Credit Cards in the world of taxpayer-owned banks
"meet the new boss. Same as the old boss." -The Who
The American people ponied up $700 billion to supposedly bail out some big banks on Wall Street. So far, we have not seen the banks what banks are supposed to do, lend people money. Instead they are doing the thing that Wall Street raiders do, take over other companies. PNC and Fifth Third were the first banks to make deals, backed by taxpayer dollars.
Bush and Paulsen encouraged bad behavior in their bailout bill. They gave big banks money and tax incentives to gobble up small banks. They made sure that their buddies on Wall Street were taken care of.
Most big banks didn't need bad behavior encouragement. They've been able to do harmful things long before the government started subsiding them.
Some of the biggest abuses come in the way that banks have handed out credit cards. Now that I, like every other American taxpayer, indirectly owns part of the Wall Street banks, I want to talk to them about how they have been acting.
I want to do is to throw credit card companies off every college campus. Is it any wonder that the banks needed a $700 billion bailout? What kind of business gives huge lines of credit to students who don't have jobs?
I always thought that you had to have a job to get credit. Not anymore. I have a college student in my household. He has minimal income, no assets and big student loans. However, the credit card companies love him. He gets ten times more mail than I do. All of them "pre approved" credit cards. All go straight in the trash.
Its bad for the college students to run up debt before they have jobs. Its bad for the nation to have a generation of college graduates paying off high interest credit cards instead of saving money to buy houses and cars.
Giving cards to college students couldn't have been that great of a business or the banks wouldn't have needed a bailout.
I saw an article in the New York Times that said that credit cards were the next problem area for the banks.
DUH!
We've had years of students, people coming out of bankruptcy and people with no income getting tons of credit cards. Usually with interest rates and fees that would make a loan shark blush.
Since they are getting multi million dollars bonuses, executives at Wall Street banks should have figured out what most of us know. Broke people don't pay loans back.
You can charge them all the interest and fees that you want. If they don't have any money, they are not going to give any to you. Especially if you are an unsecured debtor like a credit card.
People will make an extra effort to hang on to secured debts, like their houses and cars. The credit cards will be last in line.
We are now in an economy where a lot of people who were barely hanging on will get closer to the edge. You see people losing their jobs or going from high paying jobs to minimum wages. You see people who counted on the value of their house or 401k plan being suddenly disappointed.
We see a lot of people worried about feeding their families and keeping a roof over their heads.
When it comes to feeding your family or paying your credit card, the family is going to win every time.
I hope the banks factored that reality in before the came up with the $700 billion figure. They might want to hang on to some of that taxpayer cash instead of using it to buy other banks.
As bad as people are projecting, it will get worse. Recent events will change how people feel about debt.
People who got stuck with high interest credit cards aren't going to be in a hurry to pay them off.
Even if they can.
Banks had two things going for them in collecting credit card debts. They could shame people by embarrassing them in front of their neighbors and they could threaten to hurt their credit scores.
Its going to be hard for a bank that was bailed out by taxpayers to shame anyone into anything. Since people with good credit can't get loans, there is no incentive for someone with bad credit to even bother. They can default on their debt and make the banks come after them.
I've tried to collect from someone who was determined not to pay me. It was expensive, time consuming and I never did get all my money. Try multiplying that by a few million people. That is what the big banks are going to be dealing with.
From a moral standpoint, I want banks to clean up their act in the credit card department. Since many of the bankers work for me, and the rest of the American taxpayers, I'd like to protect my investment by making sure the credit card issuers get out of the stupidity game.
I can't afford to give them another $700 billion.
Don McNay is the founder of McNay Settlement Group and the author of the book Son of a Son of A Gambler: Winners, Losers and What to Do When You Win the Lottery. You can write to him at don@donmcnay.com or read other things he has written at www.donmcnay.com He is Treasurer of the National Society of Newspaper Columnists.
Follow Don McNay on Twitter: www.twitter.com/Donmcnay
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MANY CARDS HAVE ONLY 22 DAYS IN A BILLING CYCLE EVEN THOUGH YOU ONLY GET 1 BILL EVERY 30 DAYS.
SO YOU ACTUALLY PAYING THE LIKE THERE WERE 16 MONTHS A YEAR INSTEAD OF 12 MONTH.
AND THAT COMPOUNDS THE COMPOUNDED INTEREST.
Maybe I should write my Congressma
Don't blame the salesman, unless he is defrauding the customer. In the case of credit cards, I am not aware of any charges of fraud. Instead, the banking industry forced through a bankruptcy revision and then turned their salesmen loose. The new legislatio
For instance, writing mortgages where borrowers can pay whatever they feel they can afford (Golden State in California
Why? Because the other sad reality is that despite the fact that those credit cards unfairly saddle young adults with a lifetime of unnecessar
Students will take out other credit card debts to pay off the first debt. They'll borrow from Peter to pay Paul over and over again during the course of their education. And since the banks keep sending them more cards, they think they're doing the smart thing - establishi
Folks who aren't in college - and are living in the real world of budgeting and trying to live within their means - simply don't have that option. At least they don't now that they can't go to the HELOC ATM anymore.
So much as I agree with you, Don, that these student accounts are a big problem for the future of our young people, I don't think the fact that Hank has thrown all of our hard-earne
Until Congress actually enacts some legislatio
So save your breath in talking to the banks. They're not listening.
For example, they increase rates based on other debt incurred and they pull fast tricks such as raising rates if a borrower does not respond to a simple mailing.
I have spoken to the office of Attorney General in our state about this problem and it is agreed that this practice is immoral, but not illegal. I was told that I should lobby my representa
This problem can be solved through regulation and the sooner the better.
The debt originator (Bank) had only to originate the debt then sale it on wall street as some debt security, where the investor gets a portion of the interest paid on the debt and a portion of the risk of default.
The insurance companies created exotic investment
That insurance aspect is probably the most questionab
Congress did this, blur the lines between insurance and investment
Scandalous
And what did the swindlers do? They passed a "hear no evil, see no evil" law, masqueradi
Yes, the swindles go all the way to the top, and encompass hundreds of "civil officers" along the way, all of which (thus saith the Supreme Law of the Land) "shall be impeached.
What will finally happen? I think it's obvious: the bitter medicine will come from other nations, never from our own.
LONE RANGER: "Tonto! We're surrounded by injuns!"
TONTO: "Whaddaya mean 'we,' paleface?"
It's called "The Euro," and it works.
Meanwhile, living debt-free and mortgage-f
I literally do not give a single crap about what my credit rating is, because I intend to never borrow large sums of money again if I can avoid it. (Private health insurance becomes much more affordable if you don't have a mortgage and unsecured credit card debts, so I finally got covered there, again for the first time in my adult life.) To be sure there are some people in some positions who will need a decent credit rating for various purposes in their lives, but I honestly think that a large number of people could live without borrowing much money at confiscato
I graduated from college in the early 1970's, though; and I was not offered a single credit card while I was in school. Since I declared bankruptcy
I hope those banks we own start acting right so we won't have to put too many CEOs in jail to get the message across that they shouldn't prey on poor people.