Living With Credit Card Debt and Other Consumer Debt- A Society in Crisis

By Mike Killian, CardRatings.com Credit/Debt Management Reporter


How I love this job. It constantly allows interaction with the most informative, intelligent and influential people and materials. My newest assignment was no less an event as I was able to review an incredible report, Living With Debt. The work was commissioned by Lending Tree and authored by Dr. Robert D. Manning. Besides hosting his own site, Credit Card Nation, Dr Manning is the author of CREDIT CARD NATION: The Consequences of America's Addiction to Credit (Basic Books, 2000) and heads the Department of Finance at Rochester Institute of Technology.

I was able to interview Dr. Manning. He suggested that we have become a society of abundance, which dramatically reduces our ability to be motivated. Older generations dealt with the scarcities of the depression and World War II. It created within that generation a deep rooted desire to help their children and grandchildren to have a better life. And that generation succeeded to the point that our society wants for nothing today.

But there has been a price for this affluence and it is spelled out in the referenced study which every consumer should read. Its predictive message is not only powerful and insightful, but alarmingly accurate as it depicts the trends and values of 6 life stages: College Students, Singles, Young Families, Maturing Families, Empty Nesters, and Senior Citizens.

Some of the findings of the study include:

• Living with significant levels of debt has become an acceptable part of everyday life.


• Many people attribute their willingness to go into debt to a dramatic increase in spending on children and grandchildren.


• Attitudes toward home ownership have changed dramatically from simply providing shelter to becoming the perfect investment.


• Financial literacy, particularly about borrowing, credit and debt, is extremely lacking.

Dr Manning endorses the concept that credit is far more accessible today on multiple levels thanks to a multitude of financial products.

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"Financing a product today is more profitable than producing it."

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Dr. Manning also referenced the phrase credit crunch, stating that rising home values have temporarily distracted from our society's credit problems. In his study he states, "We are living with increasingly higher levels of debt, which has become an accepted and normal state of affairs."

Elsewhere in the report he poignantly claims that "much of the traditional social and cultural views of good debt versus bad debt have been influenced by mass marketing to Baby Boomers and their children and grandchildren, many of whom expect or feel pressured to pursue immediate gratification over traditional values like 'saving for a rainy day'".

The opposing forces of an increased "credit crunch" and our society's negative savings rate have led to a very strong potential for crisis. Just how far can the rubber band stretch?

Dr Manning feels very strongly that we need to empower ourselves by becoming more literate as to good debt versus bad debt. There are hundreds of financial products available today and we as consumers must educate ourselves about these products and discipline ourselves. We must become a more savvy financial consumer. We must also diversify our investments so that we do not depend on real estate as our only source of future wealth.

The commissioning agency, Lending Tree, offered a very appropriate summary of the strong need for financial literacy today:

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"Changes in the lending environment, coupled with changes in the bankruptcy law, means it has never been more important for Americans to develop their financial literacy skills."

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We welcome your comments about debt and investing issues in our popular credit forum!

Click here for the LendingTree Guide to Smart Borrowing.

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Mike Killian has been writing about credit and debt management issues that are of importance to consumers for over 8 years. He formerly served as the Guide to About's credit site, which was recognized by Forbes Magazine's "Best of the Web" for 5 of the last 6 years. Mike has also offered debt elimination seminars to businesses and community colleges for many years.

Mike offers free consumer advice on the CardRatings.com Credit Forum as well as on his own site, FreeMoneyTraining.com. While at his site, you can view additional articles as well as his schedule of upcoming seminars.

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CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

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Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online. Click here for more details about using our articles and thanks for your interest!

Rebate Credit Card Triples Rewards to New Members

By Lydia Verret, CardRatings.com Reporter

In an effort to attract new card members, Shell MasterCard is offering a limited time promotion to new cardholders. Through January 15, 2006, new approved card members will receive triple rebates on purchases made for the first sixty days from the account open date.

New card members will also earn triple rebates on the first $100 spent at Jiffy Lube per day and on Shell gas purchases. Since the normal rebate for Shell gas and Jiffy Lube purchases is 5%, the effective promotional rebate is 15%. To illustrate, at an average price of $2.35 per gallon of gasoline, new card holders will receive a rebate of $.35 (15% instead of 5%) when using their Shell MasterCard for gasoline purchases.

After the 60 day promotion period, Shell MasterCard cardholders receive the following ongoing benefits:

• A 5% rebate is earned on Shell gasoline purchased with the Shell MasterCard.


• A 5% rebate is earned on the first $100 spent at Jiffy Lube per day.


• A 1% rebate is earned on all other purchases made with the Shell MasterCard.


• No annual fee for the first year. After the first year, the annual fee is waived when nine or more Shell gasoline purchases are made with the card during the previous year.


• All rebates are automatically redeemed as a statement credit toward future Shell gasoline purchases made with the Shell MasterCard.

For more information about the Shell MasterCard, please visit the Card Reports section of CardRatings.com.

We welcome your comments about credit issues in our popular credit forum!

CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

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Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online. Click here for more details about using our articles and thanks for your interest!

Credit and Debt Myths Dispelled in Book by Consumer Advocate

By Mike Killian, CardRatings.com Credit/Debt Management Reporter



I had an opportunity to interview Steve Rhode about some myths he referenced in his co-authored book Get Out Of Debt. The book can be reviewed and ordered at MyVesta. This book is part of my desktop collection as I write and speaks volumes to folks about debt reduction and credit wisdom.

I took this occasion to ask Steve about 4 of the 20 financial myths he dispels in the beginning of his book. Each incorporates notions many within our society hold near and dear to their hearts, but which in reality are false.

For example myth 4 says, "All credit is bad." I asked Steve, "Realizing credit can be positive or negative, is today's economy forcing us to live more on credit than on real dollars?"

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"Absolutely. Today we are faced with the reality of either doing what is right for us from a strict personal finance point of view or doing what is best for our credit report by using credit. There are many positive aspects to using credit as long as you don't let it get out of control.

The very nature by which consumer societies operate worldwide does in a way force us to use credit. For example, on a recent trip abroad it was very easy to use my credit card no matter where I was, I did not need to exchange currency and all businesses are ready and prepared to accept a credit card for payment."

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Myth 8 offers: "My credit card company is taking advantage of me with 22% interest".

So I asked Steve, "Is it possible this is actually fact when a universal default is applied or the credit card company alters the agreement in some other way?" I thought Steve's response was very interesting.

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"Most people are unaware of the number of factors that go into determining the appropriate pricing of interest. The largest factor would be risk. If you exhibit high risk factors then you are going to pay more interest. Some sub-prime lenders also add a bump to the calculated rate, because they can."

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Myth 11 claims: "Credit card companies wouldn't send me applications unless I could afford it". I asked, "Realizing this is a foolish concept, would the same apply to convenience checks sent unsolicited to credit card holders?"

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"Absolutely. Any encouragement to borrow by a lender is at their best interest, not yours (pun intended!). You are the customer, i.e. the place where the business makes their money."

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Myth 13 reflects the thought process of many consumers: "Somewhere is a magical solution to my problems". I asked, "Bankruptcy has always been seen as a way out if things were really bad. How will the new bankruptcy law affect these options?" Steve's response was very clear.

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"The new bankruptcy law makes it more difficult for consumers to recover from difficult financial times. Rather than get a fresh start, consumers above the median income line may be forced to repay debt over a multi-year period and delay their ability to begin again. This will have a negative impact on the economy and the consumers emotional state."

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I concluded by asking Steve if he had anything else he would like our readers to know concerning credit myths.

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"Never assume. The financial world is like opposite land- you can't apply logic and common sense to what creditors do!"

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Applying logic and common sense to the credit industry may be a futile effort at times, but applying Steve's financial truths can help you avoid credit quagmires. :0)

We welcome your comments about credit issues in our popular credit forum!

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Mike Killian has been writing about credit and debt management issues that are of importance to consumers for over 8 years. He formerly served as the Guide to About's credit site, which was recognized by Forbes Magazine's "Best of the Web" for 5 of the last 6 years. Mike has also offered debt elimination seminars to businesses and community colleges for many years.

Mike offers free consumer advice on the CardRatings.com Credit Forum as well as on his own site, FreeMoneyTraining.com. While at his site, you can view additional articles as well as his schedule of upcoming seminars.

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CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

---

Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online. Click here for more details about using our articles and thanks for your interest!

Is the Controversial Credit Card Universal Default Clause Finally on the Way Out?

By Nancy Castleman, CardRatings.com Consumer Reporter




USA Today reported the other day that credit card issuers seem to be moving away from the practice of "universal default" -- where one late payment on a credit card or bill can raise the interest rate on a person's other credit cards -- as well as the cost of future mortgages, car loans, and insurance policies. (That's in addition to any fees that might have to be paid on the original late payment.)

The article sites four major lenders who are either not using universal default or are changing how they do use it: Citibank, Chase, Discover, and American Express.

While the end of universal default would be very welcome news to cardholders and consumer advocates everywhere, unfortunately, that may not be what's going on. For example, Linda Sherry, the Editorial Director of Consumer Action, the highly respected nonprofit advocacy organization, advises us not put too much stock in the notion that universal default is going away any time soon:

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"It's my sense that lenders are backing off from it. But I'd be amazed if they really stop using it. It's still a risk management tool they have a lot of confidence in."

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In fact, Consumer Action's annual credit card survey found that almost half of banks have universal default policies, where rate hikes can be triggered by more than just late payments. It might be because someone's credit score got worse for unrelated reasons, say a bounced check, too much debt or credit, going over the credit limit, and even shopping for a car loan or mortgage.

Change May Be in the Offing

There are some recent developments that give consumer advocates reason to hope that the practice of universal default can be curtailed. For example, there are at least three separate bills wending their way through the House and Senate that would prohibit universal default. Consumers who would like to see this practice outlawed should let their Senators and Representatives know now.

Interested? To contact your elected officials in Washington, click here, enter your zip code, hit enter, and you'll see all the contact information you will need, including the appropriate email addresses.

In the Meantime

Whether lenders change their universal default policies at all, and whether they do it voluntarily or due to legislation, there is no doubt that our credit reports and credit scores will continue to be used by lenders, employers, landlords, and insurers. To make sure you get the best possible outcomes when you are shopping for a credit card, mortgage, job, apartment, or insurance policy, heed this important advice from Consumer Action's Linda Sherry, whose number one tip is: pay your bills on time.

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"This is something that impacts consumers in a really really big way. Don't go on media reports that universal default is going away. All the risk management policies used by companies today include credit reports. Make sure yours is clean -- there may be some errors on it. Don't even allow your life to go into the direction in where your credit report gets tarnished -- it could really seriously hurt you."

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Linda sums it up well. Click here for more tips on what you can do to avoid interest rate hikes.

We welcome your comments about credit card issues in our popular credit forum!

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Nancy Castleman has spent 20+ years helping people get out of debt, save money, and live better on less. Along with her partner, Marc Eisenson, Nancy is known for her work on mortgage pre-payment, and for first explaining "credit card math" in her often acclaimed free e-letter, The Pocket Change Investor. Find it, along with many articles from back issues, special reports, link picks, and book reviews, on her Good Advice Press Web site. You can also see pictures of her 10,000 sq ft organic garden and her nine grandchildren!

But what she'd most like you to do is read about her book, Invest in Yourself(Wiley, 1998, 2001), which she wrote with Marc Eisenson and Gerri Detweiler. Nancy considers this book, which discusses how to invest your time, energy, and money to create the life you want, to be her life's work. Nancy's books have received rave reviews in leading national publications, including USA Today and Money Magazine.

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CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

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Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online. Click here for more details about using our articles and thanks for your interest!