Is The U.S. In A Recession?

While watching the evening news the past few weeks, there have been several stories about the “possibility” that the U.S. “might” be headed into a recession.

Might?

Yet today President Bush told reporters at a news conference that “I don’t think we’re headed into a recession”.  

Huh?

You don’t need to have graduated from the Harvard Business School to know that we already are in a recession. Maybe certain business leaders or people in the government don’t want to “scare” the American public by actually uttering the word r-r-r-recession.

But come on, give us a little credit here. We all know what’s going on. Things are not going that well financially for a lot of Americans right now. All you have to do is take a look around.

And you know what? As much as I hate to say it, I think it’s probably going to get worse before it gets better. You don’t just snap your fingers and halt a juggernaut overnight. It took years (perhaps a couple decades) for us to get to where we are right now, and I believe it’s going to take a few years or longer to get this thing turned around.

Sorry to sound like Mr. Doom-and-Gloom, but you can’t ignore the facts.

But in a strange way this cloud could have a silver lining. I actually think some good can come of these challenging financial times.

With all the financial pressure and uncertainty, we’re all eventually going to be forced to make some new choices that will require all of us to …

From a financial perspective, I believe each of us needs to reduce our debt burden and simultaneously consume less and less to break out of the cycle that traps us in financial servitude. As we do that, things will settle down, and we’ll start to experience freedom again by not having to work so many hours to support our prior spending habits … and we’ll probably conclude that we didn’t need half of the crap that we thought we needed anyway.

And maybe one day we’ll get back to the day where it’s socially acceptable to just sit on your back patio with your neighbors on a July evening and just listen to the baseball game … or play fetch with your dog … instead of checking your email 20 times a day from your iPhone.

No doubt it’ll take some courage to walk away from the illusion of excessive consumption, and consider the possibility that your quality of life will be just as good (or even better) without the burden of all the “stuff” you thought you needed.

OK, I think I’ll go take a nap now.   :-)

Credit Card Debt Statistics … The Numbers Might Surprise You

A few weeks ago I came across a fascinating article written by Associated Press writers, Rachel Konrad and Bob Porterfield titled, “Unpaid Credit Cards Bedevil Americans”. Here are a few highlights from their article that really caught my attention:

If you’d like to read the full article, here’s the link  >>  Unpaid Credit Cards Bedevil Americans

If you’re looking for additional information on credit card debt statistics, here’s another link that might be of interest to you  >>  Credit Card Debt Statistics

Credit Card Debt & Personal Responsibility

Earlier this month I wrote an article about the practice of certain credit card companies jacking up interest rates to astronomical levels even though the cardholder has never been late on their monthly payment. In case you missed that article, you can check it out by clicking here

There’s a related matter that I wanted to touch on briefly, and that is the topic of personal responsibility.

It’s true that I believe some credit card companies have policies that are unscrupulous or questionable. However, it’s important to keep in mind that the credit card companies are not forcing you or anyone to use a credit card. It’s all voluntary.

When a person racks up too much debt and creates a challenging financial situation for themselves it’s tempting to look for someone else to blame for their financial predicament, and often the easiest target to go after is the credit card company.

But remember, the credit card companies do not force their cardholders to:

Bottom line, we’re just talking about being personally responsible for your actions. If you can’t afford it, don’t buy it. Don’t worry about keeping up with the Jones. Let the Jones — not you – get the ulcers from worrying about how they’re going to pay for everything.

Now don’t get me wrong, I am not defending the credit card companies and some of their questionable policies and tactics. I believe there are some things they can definitely improve upon. 

And I’m not saying that all credit card purchases are reckless or frivolous, either. Unexpected events (like medical emergencies) do sometimes happen. All I’m saying is let’s not alter reality and place 100% of the blame on someone else when in fact we had a hand in creating the problem. That’s all I’m saying.

If you’re presently struggling with a lot of debt, I know what you’re going through. Been there, done that. Not fun. Most of have felt the financial pinch or maybe even an outright meltdown at some point in our lives. And yes, you’re going to have to address the situation sooner or later. But accepting responsibility for what has happened is almost always the first step toward resolving the matter.

If you’d like a little comic relief, check out this SNL video that pokes fun at credit card debt and personal responsibility >>  click here to watch the video

Credit Cards & Unfair Interest Rate Increases

In the past couple of weeks it’s been in the news that the U.S. Senate is looking into the practices of certain credit card companies. The 2 senators leading this latest investigation are Carl Levin of Michigan and Norm Coleman of Minnesota.

Specifically, they’re investigating the practice of credit card companies raising the interest rate on a cardholder even though that cardholder is paying on time. In other words, one month a person’s interest rate on an outstanding credit card debt might be something manageable like 10%, 12% or 14% then all of a sudden the interest rate jumps up to 25% or 30% even though that person never missed a payment.

Having worked in this industry for over a decade, here’s what I see going on. The credit card companies are constantly monitoring a cardholder’s credit score, the most popular of which is called a FICO score. The moment a person’s FICO score drops, the credit card companies pounce on that opportunity to raise the person’s interest rate.

The credit card company’s argument is that “because a person’s FICO score went down, that person now represents a greater credit risk to the credit card company, therefore they have to raise that person’s interest rate to compensate for the greater credit risk the cardholder now poses”.

If you ask me, I think it’s kind of a sleazy way to justify jacking up someone’s interest rate. But unfortunately this type of thing has been going on for a few years now.

But you might be asking, “How can a person’s credit score go down if they’re paying on time?” Easy. The payment history is only one component of a FICO score.

Another major component of a FICO score is the amount that you owe. So as a person starts to rack up more debt, their increased debt total alone can cause a FICO score to drop — even if that person continues to make their payments on time.

Yes, credit card companies are in business to make a profit and I have no problem with that. But I also believe that any reasonable person would agree that if you pay at least the minimum amount listed on your monthly statement, you are fulfilling your monthly obligation and your credit card company should not be allowed to use obsure “reasons” to justify interest rate hikes. That’s all we’re talking about here.

We’ll continue to follow this story and as soon as there are any further developments we’ll post them here for you.

For more information on topics discussed in this article, please visit the following links:

http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx

http://levin.senate.gov/newsroom/release.cfm?id=288169

http://www.msnbc.msn.com/id/22090817

Hoffman Brinker Roberts & The Drudge Report

While perusing The Drudge Report this morning, I see the following:

Interestingly enough, the Hoffman Brinker website had it’s busiest month ever in November 2007 as well. Admittedly, we did not have 455 million hits last month, but the traffic to our website has increased 408% in just the past 9 months alone!

I guess we must be doing something right.

 :-)

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