House Of Cards, Indeed

The story Renee told me might have curled my hair if I hadn't recently gotten a perm.

"My daughter's mother-in-law is hitting her up for money again. Can you believe it?"

"You're kidding? I thought the old chick inherited a huge wad when her mother died?"

"She did--about $300,000. Remember how she borrowed $1000 from Megan and Robby when they first got married? And how it was their wedding money, which they planned to use to remodel their bathroom?"

"Serena paid Megan and Robby back when her mom died, right?"

"Yeah, two years ago, but not before she made them feel horribly guilty every time they asked her to make at least a partial payment. So guess what? She's spent her way through 300 grand already, and is calling to borrow enough money to last her until her husband gets paid in five days..."

"Wait a minute. Isn't that why God made Pay Day Loans?"

Serena's husband makes around $80,000. They are empty-nesters, so I'm thinking 80 grand isn't too bad. What's bad is that the people they're hitting up--Renee's daughter and son-in-law--have three kids under age five, and make a combined income of less than $30,000.

"But what did she do with the money?" Curious minds and all that.

"They bought a camper trailer that they parked somewhere down in the Ozarks, but Serena doesn't like to drive down there to stay in it. They practically gutted their house to redecorate, but didn't pay off the house or even do any of the major repairs it needs. And they bought a $42,000 truck."

"Did they pay off their credit cards? Because wasn't that their biggest problem in the first place?"

"Before Serena's mother died, they had a jillion credit cards, all run up to the top. They weren't even making minimum payments. Nothing. When Serena got the loot, they caught up with all their minumum payments and stayed caught up until the money was gone. Now they have all the same credit cards, all back at the top, and they're not making any payments."

"But I still don't get it. Where did the rest of the money go? Serena is a recluse, so we know they didn't take any big trips. Heck, she won't even go to the Penney's Outlet Store. I figure there's still $150,000 unaccounted for..."

"Well, they've got all those spare bedrooms since the kids moved out, you know. Two of those rooms are filled floor to ceiling with all the stuff--still in boxes--that Serena buys on the Home Shopping Network. And the third room, that's her Avon room."

I'm picturing a desk and file cabinets and Avon brochures in little plastic bags ready to hang on her neighbors' doorknobs. Serena's never earned even a nickel, so starting a home-based venture would be huge for her.

"You mean she's started a business? She's an Avon Lady?"

"Oh, nooooo....." Renee said. "She's not selling it. She's just buying it. Megan says the room is so stuffed that Serena can barely open the door to wedge in one more lipstick."

Renee is rightfully worried that her daughter and son-in-law are going to get sucked in to perpetually bailing these people out. I'm always shocked when I hear stories like this one, which by the way is completely true except for the names. But it looks like inside of twelve months, millions of people will get the shock of a lifetime. I read this today at dollarstretcher.com and I'm just going to copy it here for simplicity's sake.

All I can say, folks, is please don't let this happen to you! If you don't have a real plan for getting out of credit card debt, now would be the time to get one. And no, I'm not selling anything! (Though I do know someone with a couple boatloads of Avon...)

A Storm Is Coming...
by Greg Moore
Credit card payment crisis looms

What would you do if your required minimum monthly payments on each of your credit cards doubled without your charging a cent more?

For example, suppose you owe $10,000 on a card and your required minimum payment is 2% of your balance or $200. What would you do if your required minimum payment ballooned to $400?

Reduce retirement savings? Increase the debt on your home? Decrease your standard of living? Panic?

Twelve months from now this will be a desperate reality for thousands of credit card holders making minimum payments. According to "Business Week," April 25 edition, a rule change by the Office of the Comptroller of the Currency first introduced in January of 2003 is now being strictly enforced, requiring credit-card companies to increase required minimum monthly payments over the next 12 months.

Today, typical required minimum monthly payments are 2% of the balance. Some credit-card companies require as little as 1% of the balance. In 12 months, typical required minimum monthly payments will double to 4% of the balance!

This rule change is an attempt to eliminate Black Holes, also called negative amortization, where payments don't cover at least the interest due. It's also an attempt to assure at least some of the principal is paid with each minimum credit card payment.

Although well intentioned, a noose is tightening...Inflation is accelerating...

"Soaring energy costs helped drive the U.S. Consumer Price Index up in March by 0.6 percent, the sharpest monthly gain since October." -- USA Today

...taking a bigger bite out of paychecks leaving little room to absorb payment increases.

Paychecks are getting smaller...

"Wages for average worker fell in 2004, after adjusting for inflation, first such drop in nearly decade." -- N.Y. Times

...so we can't count on bigger paychecks to make these payments.

If you think bankruptcy will provide some relief, think again. A new bankruptcy bill has been signed into law making it tougher for heavily indebted Americans to wipe out their obligations.

Look for a cascade of financial pain for many Americans about 12 months from now...

Credit card minimum payments increase, which leads to missed payments, creating late fees and higher interest rates, which decreases FICO score, triggering Universal Default clauses on other credit cards causing their interest rates to skyrocket, and more missed payments, and so on. And not even bankruptcy will guarantee escape.

The only guaranteed way to avoid this disaster is to start today with a systematic plan to pay off all debt, but especially your credit card debt, as fast as possible. Even paying off 1 or 2 cards will create some cushion to absorb increases 12 months from now.

The first warning shot was fired back in January 2003. You have a 12-month window of opportunity. Take it.
_____________________

Greg Moore is the Architect of the Wealth Building System, 'DebtIntoWealth -- Lessons from My Journey to Debt Freedom' providing knowledge, tools, and support to families seeking to escape conventional financial wisdom in order to save their financial lives. Visit http://www.debtintowealth.com/stretcher.html

Posted by Katy on 06/13/05 at 09:11 AM

Fallible Comments...

precisely why we don't have credit cards anymore (but i will confess..we are still dutifully paying back taxes :(...)
i love dollar strecher..lots of good advice there!

-----
Posted by lisa on 06/13/05 at 08:31 PM
This is scary stuff. Not so much that minimum payments are being raised, but that so many appear to have borrowed so much. And for what?

The 'charge it' mania started so many years ago, and it seems that so few have been taught what my dad called 'healthy living skills.'

Not sure if this is possible in the USA, but here in Finland banks offer a service where you can pay the CC bill off each month from your normal bank account - enjoying the 45 days or so free credit - but without being charged any interest or risking a late payment fees.

It required a huge change in attitude in spending for us. "Can we afford to buy this?" but it's not a bad rule of thumb.

Still my heart goes out to those caught up in the spending frenzy. A house full of Avon/MaryKay /tupperware is my idea of hell. But here you have to pay cash for those home purchases! Just as well :)
Posted by Lorna on 06/14/05 at 05:53 AM
If they haven't even been making minimum payment on the credit cards, why haven't they been sued? I didn't make minimum payments for three consecutive months and my credit card company terminated my card & put me on the central bank's blacklist! That frightened me enough to get me to start paying it all off but if I hadn't, I'm pretty sure I would've been sued.

It's hard to imagine parents like Serena & her husband when my parents are so frugal & responsible... I'm the spendthrift one in the family. But I'm getting better! (I hope)
Posted by irene on 06/14/05 at 11:19 AM
Thank you for a responsible and well researched blog post, Katy. You done good.
Posted by Paula on 06/14/05 at 08:10 PM

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Personal blog of christian writer & fallible mom Katy McKenna Raymond in Kansas City, Missouri Katy is represented by Greg Johnson at WordServe Literary Read more Katy at LateBoomer.net Follow Katy on Twitter Follow Katy on Facebook 123 Recent Posts Try Becoming Brenda Starr Off Beat Scattered That’s It So I’ve Finally Signed With An Agent. Now What? The Spoon Sciatica Sweetheart A Woman’s Train of Thought Has No Caboose However much we own, we are all still living on borrowed time After all, when restaurants shrink portions, they don’t shrink prices. As with everything in life, balance is key. Slow down, you move too fast… Yeah, I know. I have issues. Search Advanced Search Syndicate Login E me at katy @ ngenius.com	House Of Cards, Indeed The story Renee told me might have curled my hair if I hadn't recently gotten a perm. "My daughter's mother-in-law is hitting her up for money again. Can you believe it?" "You're kidding? I thought the old chick inherited a huge wad when her mother died?" "She did--about $300,000. Remember how she borrowed $1000 from Megan and Robby when they first got married? And how it was their wedding money, which they planned to use to remodel their bathroom?" "Serena paid Megan and Robby back when her mom died, right?" "Yeah, two years ago, but not before she made them feel horribly guilty every time they asked her to make at least a partial payment. So guess what? She's spent her way through 300 grand already, and is calling to borrow enough money to last her until her husband gets paid in five days..." "Wait a minute. Isn't that why God made Pay Day Loans?" Serena's husband makes around $80,000. They are empty-nesters, so I'm thinking 80 grand isn't too bad. What's bad is that the people they're hitting up--Renee's daughter and son-in-law--have three kids under age five, and make a combined income of less than $30,000. "But what did she do with the money?" Curious minds and all that. "They bought a camper trailer that they parked somewhere down in the Ozarks, but Serena doesn't like to drive down there to stay in it. They practically gutted their house to redecorate, but didn't pay off the house or even do any of the major repairs it needs. And they bought a $42,000 truck." "Did they pay off their credit cards? Because wasn't that their biggest problem in the first place?" "Before Serena's mother died, they had a jillion credit cards, all run up to the top. They weren't even making minimum payments. Nothing. When Serena got the loot, they caught up with all their minumum payments and stayed caught up until the money was gone. Now they have all the same credit cards, all back at the top, and they're not making any payments." "But I still don't get it. Where did the rest of the money go? Serena is a recluse, so we know they didn't take any big trips. Heck, she won't even go to the Penney's Outlet Store. I figure there's still $150,000 unaccounted for..." "Well, they've got all those spare bedrooms since the kids moved out, you know. Two of those rooms are filled floor to ceiling with all the stuff--still in boxes--that Serena buys on the Home Shopping Network. And the third room, that's her Avon room." I'm picturing a desk and file cabinets and Avon brochures in little plastic bags ready to hang on her neighbors' doorknobs. Serena's never earned even a nickel, so starting a home-based venture would be huge for her. "You mean she's started a business? She's an Avon Lady?" "Oh, nooooo....." Renee said. "She's not selling it. She's just buying it. Megan says the room is so stuffed that Serena can barely open the door to wedge in one more lipstick." Renee is rightfully worried that her daughter and son-in-law are going to get sucked in to perpetually bailing these people out. I'm always shocked when I hear stories like this one, which by the way is completely true except for the names. But it looks like inside of twelve months, millions of people will get the shock of a lifetime. I read this today at dollarstretcher.com and I'm just going to copy it here for simplicity's sake. All I can say, folks, is please don't let this happen to you! If you don't have a real plan for getting out of credit card debt, now would be the time to get one. And no, I'm not selling anything! (Though I do know someone with a couple boatloads of Avon...) A Storm Is Coming... by Greg Moore Credit card payment crisis looms What would you do if your required minimum monthly payments on each of your credit cards doubled without your charging a cent more? For example, suppose you owe $10,000 on a card and your required minimum payment is 2% of your balance or $200. What would you do if your required minimum payment ballooned to $400? Reduce retirement savings? Increase the debt on your home? Decrease your standard of living? Panic? Twelve months from now this will be a desperate reality for thousands of credit card holders making minimum payments. According to "Business Week," April 25 edition, a rule change by the Office of the Comptroller of the Currency first introduced in January of 2003 is now being strictly enforced, requiring credit-card companies to increase required minimum monthly payments over the next 12 months. Today, typical required minimum monthly payments are 2% of the balance. Some credit-card companies require as little as 1% of the balance. In 12 months, typical required minimum monthly payments will double to 4% of the balance! This rule change is an attempt to eliminate Black Holes, also called negative amortization, where payments don't cover at least the interest due. It's also an attempt to assure at least some of the principal is paid with each minimum credit card payment. Although well intentioned, a noose is tightening...Inflation is accelerating... "Soaring energy costs helped drive the U.S. Consumer Price Index up in March by 0.6 percent, the sharpest monthly gain since October." -- USA Today ...taking a bigger bite out of paychecks leaving little room to absorb payment increases. Paychecks are getting smaller... "Wages for average worker fell in 2004, after adjusting for inflation, first such drop in nearly decade." -- N.Y. Times ...so we can't count on bigger paychecks to make these payments. If you think bankruptcy will provide some relief, think again. A new bankruptcy bill has been signed into law making it tougher for heavily indebted Americans to wipe out their obligations. Look for a cascade of financial pain for many Americans about 12 months from now... Credit card minimum payments increase, which leads to missed payments, creating late fees and higher interest rates, which decreases FICO score, triggering Universal Default clauses on other credit cards causing their interest rates to skyrocket, and more missed payments, and so on. And not even bankruptcy will guarantee escape. The only guaranteed way to avoid this disaster is to start today with a systematic plan to pay off all debt, but especially your credit card debt, as fast as possible. Even paying off 1 or 2 cards will create some cushion to absorb increases 12 months from now. The first warning shot was fired back in January 2003. You have a 12-month window of opportunity. Take it. _____________________ Greg Moore is the Architect of the Wealth Building System, 'DebtIntoWealth -- Lessons from My Journey to Debt Freedom' providing knowledge, tools, and support to families seeking to escape conventional financial wisdom in order to save their financial lives. Visit http://www.debtintowealth.com/stretcher.html Posted by Katy on 06/13/05 at 09:11 AM Fallible Comments... precisely why we don't have credit cards anymore (but i will confess..we are still dutifully paying back taxes :(...) i love dollar strecher..lots of good advice there! ----- Posted by lisa on 06/13/05 at 08:31 PM This is scary stuff. Not so much that minimum payments are being raised, but that so many appear to have borrowed so much. And for what? The 'charge it' mania started so many years ago, and it seems that so few have been taught what my dad called 'healthy living skills.' Not sure if this is possible in the USA, but here in Finland banks offer a service where you can pay the CC bill off each month from your normal bank account - enjoying the 45 days or so free credit - but without being charged any interest or risking a late payment fees. It required a huge change in attitude in spending for us. "Can we afford to buy this?" but it's not a bad rule of thumb. Still my heart goes out to those caught up in the spending frenzy. A house full of Avon/MaryKay /tupperware is my idea of hell. But here you have to pay cash for those home purchases! Just as well :) Posted by Lorna on 06/14/05 at 05:53 AM If they haven't even been making minimum payment on the credit cards, why haven't they been sued? I didn't make minimum payments for three consecutive months and my credit card company terminated my card & put me on the central bank's blacklist! That frightened me enough to get me to start paying it all off but if I hadn't, I'm pretty sure I would've been sued. It's hard to imagine parents like Serena & her husband when my parents are so frugal & responsible... I'm the spendthrift one in the family. But I'm getting better! (I hope) Posted by irene on 06/14/05 at 11:19 AM Thank you for a responsible and well researched blog post, Katy. You done good. Posted by Paula on 06/14/05 at 08:10 PM Page 1 of 1 pages Commenting is not available in this weblog entry. Next entry: Thanks For The Meme-Story... Previous entry: Honest To Mom << Back to main


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Personal blog of christianwriter & fallible momKaty McKenna Raymondin Kansas City, Missouri

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House Of Cards, Indeed

Personal blog of christian
writer & fallible mom
Katy McKenna Raymond
in Kansas City, Missouri