There's Still a Way to Fight Back on the Bankruptcy Bill

[GiovanniC]

After the passage of a bankruptcy bill that is exceptionally unfair to those among us who find themselves in the financial hardship (often through no fault of their own), a lot of us are angry. Hell, I know I am.

We're talking about a hypocritical government that knows a thing or two about digging itself into an insurmountable debt:



But there's a way that you can fight back and stick it to the credit card companies that pushed this legislation. Credit card companies make exorbitant amounts of money from interest and fees on their credit cards: but you only pay that if you are in debt to them. I'm suggesting that we all get out of debt from the credit card companies and stay that way -- a solution that I realize is easier said than done.

In late 2001/early 2002, I went into bankruptcy due to a loss of job and tanking investments. So I know how valuable that safety valve is, and I know first-hand what some people are now going to lose as a result of this bill.

But I also learned financial discipline that has greatly helped me in the years since. And in this guide, I want to help you cut the cord between the credit card companies and yourself. I want to help you effectively boycott credit card companies (and those companies are among the toughest to boycott).

STEP ONE: Get rid of your credit cards. I realize this isn't always an easy thing to do. But it's necessary, and it's liberating. Remember: these are the motherfuckers who are preying on poor people and then getting legislation passed to anally rape said poor people with a splintery broom handle. They are the enemy. Cut those cards up and send the pieces back to the credit card companies with your next scheduled payment. You may still want to retain one credit card, though (we'll talk about that in a minute).

STEP TWO: Try to consolidate. Loan interest varies widely depending on the type of debt and the company and terms you negotiate. Some credit cards have interest rates around 25%, while other loans can have single digit interest rates. Paying off a $5000 credit card debt at 22% interest and $125 monthly payments will take 6 years and cost a total of $9000 (practically double the original debt!) Consolidating that debt into a loan at 12% interest will take two years and $2600 off that amount... not too shabby.

STEP THREE: Negotiate a lower rate. Particularly if you're a cardholder in good standing, credit card companies will often oblige a request to lower your interest rate if you just take the time to ask them. It's not a guaranteed shot, but it's certainly worth an ask. Often, credit card companies will lower your interest rate down to 11-12%, which will give you the same effect as the above example. (Make no mistake... they're still making a killing. You're not taking any food off their families.)

STEP FOUR: Get them to stop sending the offers. For some, getting offers from the credit card companies is too great a temptation to resist. Having the offers for more credit cards with great introductory rates sounds good at the time but usually ends up getting people into more trouble than they're worth. By calling 1-888-5-OPT-OUT, you can get those offers to stop coming. (It basically keeps companies from selling your info.) You can also do what many others have suggested, and send junk mail or other miscellany back to the credit card companies in their Business Reply envelope. This will eventually stop their assault on your mailbox as well.

STEP FIVE: Reduce temptation. If you have a credit card (and since some things like car rentals often require one, it's still a good idea to own one), the problem a lot of people have is with temptation. If I only use cash and I only have $20, I can't get tempted too much by something that costs $100 -- I just don't have it. But if I have a credit card, it allows me to afford things that I cannot actually afford. This is the problem some get into. Here's an idea that works for me. Get one of those large "disposable" Tupperware-style bowls (or even a large butter container or the like). The bigger the better (but still small enough to fit in your freezer). Fill it with water. Put your credit card into a small zip-lock bag, get all the air out of the bag, and seal it. Place the bag into the water, ensuring that it submerges fully. Freeze the bowl, locking your credit card into a block of ice. The next time you need to use your credit card, you'll be able to, but you'll have to thaw it out in your sink first. This will also give you a "cooling off period" to be sure that you truly want to make the purchase you're about to make (not just something really cool that came on Home Shopping Network).

STEP SIX: If possible, use a debit card instead. Many bank check/debit cards have the logo of Mastercard or Visa on them. If you HAVE to use something other than cash (on the Internets, for example), try to use these instead of a credit card. They have the same protections as a credit card, but you are spending money that you have, not money that you hope to have at a later date.

STEP SEVEN: Pay more than the minimum. The minimum payment is typically barely enough to cover interest. Banks give you this "minimum payment" to basically keep you in debt in perpetuity. Try to make at least double the minimum if you can at all afford it. If you can't afford it, try to find a way to afford it (selling fluids? j/k). If you still can't, at least put as much as possible at it. Paying down these debts has a much higher rate of return than most investments and much better than even the best savings plans.

STEP EIGHT: Attack the cards with the high interest first. Seems simple, and maybe goes without saying, but I'll say it anyway. If you have two credit cards, and one has a 22% interest rate and the other one has a 14% interest rate, throw everything you can afford at the 22% interest rate card and make only the minimum on the 14% interest rate card. It does not make mathematical sense to make more than the minimum on a 14% card when you are still carrying a balance on a 22% card. Take care of the high interest rate debts first, then work down.

STEP NINE: Use your savings. This sounds counter-intuitive, but it really isn't. It's silly to have $1000 sitting in a savings account earning 2% interest while you're paying off $2000 on a credit card charging 18% interest. Empty that piggy bank: paying off your credit cards pays a much higher dividend than does your savings account.

STEP TEN: Don't carry a balance. Once you get your cards paid off, you'll want to try to use credit cards as infrequently as possible, and only use them for charges that you can afford to pay now. But sometimes, there are benefits to using a credit card that WILL benefit you more than the card company. My mom has a Discover card with a 2% cashback incentive. This card can be paid in person at any Sears store. My mom will often buy something at Sears and then after charging it on her Discover card, she will then turn around and pay the Discover card off with cash. So she buys $100 worth of stuff with the card, then pays $100 in cash to pay the card off instantly, and Discover pays her $2 for the priveledge. This definitely adds up over time. Oh, and they absolutely HATE her for this, which just adds to the glee. She never carries a monthly balance which means she never pays a dime in interest or fees. Credit card companies call people like her "deadbeats", which is pretty comical when you think about it.



Now, this guide is by no means intended to be comprehensive, but it might help those who might be despairing over the recent bankruptcy laws and it also gives us a way to send a message to the credit card companies the only way they understand: take away the money.

[Disfronted]

1. I cannot agree more with a post

I cannot agree more with a post.

This is all something everyone should do whether the bill passes or not.

[Kazak]

2. Pay those suckers off, and...

never carry a balance again!!!

[FloridaPat]

3. It's stupid to use saving to pay cc unless you actually cut up the cc

after it's paid off. If you don't, you will use it to run up another balance. A lot of people refinianced their homes to do this and didn't cut up the cards.

[GiovanniC]

5. I Actually Recommend Cutting Up the Cards

BEFORE they are paid off, to prevent incurring new charges when the aim is to get it all paid off.

[FloridaPat]

8. Now I see what you were aiming at. This is all great advice, alone or

together. Together it is a great economic plan.

[Cuban_Liberal]

4. GREAT financial advice.

The temptation to live well on borrowed money can be enormous, but you will thank yourself for resisting it. In one way only, growing up in a less-than-affluent/comfortable home was a good thing--- I learned as an article of faith to pay cash or do without whenever I reasonably can. I am far from wealthy now, but everything I own in this world is MINE, with the exception of my home, which has a small (and shrinking) mortgage on it.

Please, do as the poster advises.

:)

[demwing]

6. Recommended For Greatest Page. Who will Second? /nt

[Media_Lies_Daily]

7. Step Eleven: Declare bankruptcy as soon as possible to take full....

...advantage of the current bankruptcy laws. Don't wait until it's too late and the new bill has become the law of the land.

[GiovanniC]

15. Well, For Those Who Think They Need To, Yes

But I think people should just cut themselves loose from the credit cards even if they're fully financially solvent. We can stop feeding that beast.

[Hamlette]

9. it's more than not carrying a balance

credit card companies charge the merchant on average 2% for each purchase. Everytime you use a credit card the credit card company makes money. If you want to starve the credit card company, don't make charges at all.

All good advice, btw.

The response of Americans to the new bankruptcy law should be to stop spending too much money which will totally screw the very groups that pushed for the new bankruptcy law. I love symetry.

[GiovanniC]

10. I Knew Merchants Were Charged

Just wasn't sure how much. In the example with my mom's Discover, then, it sounds like it's a wash for the credit card company, and essentially the cashback just comes from the merchant. But the card company doesn't make a dime on that, so it works out okay.

As for the rest, knowing that the card companies make money on the merchants too, I'd recommend not using them except when you pretty much have no choice. You often have to have a credit/debit card to book a flight, rent a car, make hotel reservations, buy online, etc. It's hard to cut the cord entirely without screwing yourself.

By the way... do you happen to know... if you have an ATM/Debit card, and the cashier asks you "Credit or Debit?", if you use it as a debit card, does that benefit the credit card company, or just your particular bank, or neither?

[dddem]

22. I have heard,

but I don't know if it's true (my bank doesn't charge a fee to use the debit card), that some banks charge you a fee like the one when you use an out-of network atm when you call the transcaction a debit instead of a credit. I would check with your bank - it could end up costing a bit of change for the convenience.

[Hamlette]

24. actually, Discover charges a higher percentage

I believe. It's why so many merchants won't take it.

Trust me, Discover is making a profit WITHOUT balances and interest.

[durablend]

11. #6 is DANGEROUS if you buy off the internet

REGARDLESS of what the bank will tell you. Which would you rather have--a fraudulent balance on the credit card that they'll remove if proven that it's bogus or your entire checking account balance wiped out that you'll have to fight tooth and nail to get back (while bouncing checks in the meantime)?

Another thing I forgot...if you're still running balances on more than one card, don't be in a huge rush to close them out one by one once you've paid one or more off as it'll make things WORSE. Your balance to available credit limit along all cards ratio will become WORSE, giving the other card(s) another excuse that they could jack you while you're trying to pay them off (which you DON'T want)

Truthfully if you've got the cards already, you're better off just leaving them open and not using them once they're paid off...freeze them in a block of ice like you said or if possible, stick them in a safe deposit with your bank OUT OF TOWN (so you don't have easy access to them). There's just too many things other than loan approvals (insurance rates, job approvals, etc.) that rely on credit scoring these days that you don't want to make it worse for yourself by causing your scores to tank.

[GiovanniC]

13. I Typically Only Buy From Trusted Merchants

But I did have a situation where I was (accidentally?) charged three times for the same fairly high-priced item. I went into my bank, filled out a form, and the situation was corrected. There were a couple of overdraft fees that went through before I realized what was going on, and they took care of that too. I suppose it's possible that your mileage may vary depending on your financial institution, but my experiences have not been bad.

[mcscajun]

19. Keep One Credit Card (with a LOW Credit Line) for Internet Purchases Only

That's what I was advised by an internet security expert in the banking industry. (I worked for 'the beast' for 32 years.)

Apply for and keep one card that is the only one you use for Internet purchases; if anything happens to compromise that card, you've 'firewalled' yourself from the total disaster that a compromise of your checking account or primary credit card could be.

I got "Blue" from American Express for that purpose; it never leaves the house.

[negativenihil]

12. Yes!

Awesome post!

[bear425]

14. another suggestion...

If you happen to be lucky enough to have, or come into, some extra money, negotiate a pay-off with the credit card company. Many are willing to settle for less pay-off, rather than nothing at all. Make sure that if they accept your offer, they agree to do so without a derogatory mention on your credit report.

[GiovanniC]

16. How Does This Work?

Have you done this before? I assume you're talking about coming into extra money by maybe a windfall or something, like an inheritance? Or am I wrong?

[bear425]

23. Yes, Giovanni.

A windfall, inheritance or maybe even a tax return are likely precursors to being able to pay off high credit card balances. While I personally have not done this, I knew a debt consolidator who recommended this route.

One would contact the credit card company and essentially make an offer, usually with a supervisor. Unfortunately, it doesn't usually work when the debtor has good credit. They must demonstrate that they are having difficulty paying and the alternative is bankruptcy.

[bleedingheart]

17. I had that happen with a hospital bill..

it wasn't even late but the hospital billing group called and told me that they would take 30% off the bill if I paid it right there and then....
I was shocked...never had that happen before.

[bleedingheart]

18. Learn the difference between Want and Need..

that leads to most people's credit card problems which are due to buying shit.

[mcscajun]

20. STEP FOUR: An alternative

Thanks for posting this whole thing, but especially for Step Four.

I called the number almost before I finished reading the paragraph; I got a voice-response unit that let me know I could complete the Opt Out online.

Here's the link: www.optoutprescreen.com

On that site, you can opt out for 5 years, or PERMANENTLY! Woo-Hoo! That's what I did.

The caveat is that you'll still get some offers indefinitely (from mailings that don't use the major credit bureau's lists), and you'll even get some of the offers for a few months until the lists get scrubbed.

I can't wait to see how my 'junk mail' drops, as I typically get 2-3 of these things in my mail EVERY DAY!

[amazona]

21. step 6 is incorrect and should be corrected

You in no way have the same protections with debit cards as with credit cards.

With a credit card, if your identity (or just the card) is lost or stolen, then you still have the money and you have the choice to inform the credit card company of the problem. You do not owe money for debts you did not incur, and eventually they'll straighten the problem out.

With debit cards, if your identity or the card is lost or stolen, your entire bank account can be wiped out, and while in theory the bank is supposed to replace your money since it was in their trust, in practice it can be many months before you get your money back.

Debit cards cannot be avoided if you travel overseas since they are your best route for getting euros and other foreign currency, but they are too risky to use for routine purchases unless you can tolerate being unable to get at your money for several months during a time of crisis.

I can't repeat this too strongly from my personal experience -- in a credit card dispute, YOU are in the position of power since you don't have to pay for wrong or fraudulent charges and in time the problem will be resolved in your favor if you insist on not being charged for fraudulent charges. In a debit card dispute, you are in a position of weakness. They have your money and they have no incentive to give it back. So you have to be willing to take legal action if necessary to force them to comply with the law. Meanwhile, you are out the money.

Replacing credit cards with debit cards is out of the frying pan and into the fire.

The conservation movement is a breeding ground of communists
and other subversives. We intend to clean them out,
even if it means rounding up every birdwatcher in the country.
--John Mitchell, US Attorney General 1969-72

[earth mom]

25. Another idea-Get rid of your checking account...

especially if you are living paycheck to paycheck and run the risk of bounced check fees. Pay cash, or with a money order. Also, spending in cash makes you think twice about what you are buying and spending your hard earned money on!

[amazona]

26. I hope this is satire

These days if you do not have a checking account of your own, there are fees to cash even your paycheck at "foreign" banks. In these days when bank accounts are giving you $$$ to open checking accounts, it seems crazy not to have one. It is a long time away from the days when you paid for a checking account -- the bank is paying you. Try Bank One, they have promotions all the time.

Also--Becoming known as one who pays cash and has a lot of cash on hand is a great way to get robbed. I've known of several people it happened to.

The conservation movement is a breeding ground of communists
and other subversives. We intend to clean them out,
even if it means rounding up every birdwatcher in the country.
--John Mitchell, US Attorney General 1969-72

[earth mom]

27. No, it's not satire, I'm serious...

if you've ever lived on the edge and paycheck to paycheck-you would understand what I'm talking about. Once you bounce one check, it can quickly become an out of control nightmare where several checks get bounced, resulting in a whooping negative checking account balance and no money for gas or groceries until next payday. Getting rid of a checking account is liberating and there are plenty of ways to cash a check and not pay "fees". If there's any "extra" money lying around-that's what savings accounts are for.