Credit Card Debt: The Common Denominator

[NVMojo]

Credit Card Debt: The Common Denominator

If you carry a credit card and have a balance, you’ve probably learned first-hand that credit card companies are raising the monthly minimum payment required. The change stems from guidelines issued last year by the Office of the Currency of the Comptroller, one of the regulators of national banks and credit card companies. The new guidelines require credit card issuers to ensure the minimum monthly payment is high enough that it pays off some principal, not just finance charges and fees.

Before the rules changed, most card issuers had lowered their monthly minimum payment to just two percent of the balance. Essentially, this made it easier for borrowers to maintain high balances, while providing a rich gravy train of interest revenue for the lenders.

As an AP story noted yesterday, the hand-wringing on Wall Street over lost profits has already begun. Lehman Brothers analyst Jason Goldberg said that the new rules could cost JP Morgan and Citigroup each about $500 million in losses and lost revenue this year. Even if these companies lost revenues and profits, they’d still be remarkably successful and highly profitable businesses, something the article fails to mention. The reality is that the credit card industry is the leading profit engine of the banking industry, generating pre-tax earnings of over $30 billion annually.

more...

http://www.tompaine.com/articles/2006/03/13/credit_card_debt_the_common_denominator.php

[EST]

1. I carry five credit cards.

Other than monthly living expenses, food, heat, light, property taxes, gasoline, I owe nobody anything. We pay all cc charges in full every month. We manged to pay off the mortgage (by intensively doing without a lot of creature comforts a lot of folks consider essential) and have the pantry stocked with enough canned goods that, with careful rationing, we could live for about 5 or 6 months without going to the grocery store.
I do not intend to go into debt for anything again, ever.

[physioex]

4. Agreed....

Credit cards should only be used for things that you are able to pay for when the statement arrives. Maybe this is a good thing in the long run if it keeps people from running up debts.

[EST]

5. I have a sick feeling that, for far too many, the cure is worse

than the disease.

[Nye Bevan]

7. Good for you

I guessed that you were a midwesterner before clicking on your profile!

Your sensible attitude is very uncommon out East.

[rumpel]

2. I want to comment, but there is so much that happened over the past

few days peaking into today, I have to come down from the ceiling first.

If I bring myself to it I will post my experience, it is too fresh right now,

[physioex]

3. Sure...

It sounds interesting. But try and be brief....:)

[erpowers]

6. Problem Is

I think the real problem with credit cards is that credit card companies are allowed to give credit cards to the wrong people. Sometimes this can to a degree be a good thing. I think either credit card companies should have to stop giving credit cards to college student, especially if they do not have jobs, or they should have to give much smaller lines of credit and fewer cards to college students. I think much of the money made by credit card companies comes from college kids who are given seven or more cards with limits of $1,500 or more. I think for the poor kids the cards can help them to a degree; however, some of the kids can be tempted to go crazy and buy many things they do not need. Also, I contend credit card companies should not be allowed to give cards to people who have just filed bankruptcy. During the bankruptcy bill debate there was a news report that stated that a women who had just filed bankruptcy in order to get out of credit card debt was sent offers for more credit cards.

[Jeffersons Ghost]

8. Big business simply needs more funds to invest overseas

This credit card change mainly puts the squeeze on the middle class. I predict we'll see more measures that assist gigantic banking concerns, while lowering the living standard of most Americans.