don't understand just how dreadful some of these offers really are.
Let the newly bankrupt find these co's if they want credit after BK. Not allow these co's to bombard them with these offers.

Paying ones essentials and having savings should be enough to show a person is responsible enough to get a decent rate on a mortgage or a car loan.

Just as some should never touch alcohol, some should never touch credit cards.

Bonnie
http://pupart.1hwy.com/

This is an unfair assessment of Ron Paul. He simply doesn't believe government help is the answer. It hasn't solved the problems for the entire history of the country, what makes you think it suddenly will with a new program? Each new government program has created a bigger government and increases government overhead. We aren't getting our money's worth from our taxes. There is a reason we have a growing problem with poverty, and it isn't a lack of government programs to help the poor. We need to address the problem, not the symptom.

Too bad no one wants to really hear the truth of the matter. They like the lies that come out of Washington now, because they wish it were true.

Jim Anderson

The Truth About Credit

Facebook Profile

"Since I have enough money in my savings account to pay the credit cards off if push comes to shove, how is my financial plan built on a house of cards?"

You are borrowing money to justify borrowing more money at a better rate. You spend money on interest so you can spend more money on interest. That sounds like a plan for financial success. ;-)

Why do you think the credit card companies sell 0% interest so hard? (hint: it is profitable to do so) Why do you think they let people who pay off their credit balances every month to avoid interest payments? (hint: it is profitable to do so)

Credit card users spend 12 to 18 percent more than when they use cash, according to a study by Dunn & Bradstreet. Do millionaires get rich with reward programs from credit cards? i don't think so. What do broke people do? They use credit cards. According to the American Bankruptcy Institute, in 69% of bankruptcies credit card debt is blamed for the bankruptcy.

Juggling 0% interest cards isn't smart, it is deceived. There are better ways to get a low interest mortgage.

Jim Anderson

The Truth About Credit

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Never heard of them being in church lobbies, nor seen them there. Am I missing something?

Jim Anderson

The Truth About Credit

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Interesting. I'm not opposed to using new technology to achieve God's purposes, however, I am not a fan of letting the bank get a piece of the action with the merchant fee. I also don't want to encourage churchgoers to use plastic to pay. I am really opposed to the machines that take credit cards, for obvious reasons.

The pastor that is doing this probably needs to think more about how he uses his money. If he buys everything with a debit card, he has let himself become dependent on convenience. That is a step in the wrong direction.

Jim Anderson

The Truth About Credit

Facebook Profile

At this point in my life if I was in any of the situations you described, I would contact a church and ask for help and not use a credit card. That to me is rational behavior.
If you have ever seen some of the credit card offers that are sent to the newly bankrupt,I am sure you would tell anyone to stay clear of these Goliaths of Greed. Read the terms on some CC issuers like First Premier or Tribute. You can easily find them doing a search. These are two of the co's that flood the mailboxes of the newly bankrupt. Unfortunately, some fail to read the offer and fall for these traps. Others are just desperate and don't even realize what they have gotten into until it is too late.
Tribute was started by an heir to a family who made big money in the debt collection business. I am sure Tribute knows all the traps and tricks and even more !

I am not against CC use for those who can handle them responsibly. I am against predators contacting the newly bankrupt who are in a vulnerable position. If they want credit, then let them go find the predators. Don't allow the predators to contact them .

Bonnie
http://pupart.1hwy.com/