We talked about this last fall. Credit card companies that abuse their authority, and make a huge negative impact to the consumer. American Express, Chase Cut Card Limits, how does this effect you? What can you expect in the future, and what can you do to stop this sort of abuse. All of these are valid questions, but the answers might shock you.
Let’s first visit the idea of what your credit card payments are going to be with this new “Terms of Service” that has been thrust on you. According to cardtrak.com 2008 ended with the average credit card balance per household at $10,728. Now this is an average rate, if the consumer has a 15k credit limit than American express wants to cut down the consumers limit down to $11,000. Now look at what kind of spot the consumer is in. If your balance is close to your limit your credit score will plunge quickly. With credit scores plunging, this will make it harder for the consumer to get future loans at lower rates. The FTC has a credit card calculator that we will use as an example:
You have entered a balance of $11,000 at 15.00%. We estimate that:
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$550 |
Estimated initial minimum payment |
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10 years |
Amount of time to pay off your balance, if you make no more charges and make only the minimum payment on time each month |
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$3,615 |
Interest charges you will pay in that amount of time |
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This is an estimate based on the information you provided and assumptions made about your account. The actual time and cost to pay off your balance by only making the minimum payment will depend on the terms of your account and future account activity.
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So, if you are well disciplined, and never have an emergency, the stars, and moons align, then you will be able to get out of this. If you are the average consumer, then this debt will be with you longer then 10 years.
The old adage that consumers are living beyond their means has never been so more obfuscated than it is now. Credit card companies are whole heatedly responsible for the demise in consumer credit scores, and consumer spending. Furthermore, does it make sense to punish consumers that are considered to be living beyond their means? Three years ago, anyone with a job could get a credit card with almost no restrictions, but as consumers eased their spending, conglomerates such as; Chase needed a way to maximize returns for investors.
So, what are the solutions? Write to your congress, and ask that all TALF funds be taken away from the credit card company that is abusing the Term of Service agreement initially agreed upon by you the card holder, and the lender.
Here are some good articles to cruise through
http://www.bloggingstocks.com/2008/12/21/its-not-tarp-its-talf-whats-that/
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