Credit Card Predators

I was going to say something about salt - sodium content in our food supply - but this one kind of hit me like something hard and fast out of the unexpected area.

As some of you know, I've been out of work for over a year now, but I freely admit that my credit card woes go back a few years further than that.

A long, long time ago, when I was employed, getting raises and more or less living the high life of an upper middle class nitwit, I had lots and lots of credit.  I had so much credit at one time that I found myself in a position where I was forced to face a few facts about having lots of credit.  The main one is that each dollar of credit is roughly the equivalent of some measure of the amount of rope I had with which to hang myself.  I had, at one time, over 120,000 feet of rope.

Needless to say, that's long gone, but the curious part is that, despite record bankruptcies and defaults among credit card holders, the issuers don't seem to get it.  They think that the obvious way to make a credit card holder who has fallen on rough times, due to their own stupidity or for other, less culpable reasons, is to blackmail them.

That's right, except it's "legal blackmail."  It's legal because Congress doesn't have the balls to regulate the banks and other credit card issuers (CCIs) the way they so desperately need to be regulated, and that also feeds back into the current economic mess we're in, which is almost 100% due to financial misdeeds by the banks and their owners.  You know, those guys (mostly) who are out on $400,000 yacht junkets on our dime, courtesy of the Congressional sell-out - oops!  I meant bail-out - which saved their utterly useless asses from the financial ruin they so richly deserve but we so poorly get stuck with.

(Surprisingly, Congress does have the balls to act like they represent us, the people, when they're kowtowing to their corporate masters right in front of us.  Almost every last member of Congress does it, and that must make it right.)

But I digress.

The reason their blackmail is legal is two fold.  First, it's contractual.  That means that when you get a credit card, all the sneaky little tricks, fees, fines, and other assorted punishment they will nail on you if you dare to make a single payment late are all right there in that glob of fine print you probably did not read when you signed it (because you need a law degree and an accountant certification to understand it, or a bankruptcy or two).  And because they're such sweet folks, they usually will give you one or two months before they slam the lid on your fingers so you may never be able to pay them back.  If that doesn't make any sense to you, you're not alone.

Secondly, there used to be laws about how much interest a lending institution could charge you.  It was called usury (which, actually, refers to any rate of interest, if you read the Bible).  This is no longer the case.  Those 30% and higher "fees" and interest rates are only that low because the banks haven't raised them again, yet.  Congress took the limit off during the Bush years because the banks are such trustworthy embodiments of something that they'd never do wrong to their own customers.  They learned from the Great 1929 Depression, didn't they?  They're too big for that!  They're also too big to fail, but that doesn't mean they can't fail, it means we can't afford to let them fail.  Big difference.

What happens when you can't make the payments after a certain number of them, which ranges anywhere from 1 to 3 or more, but usually not more than 3, is that they jack up your interest rate as high as they can.  These days, with savings accounts paying less than 1% interest, it's pretty obvious that the minimum high rate for those bad credit risks should be roughly the same - times 30.  Why, they might never get any of it back if they don't put the screws to you!

Yes, you read that right.  If you did not know it before, be assured: your savings with them pays you less than 1%, but if you borrow from them and miss a payment, you get jacked with 30% interest.  That's almost 1/3 of what you owe them in the first place.

It used to be loan sharks and the Mafia that were the only ones who could charge that much interest, and it wasn't legal.  Nowadays, the loan sharks are nicer than the banks, or they work for them.  Okay, maybe not, but it seems that way.  Why commit a crime when you can now do the same thing and get away with it legally?

So, back to the first missed payment.  You get socked with a fee for a late payment.  This used to be around $5 per month, but now it's $29, $39, whatever they want.  It's in the contract you signed.

If you happen to be a displaced worker (like me), there's a chance your charge balance will run over your credit limit at some point, probably sooner than later.  They say (yes, that infamous "they" said it) that you should never have more than 1/2 of your credit limit as a balance on any of your credit cards at any time.  In these wonderful times of financial crunch, that's harder than ever, and we Americans are notorious for spending close to the limit all the time.  But, as soon as you go over that limit, bam, there's another charge they tack on.

Sometimes it's not even your fault.  After all, the credit limit is there to limit their risk and your indebtedness, right?  Wrong.  It's there to limit their risk all right, but they don't give a hoot about your indebtedness.  If they did, you'd never be able to go over your limit because their system would calculate all pending and actual charges and decline anything that might take it over the top.  Instead, they don't.  In fact, they don't even stop charges that come in after you've gone over your limit if, for example, you have an ongoing payment set up to charge against that card.  Like what?  Like, oh, I dunno, maybe a monthly fee for your kids' gymnastics lessons that you used to be able to afford.  As long as the credit card issuer approves the charges, you can afford it.  I mean, after all, they do know what they're doing, don't they?

(Yeah, just like they did with credit default swaps, and sub-prime mortgages, and all their other get-rich-quick-and-forever schemes that we are now paying for, to the tune of $12 TRILLION and climbing.)

I know someone who, mainly because of the over-limit allowed charges, has fallen behind in their payments and cannot catch up because they're on a limited income (retired, elderly, not as healthy as once, etc.).  As you probably figured out by now, they are now paying 30%+ interest on what used to be much lower rate accounts, plus $39 over-limit fees, plus $39 late fees, or they would if they had a prayer of catching up.

Some people in this situation just stop paying and ignore all the phone calls from the banks and the collectors.  I mean, if they can't pay, what else is there to do?  If they're patient enough, eventually one of the collection agencies will offer a reduced payment, sometimes as low as 50% of the original defaulted balance (before all the fees and interest kicked in) or less.

(If I had that kind of money, I'd pay them off just to settle the account.  I've done it on a couple of accounts and it at least stopped the late payment and default reports that were piling up at Experian, Transunion and Equifax.  Those are the companies that don't even recognize mercy as a word.  It didn't clear the notices from my credit report, but one step at a time.)


I have a better solution.  I plan to suggest this to my friend who is about to get drowned in this situation, though I doubt that their credit card issuer will take it.  I'll get back to that.

Here's the solution:

1) Temporarily raise the credit limit on the account such that the existing balance is at or less than the limit.  (Oh, well, no more over-limit charges.)

2) Lower the interest rate to something reasonable, maybe like what it was before it was jacked up to 30%+.

3) Recalculate the minimum payment and go with that, instead of the total balance over the limit plus the former minimum payment.

Why won't they do that?  It would give the customer a shot at making good on the debt, they get money coming in again, and everyone is better off.

They won't because it's not what they are "owed."  They have a contract with (on) you.  They want all the money, period, so why settle for less than everything?  They "can't" raise the credit limit because the customer can't be trusted not to do the same thing all over again.  Never mind that it was the CCI's stupid error in accepting charges when the account was already over the "limit."  Never mind that this customer actually wants to make good on the debt, no matter how it went up.

They can't lower the interest rate.  That would mean less money for them.  They're willing to overlook the fact that they're not getting any money on the account right now anyway.  In fact, they'd rather go bankrupt themselves than make allowances to get their debtors to pay them back.  That is unless they can convince (i.e. bribe) Congress to pay them out of your grandchildren's pockets by extorting it from the government instead.

Finally, if they recalculated based on the above scenario, they won't get the over-limit amount back, either.  So what if they never get it back at all because of a bankruptcy or a collector's half-off deal!

Wait, I have an idea - let's blame it on those liberal Democrats!  If they'd just spend money without ever raising taxes, like the Republicans want, that would solve everything!  The government would collapse, free markets would rule once again, and all would be the way it once was - a world of brotherly love and peace, with the rich on top where they belong and everyone else in abject poverty and slavery, where we belong.  Right?