Yet another commentary on the news...
Okay, as I am wont to do, I was skimming through assorted news items on line. Today, I came across an article reporting that banks were concerned that the new laws requiring higher minimum payments will negatively impact their profit margins, due to higher default and charge-off rates.
First of all, I'm glad I read the article. When I heard that new higher rates were going to be required, I was irritated. I would have been upset, but I got out from underneath my credit cards a few years ago (although I still owe Mom a bundle for helping me pay off my last one.) The new requirements demand that credit card companies charge, as part of their minimum payment, not only the interest amount due, but also a percentage of the principal owed, as well, forcing credit card companies to slowly decrease the amount owed on an account. Looks good, in theory, but I don't think it's going to work.
Personally, I think the credit card companies deserve to lose a chunk of their profits. They've dug this credit pit that they keep throwing people in. They COULD, if they were really concerned about their clientele, decrease the interest rate, so that the minimum payments would remain the same, while still meeting the new requirements...but I don't think that'll ever happen, either. That flies in the face of the same logic that says, "Hey, our client can't afford to make his payments on time...so let's charge him even MORE money for the amount he already can't afford to pay us." When it gets to the point that you are charging someone ONE-FIFTH of what they borrowed, on an annual basis, I really have a hard time feeling sympathetic. The line between credit card company and loan shark is pretty slim...granted, credit card companies don't break your fingers or knees or anything like that...but loan sharks don't get the courts to take money right out of your paycheck whether you want it or not.
Combine this, with the new bankruptcy laws that make it more difficult to declare bankruptcy, and our average credit rating is just going to get worse. People won't declare bankruptcy, they'll just stop paying their bills. In an economy that measures the average level of debt as a measure of its health, I wonder what effect that will have. I was always taught that it was economic responsibility to try and stay out of debt--so part of me just rebels at the thought of taking out a loan or buying something on credit in order to make the economy healthier. It's using a flesh-colored band-aid on a gunshot wound...you might not see the injury, but it's not going to get any better.
I might be blindly optimistic, but I hope to never get another credit card in my life. I mortgaged my soul to that devil once, and have reveled in the freedom of knowing they will never call again. I can't imagine getting myself in a situation where I give that up again. They traffic in deception...playing on our desires for immediate gratification, by preaching a 'buy now, pay later' philosophy. They just conveniently obscure the amount you'll end up paying later.
It wouldn't hurt my feelings if they all went belly-up. I know it'd be a huge impact on the economy--and I normally have a really hard time wishing ill to befall people.
But for a credit card company, I'll make the exception.
Okay, as I am wont to do, I was skimming through assorted news items on line. Today, I came across an article reporting that banks were concerned that the new laws requiring higher minimum payments will negatively impact their profit margins, due to higher default and charge-off rates.
First of all, I'm glad I read the article. When I heard that new higher rates were going to be required, I was irritated. I would have been upset, but I got out from underneath my credit cards a few years ago (although I still owe Mom a bundle for helping me pay off my last one.) The new requirements demand that credit card companies charge, as part of their minimum payment, not only the interest amount due, but also a percentage of the principal owed, as well, forcing credit card companies to slowly decrease the amount owed on an account. Looks good, in theory, but I don't think it's going to work.
Personally, I think the credit card companies deserve to lose a chunk of their profits. They've dug this credit pit that they keep throwing people in. They COULD, if they were really concerned about their clientele, decrease the interest rate, so that the minimum payments would remain the same, while still meeting the new requirements...but I don't think that'll ever happen, either. That flies in the face of the same logic that says, "Hey, our client can't afford to make his payments on time...so let's charge him even MORE money for the amount he already can't afford to pay us." When it gets to the point that you are charging someone ONE-FIFTH of what they borrowed, on an annual basis, I really have a hard time feeling sympathetic. The line between credit card company and loan shark is pretty slim...granted, credit card companies don't break your fingers or knees or anything like that...but loan sharks don't get the courts to take money right out of your paycheck whether you want it or not.
Combine this, with the new bankruptcy laws that make it more difficult to declare bankruptcy, and our average credit rating is just going to get worse. People won't declare bankruptcy, they'll just stop paying their bills. In an economy that measures the average level of debt as a measure of its health, I wonder what effect that will have. I was always taught that it was economic responsibility to try and stay out of debt--so part of me just rebels at the thought of taking out a loan or buying something on credit in order to make the economy healthier. It's using a flesh-colored band-aid on a gunshot wound...you might not see the injury, but it's not going to get any better.
I might be blindly optimistic, but I hope to never get another credit card in my life. I mortgaged my soul to that devil once, and have reveled in the freedom of knowing they will never call again. I can't imagine getting myself in a situation where I give that up again. They traffic in deception...playing on our desires for immediate gratification, by preaching a 'buy now, pay later' philosophy. They just conveniently obscure the amount you'll end up paying later.
It wouldn't hurt my feelings if they all went belly-up. I know it'd be a huge impact on the economy--and I normally have a really hard time wishing ill to befall people.
But for a credit card company, I'll make the exception.
posted by Curtis at 4:44 PM
2 Comments:
I'm sure their not going to be hurting!
I'm hoping to be out of "credit card" debt in a couple years.
Hopefully the lesson is learned!
I can't see past the outrageous greed that is a part of so many industries these days. It's all about quick profit and not about stability and long-term growth.
I was mentioning to my wife just yesterday that pretty soon all of the retirees who actually received a pension during their working days are going to starty dying off and that will leave retirees with nothing. Then we'll have to revisit the issue and fire the politicans that have worked to eliminate pensions in the workplace for the past 25 years.
Pensions were created for a reason because there was an obvious need. It helped spawn the growth of the middle class. The middle class is now shrinking due to the rule changes that are aimed at it. All those changes are coming back to bite us all in the ass real fast.
Hope it's not too late for people under 40.
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