Sunday, May 22, 2005

Establishment Press Lectures Masses On Debt

Many observers pay attention when the NY Times and the WS Journal go an a publicity run, as this article continues. "More and more Americans are turning to debt to pay for lifestyles their current incomes can't support."

"'I felt insecure. I was an hourly-paid worker in this fancy neighborhood,' said Benjamin Baggett. Twice he used a home-equity loan to pay off his credit-card debts, and twice he ran up steep credit-card bills again. When his debts reached $30,000 and he ran out of home equity, he filed for bankruptcy in 2003. He has sold his home, and is divorced."

"Last year, 28 of every 1,000 Utah households filed for bankruptcy, twice the national average and nearly triple Utah's rate a decade earlier. In April, Thomas Monson, the (Mormon) church's second-ranking leader, said he was 'appalled' at advertising for home-equity loans that is 'designed to tempt us to borrow more in order to have more.' He repeated the words a Mormon elder spoke during the Depression: 'Interest never sleeps nor sickens nor dies. Once in debt, interest is your companion every minute of the day and night.'"

"Outstanding household debt doubled to more than $10 trillion between 1992 and 2004, after accounting for inflation. Since 1990, income for the median American household has risen only 11 percent after adjusting for inflation, while median household spending has jumped at 30 percent."

"Americans spent half the money from refinancing their homes in 2001 and early 2002 to pay for home improvements, cars, vacations and other consumer expenses, the Federal Reserve reports. U.S. households with at least one credit card owed $9,205 in 2003, a 23 percent increase from five years earlier after adjusting for inflation." Notice that credit card use went up, at a time when we were led to believe the home equity cash-out was being used to pay down consumer debt.


At 2:54 PM, Blogger Ben Jones said...

I tried to find a non-subscription link for this story. If you paste the link into google, you can view it.

At 3:22 PM, Anonymous Anonymous said...

My wife and I like to take a cruise every other year. We like to be able to travel to far places once in a while and near places often. We like a nice meal out and a new car every 3-5 years.

How will the people who buy these homes by the skin of their under-funded teeth ever be able to do these things? It's not likely they do not want to. And it's not likely they want to wait until their income catches up to their debt, either. Their credit limits are drawing nigh. It has to be pretty close to reckoning day for a lot of them.

At 4:13 PM, Anonymous joseph_P said...

(Their credit limits are drawing nigh.)

I think we will know that the end is nigh when credit card companies start getting tighter. I don't know if this is happening yet.

Most of my credit card companies are still increasing my credit limits. I have pristine credit and way more credit availability than my interest in using it.

But I had an interesting call yesterday. I have one card (out of four total) that I never use anymore. I was going to cancel it but I read that it's better to keep it and not use it. The card is from RBS, one of the bigger players. All my other cards charge under 9% interest (some as low as 7%), though i rarely have a balance. But this one is at 19%.

I called them a while back and asked them to lower my rate. They refused. I said that I wouldn't use it if they didn't lower the rate. They still refused.

I haven't had a balance on it for months so I don't even look at the statements. I got a call yesterday from RBS telling me my account was past due and that I needed to pay it immediately. Turns out there was an annual charge for the credit card itself ($25) last month. And I owed $10. The payment was four days late.

Now I don't know if it's meaningful, but considering my credit history, I find it odd to get a phone call telling me that I owe $10 for a bill that is four days late.

Maybe this is company-specific to RBS or maybe it is a sign that credit is tightening. I've been a few days late from time to time over the past few years on different bills (i travel a lot) and have never gotten a call like that.

At 5:37 PM, Blogger Ben Jones said...

Interesting. Let us know what else developes.

At 6:10 PM, Anonymous semper fubar said...

Joseph - did you get socked with a $30 late charge? That happened to me last month when I thought I had paid the total amount the previous month, but somehow was a $1.50 or so short (must have mis-read the staement or something.) By the time I realized I had a $1.50 balance the next month, I was a few days late paying it. I got hit with a $29 late charge. I cancelled the card that day.( I hardly ever used it anyway.) They practically begged me to keep it.

Funny about this story, too - the only person I ever actually knew who declared bankruptcy (AFAIK) was a Mormon living Utah.

At 10:34 PM, Anonymous joseph_p said...

(Joseph - did you get socked with a $30 late charge?)

I haven't gotten the next bill yet. They'll probably hit me with $29 like you said. Funny in a way. I stopped using the card and no longer looked at my bill. Then it turns out i'm late because i didn't pay the annual fee. Then they hit me with a late charge because I didn't pay the annual fee because I no longer used the card.

I could wind up owing thousands....

Think i'll just cancel this POS card...

At 2:19 AM, Anonymous Anonymous said...


tell them to remove the late charge and if they refuse, tell them you're going to cancel it. If they refuse again and try to browbeat you into paying it, tell 'em to go to hell. they may try to send you a bill, but just ignore it. If your credit is good, they can't touch you.


At 9:56 PM, Anonymous Anonymous said...

tell them to remove the late charge and if they refuse, tell them you're going to cancel it. If they refuse again and try to browbeat you into paying it, tell 'em to go to hell. they may try to send you a bill, but just ignore it. If your credit is good, they can't touch you.

This is not good advice - of course they can touch you. How? By reporting a late payment to the credit bureaus, thereby turning your good credit into not-so-good credit. It's always better to pay them on time (even for what seems an unjustified fee) and later ask them to refund it, than it is to pay after the due date, particularly more than 30 days past the due date.

At 2:05 PM, Anonymous Anonymous said...

I was watching that show Extra, that Hollywood fluff show that here comes on after Jeopardy, and they mentioned, in a story about expensive merchandise, the words "housing bubble." Is this a sign of impending implosion when it get mentioned on mainstream fare such as this?


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