Wednesday, November 07, 2007

Could we live without credit cards? Maybe we should.

We all know that during this most recent “housing boom” a lot of people got mortgages they couldn’t afford. How dastardly that that was allowed to happen. Was it the first time people got credit they couldn’t afford? I don’t think so.

I think when the idea of issuing credit cards was created, that was another time when people began to run up debts they couldn’t afford. I think that’s when “stuff” became too easy to buy. Trouble is, it continues and people continue to see debt as just a fact of life.

Suppose there were no credit cards, could places like Wal-Mart stay in business? I’m just curious about that. I don’t know.

This holiday season with gas prices going up and up, with many families paying mortgage payments they really can’t afford, will they cut back on spending or will they just add to their debt by swiping that card into the machine?

34 Comments:

Blogger Fixer said...

I'm all for it. It's time for the credit industry to be reined in big time. From dangling credit cards in front of college students with no meaningful income to giving people with household incomes of $30 - $40 grand mortgages for $250,000, the industry is in serious need of oversight.

Though that is still no excuse for people to take more credit than they can afford. I can understand the college kids (they are kids after all) better than family men and women who have put everything they have at risk to get into a house.

November 07, 2007 2:23 AM  
Blogger Fixer said...

And I hope you're feeling better too.

November 07, 2007 2:25 AM  
Blogger Larry said...

Before the Bush economy has reached it full effect, credit cards will be useless, as money will be few and far between.

November 07, 2007 2:40 AM  
Blogger FranIAm said...

As someone who has struggled with financial management and debt issues, despite my good earning power, this is a close to home issue.

On a good note- I did not buy more house than I could afford, when I did buy a few years back. God knows the mortgage issuer was pushing me to borrow twice as much as I did!!! I chose otherwise.

However, consumer credit has been a challenge for me- high earner, well educated and all that crap.

I wish I could explain it and I wish I could tell you it is because I bought a fancy house in a way, or that I drive a Mercedes or BMW.

No, mine is more like death by 10,000 cuts. I wonder what it has been like at Amazon. com after I was buying several books a week and then abruptly stopped about 10 months ago?

I heal. If I could get this house to move, the mortgage and the debt would be gone and I would be free. (I am moving into Mr He Is' house at this point.)

I digress.

The credit industry is extremely, extremely predatory. It did not start out that way, but it sure ended up that way.

There have even been congressional hearings and so forth, about how the industry used less than savory practices (imagine!) to up people's interest and so forth.

All this does is serve the credit card issuers- big time. And of course retailers- as you mention, Wal-Mart. That .29 cent bottle of shampoo costs way more when you factor in the interest.

And thanks to our great and supportive friends in government, all the bankruptcy laws have been changed to support those in power and deny those in need.

Not that I think easy bankruptcy is the answer, but for some it is the only answer and it no longer is so easy.

All this long winded ramble to say, once again, we are f*cked.

It will all crumble one day.

November 07, 2007 3:17 AM  
Blogger fallenmonk said...

Until the bankruptcy laws are fixed and the protections for cc companies are removed then people will continue to live beyond their means. It is so easy to whip out the plastic for instant gratification then it will continue.

November 07, 2007 3:44 AM  
Blogger Distributorcap said...

i have a lot of mixed feelings here --- which would take all day to type

in a nutshell --- the mounds of debt we have piled up buying ipods, dinners, 400 pairs of shoes and the like will eventually come tumbling down --- to a major mess...

we could learn to live without credit -- can we learn to live without so many things?

November 07, 2007 4:28 AM  
Blogger ZILLA said...

I remember the days when I had no choice but to put a car repair on Discover at 21%apr, spend months paying it down, only to suffer another car crisis. I was raising four kids, alone, on around $25k. Credit, for me, was an ugly, expensive fact of life that allowed me only the pride of not having to run to Daddy for help. If I had been smarter, I would have run to Daddy for help.

Wal-Mart would crumble, and Target would follow, and every other retailer of cheap, unnecessary "goods" would be close on their heels.

And you know what's really hard? Going into K-Mart to make a truly necessary purchase (a car seat for my grandson) and being asked by the check-out girl, "Would you like to put this purchase on your Sears card?" I don't have a Sears card, nor do I want one. What I wanted was to grab that minion of the devil by the shirt collar and scream "FUCK YOU!"

But she was only doing her job, so I restrained myself.

November 07, 2007 4:33 AM  
Blogger Jazz said...

Unfortunately credit cards have morphed from the tool they are supposed to be.

I got caught up in credit card debt once, but managed to dig my way out. Never again. The problem is it's so easy. Everything is available at the swipe of a card. No limits. Ever. And in the consumerist society where we live it's a recipe for disaster.

I still put a lot on my card, but it's cleared up at the end of each month. I still get angrywhen I think of all the free money I gave Visa and Mastercard...

November 07, 2007 5:47 AM  
Blogger niCk (Mem Beth) said...

I'd like to see people live on what they've earned, instead of living on what they MIGHT earn.

All "cards" should be debit, with credit used in emergencies.

That includes governments. It'd make the world a different place.

November 07, 2007 5:51 AM  
Blogger Randal Graves said...

Fucking blogger! Stop eating comments!

I'm kind of with dcap on this. We're so accustomed to having material things. I've been guilty of it myself. I've since paid off my cards and don't have any, but I've also been lucky to not have had to deal with any major medical issues. Others aren't so lucky.

Which leads into the most fucked up part of all this. Humans make mistakes or have unforeseen problems dumped on them, yet, unlike the corporations, they often have no recourse or forgiveness. Those who CAN afford it get their ass bailed out all the time. The rest, not so much. There IS a welfare problem in America. It's all corporate.

November 07, 2007 6:20 AM  
Blogger DCup said...

I'd love to go back to no credit cards. We lived for a long time without them. The only problem was trying to book a hotel room or rent a car.

November 07, 2007 6:53 AM  
Blogger Naj said...

Patricia,

I want to invite you to take a glimpse at our new blog and if you care, to tell me where the line between the people, the American economy, the government, and the military begins!

November 07, 2007 6:57 AM  
Blogger SB Gypsy said...


I still put a lot on my card, but it's cleared up at the end of each month.


You and me too, and for that we get called "deadbeat" by the credit card industry...

November 07, 2007 7:14 AM  
Blogger URBAN PEDESTRIAN said...

I just use my credit card for the dollar points. I never spend any more than I actually have and pay the card off every month and then once a year THEY give ME a hundred bucks

November 07, 2007 7:22 AM  
Blogger Targa said...

I have been credit card free since October 2005.
It makes budgeting take a higher priority. If there's anything I "want", I save for it. I'm patient enough that I don't have to go out and buy something just to be one of the first to have it.
I will admit that I, in the past, have run up CC debts. But after the bubble burst in 2002, those days ended. I was "proud" of my credit worthiness. But, one day it hit me... and it hit me hard. It didn't matter how much I could afford to buy on credit. It only mattered that I was healthy and alive.
Today, I have no credit cards.
When an iPod or iPhone, fancy high-tech gadget, or a fully loaded car can sustain my existence.... then maybe I'll consider those things as being important.
The banking industry and the CC industry don't give a flying rat's ass if we fuck up our own lives. They entice and lure with incentives to take your money. They feed on the emotional need of the masses to have "stuff". They know that people think that the more stuff they have in this consumerist society, the better they are as a person.
The industry is imploding on itself and they will find a way for all of us to pay for their disgrace.
And all you'll have is an iPod that ultimately will cost you $10,000.
***
I'm sorry... what was the question? :)

November 07, 2007 7:35 AM  
Blogger sumo said...

My guess your scenario is correct. They will use those cards to make it through.

November 07, 2007 7:37 AM  
Blogger robin andrea said...

One of the things about the mortgage lending crisis is that a lot of the economy was fueled by people taking 2nd and 3rd mortgages on their homes. Those debts are owed on houses that have not maintained their overstated value, and the debt grows larger as those new mortgages make a leap to higher payments. There have been bills introduced in Congress to stop predatory lending practices. People were using their homes like credit cards.

It always scared the shit out of me to be in debt. We pay our credit cards off every month. We are lucky that we have a choice not to buy what we can't afford. We don't have kids that need shoes, clothing, education, etc.

I agree that bankruptcy laws should be reformed. I also think that the obsession with "stuff" needs to stop. Getting down to the basics of what we need rather than what we want will be a very good thing.

November 07, 2007 7:54 AM  
Blogger bluegrrrrl said...

oh god, don't even mention credit cards to me...I'm currently trying to reverse some damage done during the past few months...

it's just too damned easy to rack up the charges...and the more you use the cards, the more offers you get in the mail...

I'm thinking about going minimalist this holiday season...giving only what I can make with my own hands or doesn't cost money...I have done that in the past, with mixed reception...some people value the thought behind the gift, others feel cheated because they invest so much money into the Christmas gift-giving frenzy (and no doubt rack up enormous debts which they probably won't have paid off by the time the next season rolls around)...

November 07, 2007 7:57 AM  
Blogger annie said...

Two words: Stop spending.

November 07, 2007 8:13 AM  
Blogger TaraDharma said...

right on, annie. entirely too much "stuff" is being consumed. we could end a lot of problems by scaling down our addiction to crap - stuff - junk.

i know too many people who have been addicted to credit cards, and abused them terribly. It's not "free," gang.

November 07, 2007 9:02 AM  
Blogger mommanator said...

I was into cc's once upon a time, however-I could control it, but hubby on the other hand -have card will travel! It's cash & carry for us now! Somtimes the clerks even ask -you payin with money? I usually ask- you do still take it don't ya.It's a crazy ole world we live in!

November 07, 2007 9:08 AM  
Blogger pineapple said...

I have no credit cards, my massive student loans are enough to keep me in serious debt.

November 07, 2007 9:53 AM  
Blogger TomCat said...

I don't think the two issues quite square. A lot of the sub-prime situation comes from deceptive/preditory lending parctices, while use of credit cards is more a matter of personal responsibility. Before my job was Bushwhacked, and my medical coverage with it, I never carried a balance forward on my card. Now I flirt with my limit all the time, but the only thing I ever charge that I don't have the money to pay for immediately are doctors' fees and medicine.

November 07, 2007 10:32 AM  
Blogger Dr. Monkey Von Monkerstein said...

No credit cards for me as I just quit paying on mine when I had my heart attack. I decided that I needed that money to live on more than they did. They of course got pissed and sicced their collection people on me but I let them know right away that I knew my rights under the Fair Credit Reporting Act and then they stopped bugging me. Now in a few more years they must by law write my debt off and my credit score will go back up when they do so.

November 07, 2007 10:59 AM  
Anonymous scott said...

Plenty of fault to spread around. One thing is for certain: there are many people in my generation and even more of the younger folks who are financially illiterate.

Where I grew up everybody was what they used to call “poor and didn’t know it.” Being thrifty would be a hard habit for me to break. However, I use a credit card for almost everything I buy that costs more than $10. It is the same card I got in 1979 when I got my first real job after college and I’ve never paid one cent in interest.

November 07, 2007 12:57 PM  
Blogger Weaseldog said...

I'm in my last year of bankruptcy and there is nothing easy about it.

Maybe if I were Donald Trump it would be easy, but I'm middle class.

The idea that bankruptcy is easy is a myth, like people on welfare driving brand new Cadillacs.

I know how I got into this pickle and in hindsight, know I should have avoided it. It just didn't seem like this is where I was headed.

I was making good money in the IT business in 1999-2000 and started a company with a few friends. Until early 2001, when our potential angle investors quit returning phone calls.

Then the IT business here in North Central Texas crashed and Dick Armey's efforts to ship all the science and technology jobs to India started bearing fruit...

Then 9/11....

For several years I alternated between working warehouse fright jobs loaded semi-tractor trailers by hand, and 30-60 contracts that paid almost as much as I used to make in wages. My gainful employment averaged five months a year.

Then my wife nearly died from heart failure. Washington Mutual after putting me in a hardship program, out of the blue decided to foreclose (we worked out a schedule, I kept to it). They tell lies. Go figure.

Bankruptcy seemed to be the only way to keep from becoming homeless. Since I started it, my income has dropped twice and my attorney tells me they refiled paperwork, then it turn out they didn't. As a result, my payments are at least 50% higher than they should be and I'm paying 100%.

After one refiling that didn't happen, I underpaid for 11 months and had to sell a lot of stuff to make it up. My attorney said, "Sorry about that. I guess we goofed."

Now my attorney says for more money they can file the paperwork and get things adjusted. I don't have it. It took me eight weeks to save the money to replace my water heater when it busted and soaked the walls and carpet. The carpet can wait, but eight weeks of cold showers is a long time.

Now thanks to other arrangements my attorney said were settled, but never happened, the IRS will be after me when this is done. That was more stuff that I was told was filed, but wasn't.

We're one minor emergency away from disaster.

Bankruptcy is not easy.

As to predatory lending... The lenders tell lies. The story for decades has been that the lenders are very smart people who wouldn't loan you money unless they believed you can repay it. Now that has changed. They trust the taxpayer to cover their losses, so they have no reason to avoid them.

Think of lending as Cost Plus. The more money they lend and lose the more the gov will give them. They create money from nothing, loan too much, then foreclose. They get title to the house and land, and the government makes sure they profit. Money from nothing. No risk for them.

Oh, we shouldn't bail them out? Kiss your pension and mutual fund goodbye. They'll sell those off at a loss to cover profits.

And a couple of months ago, the Fed suspended the 10/1 Fiat ratio. Banks can create all the money that they want, without guidelines, out of nothing.

On a lighter note, the last time oil peaked and declined, was 2000. A full business quarter after the decline began, the market crashed.

The market is tougher now. its padded with trillions in extra liquidity and Bernanke was huge money blower going to keep the bubble up. So enjoy the unofficial inflation rate.

It's crash or runaway inflation. You know which one governments always pick. So as the IRS tells us year after year that wages are declining, enjoy the rising costs of gasoline, milk and bread.

November 07, 2007 1:56 PM  
Anonymous pekka said...

In the simplistic world that I live in, matches should not be left for children to discover, booze for the alcoholics to find, car keys for drunks to get or credit cards for consumers to use. This is, naturally, an extreme take on the issue but let me know if there is too many other things that have destroyed lives of otherwise decent and average people?

November 07, 2007 2:59 PM  
Blogger Kathy said...

Speaking from experience, charging gifts is a poor idea if you can't pay them off the next month or soon after. Kids outgrow clothes and toys get broken, but those interest payments keep accumulating. It took me years to get myself debt free, but I sleep easier now. I also learned a good tip that I've relied on many times at the mall. If I see something I think I need to have, I go home and think about it before making my purchase. Nearly 100% of the time I realize I didn't really need or want it.

November 07, 2007 3:40 PM  
Blogger WeezieLou said...

credit cards and i parted ways years ago. i used them for things i needed, but couldn't afford, like medical bills. robbing peter to pay paul - then both peter and paul sink under blinding credit card debt and harassing phone calls.

November 07, 2007 3:42 PM  
Blogger dguzman said...

I hate the way the people at the check-out always push their dept-store credit cards so you can get a discount -- as if that tiny 10% will make up for the 20+% interest you'd be paying on the card.

November 08, 2007 7:49 AM  
Blogger Pursey Tuttweiler said...

I just read of the unintended consequences of the new bankruptcy laws. 70% of people who have missed three house payments have not missed payments on their credit cards. The banks tried to protect themselves from their predatory credit card lending practices but failed to protect themselves from the foreclosure bubble that just burst. Folks are paying their credit cards instead of their mortgages. Amazing.

November 08, 2007 2:02 PM  
Blogger Robert said...

wow-lots of comments
I cut my credit cards up a long time ago and just use cash-saves a lot of hassel.

November 08, 2007 7:03 PM  
Blogger enigma4ever said...

wow...lots of great comments ( and it was a great question)...I have a debit card..and I dont have any credit cards and I pay everything in cash..and I don't have a good credit score becuase of that...and I thrift and second hand..and I guess I am frugal ( cheap), but I don't have a choice...but Our Country ?govt has spent money that we don't really have....they have spent our future..

November 15, 2007 8:10 PM  
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May 18, 2013 1:29 PM  

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