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tomhudson's Journal: Poll: Insolvent banks and credit card rates 53

Journal by tomhudson

When you or I don't have money, we say we're broke.

When banks don't have money, they say they're "facing a liquidity crisis".

So what are they doing? Well, one quick fix is to raise credit card interest rates.

A lot of people who were paying 8.5% are, as of this month, paying 19%. Someone with a $20,000 balance is going to be paying what - an extra $220 a month in interest? The banks (at least CitiBank) are giving their customers who complain 2 choices - either accept the reaming, or cut up the card, and pay off the balance at the old interest rate ... but people are so dependent on their credit cards that the banks know they'll "B.O.G.U.S." - "Bend Over, Grease Up, Sucker!"

Why? Because most people can't afford to cut up their credit cards.

I can understand going into debt to pay medical bills, because your health comes first. I can also understand going into debt for business reasons, because it makes sense if it will generate more income than it costs. Going into debt to buy consumer goods? Stupid. Makes about as much sense as charging groceries and gas, and taking 3 years to pay them off ... (which is what the consumer has been doing a lot of this past decade, spending 103% of their income every year, year after year ...)

Poll Question: Can you afford to cut up your credit cards?

[_] Already did - cash is king!
[_] I kept one ... "just in case" ...
[_] I pay them off in full each month
[_] I "usually" pay them off each month.
[_] As long as I can make the minimum payment, who cares?
[_] I'm charging like crazy - chapter 13 here I come!
[_] I'm doing a SCO - chapter 11 and 7 are my friends.
[_] Someone stole my credit cards, but I didn't report them because they charge less than I do.

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Poll: Insolvent banks and credit card rates

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  • [_] Already did - cash is king!
    [X] I kept one ... "just in case" ...
    [_] I pay them off in full each month
    [X] I "usually" pay them off each month.
    [_] As long as I can make the minimum payment, who cares?
    [_] I'm charging like crazy - chapter 13 here I come!
    [_] I'm doing a SCO - chapter 11 and 7 are my friends.
    [_] Someone stole my credit cards, but I didn't report them because they charge less than I do.

    I'm a firm believer in having an emergency fund and savings in the bank.
    We've only had one CC from our bank
    • by tomhudson (43916)

      I dumped all mine years ago. I generally paid them off each month as the bill came in, but my ex wasn't as restrained in spending as I was, so one day I just took them all, cut them up, and flushed them down the toilet. When the renewals came in hte mail, I did the same thing, and that ended that!

      I know 2 people who have determined to do basically the same thing - pay them off, then shelve them - and they're making great progress. One has reduced her debt load by half, the other should have it down to ze

      • by Blackneto (516458)
        now the payments aren't so big

        thats the biggest problem.

        we've managed to do fairly well since the bankruptcy. mostly thanks to the advice of Dave Ramsey's book Financial Peace (now Total Money Makeover)
        both of us grew up in households were finances weren't talked about and we picked up bad habits from our parents.
        It really kills me to be carrying a balance right now since what I really want to be doing is paying down my HEL with my extra income.
        But i'll have half of the balance paid off when i get my tax re
      • by SQLGuru (980662)
        There is a benefit to using a card, even if you don't carry a balance month to month: insurance.

        Credit cards usually include additional insurance on big ticket items (electronics in particular) that go beyond what a store offers. I haven't taken advantage of it, but it is there. Also with renting a car, the credit car usually covers the insurance so you don't have to pay the rental agency for their overpriced insurance.

        Layne
  • I have a friend who also pays them off in full each month, but his trick is that he seeks out cards with exorbitant interest rates (28%) that offer a 3% or 5% discount on just about everything he purchases, including his rent. Ultimately, he saves over a thousand dollars a year, and has never paid a penny in interest.

    As for me, I do the same thing but accept frequent flyer miles instead of a discount. My wife is flying to San Francisco in March for $5.00. It's not all bad.

    • by tomhudson (43916)

      I have a friend who also pays them off in full each month, but his trick is that he seeks out cards with exorbitant interest rates (28%) that offer a 3% or 5% discount on just about everything he purchases, including his rent. Ultimately, he saves over a thousand dollars a year, and has never paid a penny in interest.

      That's brilliant! However, I've heard rumblings that banks are now dropping customers who don't generate enough revenue by paying their bills in full. The banks get a "rake-off" of between 2

      • by Tet (2721)
        I've heard rumblings that banks are now dropping customers who don't generate enough revenue by paying their bills in full.

        Unlikely. I speak from some experience here, having launched a credit card company some years ago, which was later bought out by a major bank. It's true that banks don't particularly like customers that pay off their balance every month. But ultimately, so long as the customer generates enough revenue to pay back the CPA (Cost Per Acquisition -- the average amount spent on marketing e

        • by plover (150551) *

          I simply can't understand why anyone would want credit for anything other than specific purchases (house, car[1], and so on). I can't understand the mentality of paying for general things with credit.

          And thus you are receiving failing grades in "Believing in Marketing 101", "Keeping up with the Joneses 203", and of course "Advanced Impulse Purchasing 324".

          The average American is marketed to at unimaginable levels, by psychologists who have a deep understanding of group zeitgeist and herd mentality, paid

          • "and even I find certain ads extremely compelling."

            What are these compelling ads you speak of?

            Seriously, I'm at the point where every time I see or hear a commercial, I automatically notice the weasel words, the lies, the misinformation ... for example -

            • every time I hear "Swiffer", I think "really bad for the environment because it promotes disposable single use mop-heads".
            • "Zoom-zoom cars." Gas-hogs for people who will rice them up with coffee-can mufflers.
            • "Breakfast cereals." You must think I'm
            • Re: (Score:3, Insightful)

              by plover (150551) *

              What are these compelling ads you speak of?

              Micro Center ads for Quad Core chips, for example. Even though I'm typing on a perfectly serviceable Athlon 4000+ that is generally sitting around idle, I *want* a faster computer. Even though the computer I'm typing on probably has more CPU cycles per second than the sum total of all CPU cycle seconds on all computers manufactured prior to 1970, *I want more*. It's not that there's one particular shiny Intel ad that's compelling, it's a constant flood of new

              • by tomhudson (43916)

                That's just it - I wanted to spoil myself ... but when I actually looked at the big-screen TVs, the reality was disappointing. And that's when I realized that I just am not all that interested in it, despite all the hype, despite my daughter having a 60" TV, despite my brother-in-law and one of my friends having 42" TVs ... so I decided to continue "spoiling myself" by NOT buying one. This way, I don't feel guilty about not watching it, and reading a book instead :-)

                I'd rather go visit friends, etc.

                Whi

                • by plover (150551) *
                  We just got together with my wife's side a couple weekends ago for a "board game Sunday." We played a couple hands of "Pit" (mostly because my mother-in-law doesn't like all the shouting! :-) A couple nephews played chess, others played some dice games, some euchre and cribbage, some tried to set up Mousetrap but lost patience when it didn't work right, and basically it was just a really fun afternoon spent with each other.

                  And to stray completely off topic now, I bought my wife a new copy of Pit for Chr

                  • by kurokaze (221063)
                    Oranges and soybeans? This must be the deluxe version for sure.. coz the version I play has rice, cocoa, oil, gas, etc.

                    But... damn fun game pit is...

                    Now if only I can get as many people interested in Catan!!
                    • by plover (150551) *
                      I like Settlers but next to Pit it takes a comparatively long time to learn, and definitely a longer time to play.

                      Pit is something a bunch of drunken people at a party can just pick up a handful of cards and start out yelling at each other. And if they're doing it wrong, it's all the funnier! "Corn! Corn! I mean I need two barleys -- oh, shit, did I just say that out loud? Four! Four!"

                      But my kid and his friends spend hours every week playing Catan at school, with all the add-on packs and stuff.

                • by rthille (8526)

                  We've got a 32" or 36" flat-front (tube) tv that's probably about 8 years old now. My wife is pushing for a new 52" LCD/Plasma. I'd rather go back to before when we had an old apple //e color monitor hooked up to a vcr that I dug out of a dumpster for the tuner. Actually, I wouldn't mind the 52" display, I'd just use it to display our photos which we hardly look at now, and fore-go the TV & movies.
                  • by tomhudson (43916)

                    Wait another year - they'll be half the price or less next year because of the reduced demand:

                    1. Everyone who wanted to buy one and did a refi or HELOC already did;
                    2. Recessions always reduce demand - and we're already 6 to 12 months into one as far as the average worker is concerned (and when you consider that, after real inflation, incomes haven't grown since 2000 ...);
                    3. Over-capacity as the adoption of hi-def players doesn't ramp up as fast as hoped;
                    4. Many consumer's redit cards maxed out - those who aren't,
                    • by Miguelito (13307)
                      Yeah, I've been looking at the same 71" Samsung that you likely were.. and have been doing so for over a year now. I'll probably be buying soon (after I zero out my HELOC.. which was for bathroom/kitchen repair/rennovations) when the next models come out and the current ones drop to clearance prices. To answer the original question that brought that up.. no one made me want to get a big TV but myself. I currently have a 8 year old 65" mitsu.. that still works ok.. but has a lack of hdmi inputs which I re
                    • by tomhudson (43916)

                      One solution for trivial pursuit is handicaps - you have to answer questions from 2 or more editions to advance your token. Its a LOT harder.

        • Unlikely. I speak from some experience here, having launched a credit card company some years ago...
          Interesting... I'm curious to know, how does one go about doing something like that? Does it take a ton of start-up capital to get going?
           
  • and glad I did - medical bills, even with decent insurance, the "patient's responsibility portion", is a back-breaker - The race between my building a third income and our losing our second (and her, and more than likely the house) is already uncomfortably close - hence the sig.
    • by OS24Ever (245667) *
      have you had the stuff tested for lead and dead people? Seriously.

      Looks interesting. How much money did they want from you up front?
  • Citibank won't go broke because they can make money appear out of thin air. Well, technically it's a country's central bank that does this when they lend money to the banks, but it's the bank receiving this money that's making the decision that results in the creation of money.
    • by tomhudson (43916)

      CitiBank is the one most likely to go broke. #2 on the list is Bank of America. The problem with the banks is that they need to have a certain amount of capital - money in reserve - or they can't borrow, even from the Fed's "discount window." Currently, neither on is expected to survive the ongoing housing crash in their current form, which is only expected to reach bottom some time in 2010 - 2001. BoA's purchase of Countrywide is looking worse every day - talk about buying an asset that's in decline.

      Expe

  • This reply has been brewing for quite awhile, and is not *completely* a reply to this thread, but may as well post it here.

    "Going into debt to buy consumer goods? Stupid."

    Although I've never been that good with my money, since I've taken a few economics courses (and of course, CS courses), I've learnt a few things which has changed the way that I approach
    my finances.

    The first thing, is more or less exactly what money is. What is it? Most of the time, when we talk about money, we think about something meta
    • by tomhudson (43916)

      "Investing in yourself" can take 2 different forms - buying goods and services that increase your productivity and marketability (better nutrition, education) and "fool's gold" - that big screen TV. I almost bought a big screen TV last year - then I realized 2 things - even the $6,000 model had a relatively lousy picture, and I don't watch TV. Most months, the TV isn't even turned on.

      I'm making an exception for the Sarah Conner Chronicles - if I remember - but that's it. That will in effect more than dou

      • You must enjoy something. There is an unmentioned 3rd option; spending on making life liveable. Whatever the cost, it is certainly an alternative to investing in one's productivity. I used to think(and to a large extent still do) that life is fundamentally unliveable, and that suicide was really the only rational choice. Now I'm thinking it is possible to make life liveable, but it takes a lot of work, and even more smarts.

        And I hope you're right about lending circles, that increases my hopes for the
  • Wife and I have a generally low-stress policy that's decreasing the annoying (but not disastrous) level of debt we'd accrued.
    Use one card for all our transactions, and that card kicks back 1% to the mortgage. Keeping it paid off.
    Using low-interest balance transfers to maneuver the rest of the load and continue to pay it down.
    We're also making healthy amounts of long-term investment elsewhere.
    Is it the most efficient approach? Unlikely.
    The virtue is that we've been fairly consistent over the last 18 m
  • My wife and I have been keeping a steady balance of about $3000 on our credit card, mostly because my credit score seems to go up faster when I do that. Otherwise, we pay off what we purchase each month.

    I can't even conceive of a $20k+ credit card debt. At this point I owe $3k on the credit card, $1.5k on some "no payments for a year" furniture (and that $1500 is in an interest-bearing account, and has been since the purchase *grins*), and around $7k of student loans of her that we're paying off at an acc
    • by tomhudson (43916)

      "$1.5k on some "no payments for a year" furniture (and that $1500 is in an interest-bearing account, and has been since the purchase *grins*"

      You've been paying at least 14% interest (and possibly more) on that "no payments for a year" deal. The vendor grosses up the sale amount to cover it, and pays the finance company that enables the contract. If you want to see the true rate, stop paying it ...

      So unless that interest-bearing account earns you at least 14% after taxes, you're behind ...

      Never mind t

      • by Zeriel (670422)
        Oddly, the initial transaction was supposed to be cash, and it didn't change the price--your thoughts were the same ones I had.

        I figured, if I wasn't gonna get a break for cash, I'd just take the deal and pay it off later and at least recoup some interest.

        (That and it was $500-$750 cheaper at the place I got the furniture than the next cheapest place with equivalent stuff.)
        • by tomhudson (43916)

          What you have to do is show that you're prepared to walk unless you either get a better deal, or they throw in a sh*tload of stuff. They'll do one or the other (usually the latter, since this way they can say they didn't lower the price of the tv ... hah!).

          Make friends with one of the people working there, let them know you're serious, and you'll get a chance to see as they diddle with the amounts on-screen at the sales terminal to make the deal work (its how I got an additional 13% off my camcorder, ove

          • by Zeriel (670422)
            I do that with electronics and appliances, but I shop for furniture infrequently enough that it's not really time-effective to do it there.

            (when I got my washer and dryer, I think it was 15% "display item discount", 10% cash back, and 12% miscellaneous discount)
      • by afidel (530433)
        It depends, I know some places the zero percent teaser rate resets to something like 19-25% at the end or if you miss a payment so the credit company doesn't charge the merchant anything. If you are disciplined and make the payment for the amount of (purchase price/months at 0%) then you can make out fine. I did this with a couch recently. We wanted a very nice couch and after shopping 4 places that carry this brand we finally found one willing to negotiate well, we saved about 20% off the highest price we
  • I'm usually pretty good about not going crazy with the credit card. The Amazon Wishlist (and others) has saved me countless times. ^^;
  • Though now I have two, which I got to help me pay for school (mostly software, and some hardware to run said software, and books/tuition). Though I ended up putting some expensive car repair work on one :-| But then again it is a used car that I am not making payments on, and is still reliable, so cheaper to keep at this point.

    One is almost paid off, with the other one carrying about $2000 on it. I should have them both empty in the next six months or so. At that point, if I can I am hoping to travel (Sigg
    • Try this: continue making fake "credit card payments" into a separate bank account after you pay off your card. If your numbers are right, you'll have $2000 plus interest a year from now, and you can go to Siggraph without going into debt (and paying interest) for it.
  • Looks like your poll became the front page poll almost verbatim.
    Grats Tom?!?!?!
    • by tomhudson (43916)

      Yep - they even left the html tags in with their cut-n-paste.

      Nice to know that they read my journal ;-0

  • i was one of those people living off their credit cards with only the 'hope of someday having a big salary' as the feasibility of me paying them off. I knew a lot about computers and kept thinking one day I'd land a job with an internet company, and of course anything i spent on computers was just part of my 'education' so i spent a lot... but that 'someday' never came, and long before it came there was my collapse into bankruptcy, because i simply couldn't handle the stress from my work (it was an entry l
  • I pay them off each month, all three of them. I have one exclusively for online purchases, it's not a physical card: it's just a number and has extra safeguards. One is associated with my current account and the third is associated with the joint current account with my wife. Each one of them have a special purpose.

    Why? Because I make a budget [slashdot.org]. A little planning, a little calculation and money problems are gone...

    • by tomhudson (43916)

      Your budget idea is a good one, and so is the two accounts method.

      It *is* possible to do it with only one account, but you have to be disciplined about it.

      • Well, I don't want to take credit: this is the system I learned from my dad and I just published it in a journal because it is infuriating that so many people cannot manage their money properly, even if they are on a site like slashdot where the more mathematically inclined hang around.

        Yes, discipline is part of the equation. My wife has a feeble for expensive clothes and accessories, but I pretty much budgetted that in ;-)

        • by tomhudson (43916)

          My wife has a feeble for expensive clothes and accessories, but I pretty much budgeted that in ;-)

          Clothes, shoes, purses and coats come with the territory, you ignorant clod!

          One thing I've noticed is that most single women are in better financial health than their boyfriends. Guys tend to want to "pimp their ricer", buy the latest toys, etc. A couple of grand on a new set of rims buys a LOT of clothes and accessories ...

          • Guys tend to want to "pimp their ricer", buy the latest toys, etc.

            I'm not one of those. If anything my financial health was better than my wifes. However, regarding that quote: I never got that. Why do these dolts don't just buy a car that they like in the first place? I've got an unmodified 2000 Audi TT and I have never felt the need to change anything on it. It is perfect as is. Changing it would be the equivalent of punching the designers and engineers in the balls.

            Oh, and I got that one on a par

  • [_] Already did - cash is king!
    [X] I kept one ... "just in case" ...
    [_] I pay them off in full each month
    [X] I "usually" pay them off each month.
    [_] As long as I can make the minimum payment, who cares?
    [_] I'm charging like crazy - chapter 13 here I come!
    [_] I'm doing a SCO - chapter 11 and 7 are my friends.
    [_] Someone stole my credit cards, but I didn't report them because they charge less than I do.

    I tend to try to pay my credit cards down quickly. I must admit I've put a few toys on them that have taken
    • by tomhudson (43916)

      This hit just after I put a major purchase on one card

      Isn't it always like that ... :-(

      Hopefully, things will work out over the next little bit and you'll get them cleared again.

"Even if you're on the right track, you'll get run over if you just sit there." -- Will Rogers

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