recreatingreality.com

This is an interesting piece I found in the New York Times.  Click the link for the full article.  Here are a few excerpts.  Please note this “email” is written by a banker.

As a banker, let me describe what we do wrong when we accept and review an application for a credit card. First, we don’t verify income. The first ‘C’ of credit: Capacity to repay, is completely ignored by the banks, just as it was in when they approved subprime mortgages. Then we ask for “household income” — as if other parties in the household could be held responsible for that debt. They cannot. And since we don’t ask for any proof of income, the customer can throw out any number they think will work for them. Then we ask if they rent or own and how much they pay. If their name is not on the mortgage, they can state zero. If they pay $1,000 in rent, they can say $500. (Years ago we asked for a copy of the lease to verify this number.) And finally, we don’t ask how much of a credit line the consumer is looking for. The banker can’t even put that amount into the system. There isn’t any place on the application for that information. We simply put unverified information into a mindless computer and the computer gets the person’s credit score and grants them the biggest line that score and income (ha!) qualifies for.

This message does not have to be gloom and doom, not if you are following a plan to eliminate your credit card debt.  I only emphasize the importance of this article because many of us are still living on the assumption that we are going to wake up one morning and life is going to be like it was in the late 1990’s.  That’s when we are found the wonders of using credit cards without responsibility.

The problem with continued spending beyond our means, not to mention the obvious, is that what can ruin one family can ruin several or masses of families and finally our nation.  We need to realize that the banks can be our friends but they (the banks) do not care if you or I go bankrupt as long as they make a profit.  Additionally, our government has done little to assist the consumer (you and me) as far as regulations go.

In the case of credit cards, the truth is that most of us do not spend responsibily because it is too easy to swipe the card and sign your name, never thinking about the balance due until the statement comes.  In fact, some of the people I have been working with had no idea of their total credit card debt.  One man, who was interested in getting a little guidance and motivation brought his bills over so I could help him with his budget.  I’m not a financial planner, but I (or you or anyone else) can sit down and see where your money goes and how much you have to spend.  Unfortunately, this gentleman had become so overwhelmed by debt that he had stopped making payments and stopped opening his credit card statements.

Imagine that!  Afraid to open the mail!  Three months of unopened bills had set him up for late fees, overlimit fees, and a minimum balance that he couldn’t pay. 

Please click the link above to read the full NYT’s piece.  Then, as always, have the courage to face the truth.  It may not set you free, but it will put you on the right path.

One remaining thought… some of us are going to come through this crisis with money in our pockets and no credit card debt.  Others are going to drown in the debt for years and years to come.  I suggest that I would prefer to be one of those who has money in the bank and no debt when times change… and they will.  Think of starting on a level playing field, fully able to take advantage of the great opportunities that will present themselves as the economy makes an upswing.  Or, you may be sitting on the sidelines… wishing.

Have the courage to face the truth.  Don’t wait because there is nothing to wait for.  Most of us are not going to win the lottery.  Most of us are going to need to work until retirement.  But, with proper positive planning you, too, can take advantage of the good times that are yet to come.  Be prepared for the good times.  Remember, luck is where opportunity and preparation meet.