I came home today and opened the mailbox. That’s not the news here. Neither is the fact that I had credit card application solicitations in the mailbox. But even for a Monday the total was staggering. 5 apps from Chase and 1 from Bank of America.
Is this the price of good credit? A non-stop barrage of attempts to get me into debt? Did I trigger this? About a month ago I opened an AmEx account. My very first one. Usually I will get about 2 credit apps a day in the mail. But since then it’s been 3-4 and now 6.
Ridiculous is the only thing I can think of to describe this. It reminds me of when I used to receive 4-5 home refi solicitations per week. It was there in front of you all the time. Easy money. Convenient payments. Live the good life. Buy that car. Take that vacation. I deserve it!
Well, no. Actually, if I deserved it AND could afford it there would be money in the checking or savings accounts to pay for it. But that’s a whole other post.
My point in all of this is that I suspect we will head towards some sort of credit card re-payment disaster in the next 24-48 months. I know of people paying their house payments on their credit cards! Oy.
But unlike the housing loan industry the credit card companies successfully lobbied congress into making it nearly impossible for those who succumbed to this nonsense to ever get out of the debt. Bankruptcy is no longer bankruptcy. Oh, it still means financial distress, heartache and hopefully a little embarrassment. But it doesn’t mean the debt goes away.
When I was younger and had mismanaged my financial situation (that took me 15 years to work out of, by the way) I used to be of the belief that I was 100% responsible for my actions. And while I still have a tinge of that feeling I cannot help but think that the credit card companies should get what they deserve if people start defaulting.
Like the unscrupulous of the mortgage industry (if you are reading this blog you are probably not one, but you know of whom I speak) they give credit to those they KNOW will not be able to repay without hardship. And solicit them they still do.
And now for about a year they have Congress’ blessing to do so without repercussion. Does that sound right to you?
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7 responses so far ↓
1 Wade Young // Dec 17, 2007 at 9:20 pm
I am concerned about a future credit bubble too. If a person has $50,000 in credit lines with $10,000 utilized, that leaves $40,000 hanging out there ready for use. If the people of the United States get put in a financial crunch (as we have seen by rising costs and lowered incomes), they will start to use their previously unused credit lines. I think that a credit bubble could very well be the next bubble to pop. The bankers are asking for it. I agree that the borrowers won’t be to blame for the most part. I will place most of the blame on the banks and congress. Our legislators have written laws allowing the banks to fleece the citizens (24.99% interest if the account gets behind). It is also egregious that the banks have protected themselves from personal bankruptcies. The banks have far too much power, and Congress is not protecting its citizens. It will be interesting to see how it plays out.
2 Chris Lengquist // Dec 17, 2007 at 9:26 pm
Wade, thanks for commenting.
Again, I don’t absolve the American public completely. But these credit lenders are purposefully overextending people.
Heck, I go to a lot of college basketball games and there “they” are signing up every college kid they can find. Never mind that the kids don’t have a job. Here’s some money. Oh, and we’ll just let you pay it back in pieces. (19.99% until you’re 32 and have two children.)
3 Wade Young // Dec 17, 2007 at 10:04 pm
That type of advertising is repugnant and should be illegal. It reminds me of when the military guys set up recruiting tables outside of the Top Gun movie in the 80s. They were preying on young guys’ testosterone. The credit card companies are preying on the “I’m young … I’ll live forever … I want to party” attitude of young folks. Congress should be protecting its young citizens by making dubious advertising practices illegal. Credit card companies should not be allowed to step foot on college campuses, for example. Credit cards offered to college students should be capped at $500 by law, in my opinion.
4 Paul // Dec 18, 2007 at 10:30 am
Great article, Chris!
And watch out for BOA & Discover. Their universal dafault policy can be invoked (regardless of timeliness of payments) if your credit score drops.
5 Chris Lengquist // Dec 18, 2007 at 8:10 pm
Paul - Thanks. And that’s ridiculous.
6 PeterT // Dec 18, 2007 at 9:28 pm
Paul, the credit card companies market to those in debt like Casinos market to gambling addicts. I wrote about a new company that lets borrowers pay their mortgage payments with their credit cards. Debt in all forms is a huge problem and I agree that credit cards will be the next to fall.
7 Paul // Dec 19, 2007 at 5:36 am
“Debt in all forms is a huge problem…”
Yep, and all we have to show for it are these little trinkets, when you turn them over they say ‘Made in China’…
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