My Debt Blog

No not us, we’ve played that game and now we use our money. A story on CNN Money, Barely surviving by using their credit cards has really got my head hurting. This story is so biased and at no point blames consumers for their actions. Then I read this:

Government and agency statistics illustrate this troubling trend. The Federal Reserve reported Wednesday that Americans’ credit card debt jumped 6.7% in the first quarter of this year to $957.2 billion, This spike comes despite the fact that nearly one in three banks is tightening guidelines for credit cards.

The US is near $1,000,000,000,000 dollars in credit card debt. According to the story racking up credit card debt isn’t a choice people want to make. They had to run up their credit cards because the costs of their basic needs were going up. The reason they have to use their credit cards is because their lines of credit and home equity has been used up. At no point have they acknowledged the fact that they are living beyond their income and going deeper into debt. The great expert says that they can’t increase their income, but their expenses are going up.

Why does a weak housing market all the sudden create a financial problem so people have to use their credit cards? They drained the equity they were getting out of their house to fund their frivolous lifestyle. The system of not being able to tap their house for cash like an ATM has caused them to run to their credit cards. Now their balances are increasing to the point they cannot make the minimum payment. You will never get out of a hole by digging out the bottom.

The best line was at the very end:

“A lot of people will quit going out to dinner if they see their balances rise,” Hampel said. “This will hurt the economy.”

NO!

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I’ve seem some crazy news stories about fraud before, but nothing like this. A friend sent me a story on a convicted felon who spent $3.2 million in 3 months. So how did he do it?

When we buy things like cars or property, we need to prove our identity to do so. This guy used a copy of a driver’s license and social security card which was faxed in his dealings. He had started out small buying 4 trucks, ATVs for his toy hauler, then got daring and a Dodge Viper, finally houses and land all totaling $3.2 million.

This loser got caught when he tried to buy an ATV and business required original documents. He claims that his brother gave him permission to use his credentials to buy things. How low do you have to go to drive up this much debt on a family member? The brother refers to him as a “thief, crook and slime ball” which I would happen to agree with.

Sadly though this guy doesn’t feel he did anything wrong. He got eight years in prison and his brother has to clean up the mess on his credit report. This kind of thing is exactly why it is so important to have identity theft insurance and do annual checks on your credit reports.

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The mainstream news media never ceases to amaze me. Recently the New York Times published an interactive chart on their website, All of Inflation’s Little Parts which is a visual representation of consumer spending and inflation.

Below is the breakdown of what the average consumer will spend their income on annually. I took note on some of the areas that peaked my interest:

• Housing 42% It puts 2.4% for vacations in this category for some reason. Meanwhile home owners spend about 24% of their income on their home.
• Transportation 18% Gas prices are 5.2% of our annual income, which is up 26% so we’re only paying a quarter more for gas. If you break that down, it’s about $550 more a year on 40k income, that’s $45 more per month. There’s way too much hype and panic over gas prices.
• Food and beverages 15% Adding 2 categories together, this thing shows the average consumer blows 5.4% of their income on eating out! This might have something to do with the health care costs going up.
• Health care 6% The skew in this graph is that prescriptions are 1.5%, doctor and hospitals make up 2.6%, yet we only pay 0.5% to health insurance? Maybe I’m looking at it wrong but health care costs are something that needs to be taken seriously.
• Education/Communication 6% College costs up 6% which is near twice the average inflation rate. If my generation is Gen Debt from large student loans than what generation will my children be stuck in, Gen BK?
• Recreation 6% Cable makes up the largest single component of this area at 1.2%. The media obviously can’t report this to you because they need you to watch them lie to your face and work up your emotions.
• Apparel 4% This area is a bit sexist because the women’s categories are broken up into a few things, and men has about 5 or 6 categories. Both sides are 1-1.5% but they make it look like women spend more money in this section.
• Miscellaneous 3% Obviously tobacco products take up the largest slice of this area at 0.7% on the average consumer. If a person making 40k a year stopped smoking, they would have an extra $280 a year to save or invest. Again this could be related to the health care costs too.

Feel free to look at the chart and let me know what you find interesting.

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I had some sort of government consumer group agent come to my door this weekend wanting to see my gas bill. According to my gas bill I qualified for a rate lock on the amount I pay for each them of natural gas I use. So I won’t pay more than that if the price ever goes up. It got interesting when he got to the point of what he was really after. They also have this optional program where I could pay $4 a month to buy carbon credits to offset my carbon emissions. To me it does not make sense to pay more money to continue living the way I am and claiming the green title. I said “no” but it made me think about the other stuff.

Look at organic groceries in the stores. Why is it that the organic stuff always seems to cost more and is sold under a claim that it is better for you? If it is organic then it costs less to grow cheaper produce, why isn’t the savings passed along to the consumer? I think it is pretty bold to claim the green title by buying all organic food, you’re paying more of your resources and they make a greater profit in the end using the organic buzzword.

Along side the organic food, I see more and more ads for E-85 gas because it contains more ethanol. Ethanol comes from corn and can produce higher octane gas for most cars. The problem with this is it costs more to produce ethanol than regular unleaded gas refined from oil. Granted the price of oil is getting very high right now, and it cost more to drive anywhere period.

Global warming is not our fault or due to our carbon output. Carbon is a necessary element to life, and the greatest source of carbon emission comes from nature itself and it also creates more life. Climate change is cyclical and we have warming and cooling periods every 1,500 years. With that said this does not give someone the right to pollute the air or water just because they can.

So what am I doing by not buying into this scam? I recycle paper, metal, and plastic and don’t feel the slightest need to be paid for my efforts. I have found CFL light bulbs make a big difference in my electric bill, not because I’m doing anything for the planet. Grow your own produce in a garden if you’re able to. A company throwing the green theme and carbon buzzwords around is a pure marketing gimmick. Turn lights off in rooms you’re not in, don’t let the water run, and know that you are considering the planet and your wallet at the same time. Paying for carbon credits to offset your lifestyle is a total Ponzi scheme. Change your lifestyle and don’t expect your credit to be worth anything more than your big ego.

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There’s an article out there, “Ohio Man Tells Senate Panel About Confusing Credit Card Practices”, that I found interesting. Here’s the short version of this story:

An Ohio man whose $3,200 credit card debt mushroomed to $10,700 with interest and fees told his story Wednesday to senators who denounced the industry for confusing billing practices and shifting interest rates.

This guy charged himself a little over 3k on his credit card and now owes 3 times that amount. Credit card debt affects some of us in extreme cases, but what this guy did is beyond irresponsible.

Those from Citigroup Inc. and Chase Bank USA said their companies were eliminating some practices — including the one that hit Wesley Wannemacher of Lima, Ohio, with over-limit fees on his Chase card account 47 times although he went over his credit limit only three times…..The interest charges and fees on Wannemacher’s account more than tripled his debt despite his having made payments averaging $1,000 a year over six years, noted Sen. Carl Levin, D-Mich., the subcommittee’s chairman.

This guy made payments of 1k a month a year ago over six years, but was late 47 times and over limit 3 times. There isn’t much detail about whether or not he was just paying this account off or if he was continuing to use it. Taking two steps back and three steps forward does not pay down the account. The credit card company felt his pain though:

Richard Srednicki, the chief executive officer of Chase Card Services, apologized to Wannemacher in his testimony. “In this case, we simply blew it,” he said.

What was he using the credit card for and where did the fees come from?

Wannemacher used a new Chase card in 2001 and 2002 to pay for expenses mostly related to his wedding. He had $3,200 in purchases, interest charges of $4,900, 47 over-limit charges totaling $1,500, late fees of $1,100, for total charges of $10,700 as of February. He paid $6,300, leaving a $4,400 balance — which Chase agreed to waive after he contacted the subcommittee staff.

So half of the total is interest charges, part of it is over limit fees and part late fees. After paying on it for years and years Chase decided he paid enough and waives the balance? I wonder if I could call up one of my credit card companies and just ask them if they could waive my balance due because I paid them for a few years.

When credit cards are used, for whatever reason, you usually know you’re going to pay more for what you’re buying than if you had the money to buy it. Don’t have the money to buy it? Use credit and just pay more later, after all that’s the way people have to do it, right? I do think there are credit card companies out there that put so much in their fine print that if you trip up they will sock you with a world of hurt.

I have been late before paying a credit card online by an hour because they changed the time frame a payment can be processed in. They still took the payment but I got dinged with a late fee. Called the company up and got the late fee refunded, and figured things would be fine. One hour late even with having the refunded fee got me a penalty rate which I had to deal with for, get this, 13 consecutive months of payments! Now that it is a year ago I don’t have that lousy rate to deal with, so if I were to continue paying the same amount towards that card more money will pay the principle balance faster. I will eventually get it paid off, it just takes some time and higher payments.

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