In Defense Of Credit Card Companies

A closer look at creditOver the past several weeks there have been numerous reports slamming credit card companies for their alleged shady policies and practices. I’ve even seen where certain individuals are leading a “debtor’s revolt” against the credit card companies to “send them a message”.

Ira Rheingold, director of the National Association of Consumer Advocates, has said, “Banks have done really well figuring out ways to screw people without making themselves legally liable.” On some specific items I agree wholeheartedly with this statement. 

As someone that has worked in this industry for the past 15 years helping consumers resolve their excessive credit card debt, you might be expecting me to jump on the bandwagon and further villify the credit card companies. If so, I’m sorry to dissappoint you.

The reality is that the availability of credit cards does much more good than harm. Consider the following:

Convenience

I could go on and on with more examples, but you get the point. Credit cards absolutely do make modern living very convenient. 

Commerce

So, yeah, credit cards definitely do help keep the economy moving.

THE REAL REASON WHY MANY PEOPLE ARE MAD AT CREDIT CARD COMPANIES

There is definitely room for improvement at many credit card companies. I’m not disputing that. However, what I have found is that a lot of peoples’ anger and resentment is not really about the interest, late fees or overlimit fees. It goes deeper than that.

The real issue for a lot of people is that they are mad at themselves because they spent beyond their means, plain and simple. And they want to make the credit card company out to be the bad guy because they overspent. 

There, I said it.

Let’s remember that no one puts a gun to our head (in most cases) and forces us to make purchases with our credit card. It’s all voluntary. And if you pay off your bill in full each month you don’t incur any interest or fees. Not a penny. It’s actually a pretty good deal as long as you remain disciplined about your spending.

Yes, there are certainly situations where a person might have no other choice but to temporarily use their credit cards just to get by, such as paying for unexpected medical expenses or to buy groceries for their family while they are unemployed. That’s fine. I have no problem with that.

But you have to remember that credit cards are not monopoly money. Eventually you’re going to have to pay the money back, probably with some interest. I think any reasonable person understands and accepts this.

The problem I have is when people start making bogus excuses when it comes time to pay their bills. If you owe the money, you owe the money. It doesn’t matter if your debt was incurred from a 60-inch plasma TV (that you really didn’t need) or from basic living expenses just to survive, either way you owe the money. And if you can’t pay as originally intended, then you’re going to need to explore other options for resolving your debt.

IT’S OK TO BE MAD (JUST DON’T STAY MAD TOO LONG)

If you screwed up and spent too much, just admit it and accept responsibility.

I’ve screwed up financially. I have friends and family that have screwed up financially. I’ve had clients that have screwed up financially. It’s ok. It doesn’t mean you’re a bad person. It simply means you “miscalculated”. It happens. Move on.

What really matters, though, is how you respond to your financial mistakes. Are you going to be the “victim” and blame everyone else for what happened? Or are you going to accept responsibility for what happened and immediately begin taking corrective action to try and fix the problem? That’s what really matters.

focus on solutions

 

 

 

  

 

 

 Links to debtor’s revolt articles:

http://www.huffingtonpost.com/2009/09/14/debtors-revolt-woman-refu_n_285394.html

http://www.huffingtonpost.com/2010/01/04/ben-pavone-california-law_n_410630.html

Three Gems From Michael Moore’s 15-Point Action Plan

michael mooreLove him or hate him, there’s no denying that Michael Moore is not afraid to speak his mind and challenge the status quo. Although I don’t agree with all of his views, I’ve always admired Mr. Moore for having the courage to ask the tough questions and keep people accountable.

His latest movie, Capitalism: A Love Story, was released last month. On his website, Michael Moore says that the number one question he is constantly asked after people see his movie is, “”OK — so NOW what can I DO?!”

Mr. Moore responded with a 15-point action plan offering real-life solutions that normal everyday people can implement. Many of the solutions encourage people to be politically active, which is fine, but we won’t cover them here. However, 3 of his 15 points have to do with personal finance and personal responsibility, and I couldn’t agree with him more. Here they are:

To read Michael Moore’s entire 15-point action plan please click here

Beware Of Misleading Advertising From A Few Debt Settlement Firms

urgent envelope 1

 

 

 

 

 

 

 

During the past several months, a number of our clients have received very official-looking notices in the mail regarding credit card debt relief, possibly suggesting that there might be some government sponsored program to assist people with excessive credit card debt.

Upon reviewing these notices they turned out to be nothing more than cleverly disguised direct mail advertisements from debt settlement firms. They used terms like “National Council For … ” and “The Department Of … “, complete with an official-looking seal and a mailing address in Washington, DC. Some even resembled an IRS notice or a W-2 form.

Some made mention of “program eligibility” and others made reference to the “Government Economic Stimulus Act”. At the same time, however, nearly all of these direct mail pieces had a disclaimer in the fine print that indicated that they are “not affiliated with or endorsed by any government agency”.

For the record and to clear up any confusion, we are not aware of any government sponsored program to assist consumers with credit card debt relief.

An interesting question that has come up is …

“How did these firms find out that I was
even having any financial challenges at all?”

The most likely way is they purchased your name and address from one of the major credit reporting agencies (i.e. Equifax, Experian and TransUnion). It’s completely legal for them to do this. If you’re a little surprised that information about you is for sale, here are the links where you can confirm it for yourself:

Equifax  /  Experian  /  TransUnion

Note:  We actually called these companies and did a little mystery shopping and asked if we could purchase a mailing list for people having financial difficulty such as drop in credit score, late payment history, etc. They said, ”Yes, no problem.”  

Back To Basics

 

Last night was the season premiere of “24“. As usual, it was non-stop action while Jack Bauer eludes danger and saves the world from bad guys. But there was one particular minute last night that really struck a chord with me … one of the commercials.

It was a commercial from Allstate Insurance. The commercial reminded me of an article I wrote nearly a year ago. Here’s the link to the commercial >>  www.allstate.com/content/refresh-videos/AA_Back_To_Basics.wmv

Although the commercial is ultimately an advertisement for Allstate, they do a masterful job of communicating a much-needed reminder in these difficult economic times.

Nice job, Allstate.

Credit Card Bailout … Your Lucky Day?

During the past several weeks, one question that clients and prospective clients have been asking me every single day is, “What effect is the current financial crisis in the U.S. (as well as the rest of the world) going to have on my ability to obtain a settlement for less than full balance with my credit card company?”

My reply >> ”It’s probably not going to change much at all, at least for the foreseeable future.”

As I probe a little further and delve beneath the surface, what I believe many people are asking me in a roundabout way is …

1. Do you think that maybe my credit card company will go bankrupt like Lehman Brothers and I could get off not paying anything?

2. Do you think that maybe the banks are hurting so much for money right now that they would take just about anything they could get, and maybe I could lucky and settle my account in full for say $0.10 on the dollar?

3. Is there some provision in the recent $700 billion government bailout package that allows for credit card debt relief for consumers?

I wish I had better news for you, but unfortunately the answer to all three questions is no.

For the past decade I’ve witnessed peaks and valleys in the strength of our economy, although nothing like we’re presently going through, and the effect of a credit card company’s willingness to grant debt relief on outstanding balances has been negligible. Strange, but true. It’s stayed pretty consistent in good economic times and bad.

Certainly there have been periods where various credit card companies and collection agencies go through a temporary cash crunch, so they might temporarily loosen their settlement guidelines just to get some quick cash in the door. But the key word here is temporary. Remember, financial institutions are not in the business of permanently taking large losses.

What I continually tell people is that if you are having financial difficulties and you are seeking debt relief by attempting negotiated settlements with your credit card companies for less than full balance, you need to make that decision based upon how things are today regardless of what events may or may not happen in the future. If some massive bailout occurs in the future regarding credit card debt relief, that’ll be a bonus and you’ll certainly hear about it on the evening news.

If our global financial crisis worsens, things might change dramatically regarding credit card debt relief. But if things do dramatically get worse, I think we’re going to have more serious problems to deal with than outstanding credit card debt.

For now, though, it’s still business as usual with regard to credit card debt relief.

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