Double minimum credit card paym'ts

[ElectricSavant]

So the Banks must report their balance sheets differently and need the increased repayment of debt to carry all the new anticipated BK receivables on their books...

So what is your take on this, how will this effect the economy....xmas...next year...? Is the economy so resilient to aBSORB THIS?

Since CC debt is a large part of Consumer economy, how will Greenspan deal with this before he retires?

These are honest questions, I am not a doom and gloomer...I personally pay my CC debt in full at the end of each month, but I know many people do not and seem to be maxed out.

Michael B.

 

[empee]

to be honest, once again the government really messes things up. I live debt free myself, but I think what they've done is really unfair, changing the rules to debtors in the middle of the game (typical).

For example, if I charged up my card for medical expenses (most common reason for bankruptcy) or to go on vacation or whatever, if I figured you know what I can make the minimum payment but it will take me 40 years but I'm ok with that.. so I did it, then they pull out the rug and change the rules.

The idiots SHOULD have done it so that existing debt stays on the old schedule and it should be higher minimums on NEW debt, how is this remote fair to someone who said ok I can make the payment and now has to considering bankruptcy or lifestyle change because some politician says they dont like me paying off my debt slow?

Totally ridiculous, then they change the b/k laws just before this passes, on top of that this policy doesn't even make sense since we are counting on people to charge up to their gills and run 0% savings rate etcto keep the economy alive (or else we die) WHY would you make a policy like this, while at the same time we are printing money lowering inflation rates doing whatever to keep the economy afloat.

Doesn't even make sense , the right hand doesn't know what the left is doing.

Enough of my rant, but another typical case of B.S. from the government because they "know whats best" I suppose. It just makes me mad that someone somewhere is getting totally screwed when they made a fair deal and now they are changing the terms.

Its like buying a 30 year bond from the US government that pays interest x%, and 10 years into it the government says now it only pays y% (y<x), how can they change future cashflow of the American consumer arbitrarily?? I know supposedly this is good for the consumer becuase they will be out of debt faster but you can change the deal terms AFTER you agreed to something.

Anywayz..

 

[ElectricSavant]

empee,

The banks HAD TOO!

The BK's can't be written off, now!

They must maintain their balance sheet for stockholders and the FDIC so they can loan money and take in deposits.

This was a preemptive necessity!!! It was all tied together.

Michael B.

P.S. I predict there will be new accounting standards proposed for Banks...watch you will see...you heard it here on ET first..

 

[Schaefer]

Just this week they came out with a report that a lot of people were late on their credit card payments due to increase in gasoline prices. So how's doubling the monthly minimum credit card payment going to help people and the economy.

Okay, I get it now, it's not that people can't afford it, they're just too cheap and lazy to make the payments, so they are going to force them to make the payments, such a brilliant idea.

This will force a lot of people into bankruptcy; oh wait a minute, that's why they changed the bankruptcy laws. Either way, Uncle Sam's got your back, just don't drop the soap.

 

[QuoteBoy]

there will be a quick damaging reality check for the fringes (albeit that's a lot of people) and probably some bad fallout for them. Everyone who is credit card reliant and running balances who can actually make that doubled payment will be fine, b/c once that payment is made then it will free up a significant amount credit which will then get revolved again. For example instead of making the rent w/ a check, they just juggle the money so that they make the credit card payment w/ the rent check and then use the credit card to pay the rent.

 

[drsteph]

Quote from QuoteBoy:

there will be a quick damaging reality check for the fringes (albeit that's a lot of people) and probably some bad fallout for them. Everyone who is credit card reliant and running balances who can actually make that doubled payment will be fine, b/c once that payment is made then it will free up a significant amount credit which will then get revolved again. For example instead of making the rent w/ a check, they just juggle the money so that they make the credit card payment w/ the rent check and then use the credit card to pay the rent.

Xcept for the fact that these poor blokes who are stretched as it is have already 2X less disposable income due to hiked gas prices and now 2Y due to doubling of the credit card repayment rates. Expect discretionary consumer spending by the lower segment of the population of the US to fall. Why do you think that WMT broke through support at 43.75? No amount of juggling will change that.

 

[QuoteBoy]

Dr Steph - you are correct. the poor blokes are the "fringes".

the interesting thing is that many of those fringe people are not even "poor". they don't look, act , or spend "poor"
how many of the people who are truly on the fringes of the credit treadmill is what I'm afraid of.

Here is an example of this months change, using a stereotypical bad case: a maxed out person w/ 30,000 in cc , plus student loans, etc. and a 1,800 per month take home job (approx30/yr).
sound pretty bad right?(I know someone like this that I am helping w/ the change over) and this person looks perfectly normal, professional, educated, etc.
numbers are rough est.
old law:
30k in cc = 600/mo pmt. when month is done = 200 free credit line.

New law:
30k = 1200/mo payment. when month is done = 800 free credit line.

The advice to her just to deal w/ the situation = use credit for just about everything! from rent to gas to food, car payments, etc.. She really has no choice. This per se, won't necissarily run her cards up, she will revolve faster though and be mindful of the ongoing balance.
this person (and everyone else out there who can) need only juggle and change payment habits once in order to get through the revolving door. this might actually work out to be a good thing for her, b/c she has now become commited to understanding the credit cards and has a better way to keep track of where the money is going. Additionally this person is going to WMT more rather than Malls and Expensive Grocery stores. she is shopping for discounts and doing 2-for-1 frozen dinner deals instead of the being blind in the shopping process. All in all she is becoming a savy consumer b/c the credit card is a now a very uncomfortable size payment.

Its pretty fair to say, the kind of person running big cc balances really wasn't going to pay it off over twenty years under current rules, and does NOT have to pay it off over 10 years under new rules they can just keep turning the debt over.

"The quick and damaging reality" will be for the people who don't change quickly or are in much more over their head than my example above(which is pretty bad!). Again, I'm afraid of that shake out, its total BS like when they made credit card interest not tax deductible, - yup anyone recall it used to be deductible?! before my time though.

For many they will simly be using credit cards more, for all the things they might normally use cash. example- small lunches, telephone bills, energy bills, rent, bar tabs, etc. these revolving credit users will simply revolve the credit faster.