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I keep hearing that the reason our economy is tanking can be laid at the feet of a credit crunch. Credit has dried up, and because credit has dried up, nobody can get the money to do anything.

Today I was in Meijers (a chain store like Wal-Mart, but much smaller) just to pick up a couple of things. I was pushing a cart down the main aisle when, without warning, this little old lady quite literally lunged out of a side aisle and draped herself across the the front of my cart. She looked up at me with her frail old eyes through those thick bifocals, and pleaded with me in a quavering voice, "Is there any way that I could persuade you to fill out an application for a store credit card?"

What was I supposed to do? I took the clipboard and filled out the application while this snow-haired Granny stood and beamed at me. After I was done she cheerfully whipped out a coupon and told me that just for filling it out I was entitled to my choice of several different freebies. I picked a twelve pack of Pepsi and went to collect my plunder.

After grabbing the Pepsi I headed for the checkout by the most direct route - straight through the hardware, sporting goods, and electronic sections. I was looking at some CDs when I heard my name being paged. I ambled up front wondering what gives? Grannyperson was standing out in front of the service desk dancing with glee. She gave me a machine gun fast spiel that left my head spinning and handed me a fistful of paper. Next thing I knew I found myself in the checkout line clutching a brochure and an approval form for a new platinum MasterCard.

Gee. That's all I need. More plastic. Credit was what destroyed my ass last time. It ain't gonna happen this time. Right now I have exactly $0.00 in unsecured credit debt, and that is the way I wish to keep it. But I can't help wondering if credit is so tight why are they tackling people like me, poverty stricken retirees on a fixed income, and practically blackmailing us into accepting more credit cards?

Did you get her name? Maybe she's a "community organizer" called Fannie Mae who managed to get hold of some of Paulson's and Bernanke's $700 billion as security?

Hmm. I don't even have a credit card... I have a debit card... not that I even know the difference

Kevin Thomas Riley wrote:Did you get her name? Maybe she's a "community organizer" called Fannie Mae who managed to get hold of some of Paulson's and Bernanke's $700 billion as security?

Bernanke, is that the bold minister of Treasury? I always have to think of Ferengi's when I see him.. (sorry Benanke!) Any way, I hate credit cards. We had one and I had the feeling we were more money back then it was helping us. So as soon as possible we payed our debt and chancelled the card. Nixed every attempt to get one again. I am happy credit card free person!

^ Henry Paulson is the Treasury Secretary and Ben Bernanke is the chairman of the Federal Reserve.

Kevin Thomas Riley wrote:^ Henry Paulson is the Treasury Secretary and Ben Bernanke is the chairman of the Federal Reserve.

Sorry, my mistake, got them mix up...

TPoptarts wrote:Hmm. I don't even have a credit card... I have a debit card... not that I even know the difference

A debit card takes money you already have directly from your bank account. Credit cards are unsecured debt offered by companies/banks at, usually, high interest rates. So when you make a purchase with your debit card, you are doing so with your money, and the product is immediately paid for. When you make a purchase with a credit card, you are doing so with someone else's money, and there is a cost associated with doing so in that later you pay back the credit card company/bank the value of the purchase plus interest fees.

blacknblue wrote:I keep hearing that the reason our economy is tanking can be laid at the feet of a credit crunch. Credit has dried up, and because credit has dried up, nobody can get the money to do anything.

This is a common misconception. The "tanking" economy can mostly be blamed on the "credit crunch" but not because it has "dried up." The credit crunch was the result of poor choices and making poor loans. The economic situation was also exacerbated by the fluctuating stock market (which reacted to the credit crisis). It has become a viscious cycle. Credit has not "dried up." The only way to turn the credit crisis around is to get people to borrow money. In order for this to happen, it has to be more palitable for the banks. This is the reason the Fed and world banking centers slashed the interest rates a couple weeks ago. Lending money is the only way banks make money. And if banks don't start making money, the credit crisis will continue.

Speaking as someone who just spent a year writing ad copy for Visa, the credit card business is highly profitable -- even more so now, because congress (under Republican control) made it much harder for people to declare bankruptcy and have those debts wiped out. Banks argued this would allow them to charge lower interest rates on credit cards. Instead, those interest rates went higher than ever. They make their best money, of course, on people who carry a balance, but they also make money off the merchant with every single transaction.

Credit cards can be very useful, and a lot safer than cash, especially while traveling, but you really should pay off your balance every single month. Otherwise, having them is like playing financial Russian roulette. They can jack up your rates at any time to truly obscene levels for no reason at all, and you're on the hook. Personally, I think we need much better usury laws in this country.

^ But what if they have more money in their bank account than they spend with the credit card(s)?

Why would you pay 14.9% interest or more (for most people) to carry a balance on a credit card, if you have enough money in the bank to simply pay for something and be done with it, without incurring any interest charges? Sometimes people might have no choice -- say the furnace goes and there ISN'T enough money in the bank to buy a new one, or (in a very common cause of bankruptcy in this country) a health crisis drains all their resources. But if they're using that credit card to buy crap they don't REALLY need like new electronics or vacations or gifts or fancy meals out or whatever their personal weakness happens to be, AND they're racking up high balances in the process, they're just begging for financial disaster.

Believe me, I speak feelingly for reasons I probably shouldn't get into as a still-married person....

Alelou wrote:Why would you pay 14.9% interest or more (for most people) to carry a balance on a credit card, if you have enough money in the bank to simply pay for something and be done with it, without incurring any interest charges? Sometimes people might have no choice -- say the furnace goes and there ISN'T enough money in the bank to buy a new one, or (in a very common cause of bankruptcy in this country) a health crisis drains all their resources. But if they're using that credit card to buy crap they don't REALLY need like new electronics or vacations or gifts or fancy meals out or whatever their personal weakness happens to be, AND they're racking up high balances in the process, they're just begging for financial disaster.

Damn skippy.

Just pay 'em off. I've never paid interest on a credit card balalnce in my life. My husband and I have several for convenience's sake, but they're not an excuse to live beyond your means. You should never buy something you don't have money in your account to cover unless we're talking about a large ticket item that's almost always financed, like a car or a house. People who have trouble doing that really should get rid of the credit cards. And yes, I know emergencies can occur and there are exceptions, but making too many exceptions just gets you in trouble.

Wait... so like even if you got more money in the bank than you spend with a credit card you're still in "debt" if you use the credit card?? That you have to "pay off" with the money you got in the bank?? Like isn't it supposed to pay itself off or whatever?? It doesn't make any sense

Sorry I'm new to all this

TPoptarts wrote:Wait... so like even if you got more money in the bank than you spend with a credit card you're still in "debt" if you use the credit card?? That you have to "pay off" with the money you got in the bank?? Like isn't it supposed to pay itself off or whatever?? It doesn't make any sense

Sorry I'm new to all this

With a credit card, you are not using your money. So anything you buy with it, you have to pay for later. It is a bill. Like all bills, you have to pay them off. Nothing pays itself off. That's like thinking you get stuff for free.

No I didn't mean like for free, I meant like doesn't the money in the bank account pay it off... or something uh but like why would I wanna use someone else's money if I got my own, and then I'm gonna have to pay them more than I'd have to pay if I used my own money?? It still doesn't make sense