Quote:
Originally Posted by disneysteve
My thoughts exactly. All this talk about "walking away" from a house or purposely defaulting on a credit card that you can afford to pay is insane. These people should be ashamed of themselves and, in my opinion, should be prosecuted for theft because that's what it amounts to. You borrowed money. You agreed to repay it. If you have the means to do so, you have a legal and moral obligation to do so. If you choose to blow it off, there should be serious consequences.
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At one point I would have agreed with you. However, I don’t anymore.
The rules of the game, the lending game, are rigged; particularly with credit cards. I think of credit card companies as nothing but criminal enterprises whose soul purpose is to persuade and seduce the poor and middle class into a trap of permanent financial slavery.
Credit is based on a credit score. What most people don’t realize is that you can do nothing and your credit can decrease or increase. To get your credit score, an algorithm compares you to millions of other people and then assigns you and those other millions of people to particular social groups. Those groups are then looked at for patterns of behavior to determine the likelihood that a particular group of people, based on certain behaviors, would default or fall behind on payments. Based on the outcome of the analysis, you’re assigned a score which is supposed to represent your level of risk. BUT, the problem is that in order to come up with that risk assessment you’re classified into a social group. If that social group begins to default, then your risk goes up and your credit score goes down. You can do nothing and your credit score can change. You’re just in the wrong group. How is that fair?
Now, one day you need something. Who cares what it is, you decide you need it. A credit card company offers you a deal at 0% for 1 year. They give you $5000 credit to buy the $4000 item. Sounds good, you sign up. A year goes buy and you’ve been paying the minimum amount. Now the rate resets to 9.99%. You decide that you don’t like that, but don’t have many other options so you increase your monthly payment. A few more months go buy and you’re paying down the balance. You only owe $2500 at this point. Then one day you get a notice that your credit limit was decreased because your credit dropped 25 points. The credit card company doesn’t know why it dropped, but it did and according to the terms they are allowed to change the terms anytime they want. So, your available credit drops to $2500. Next statement you owe an extra $35 over the credit limit fee (the interest put you over the limit) which causes your rate to jump to 24%.
And now, you’re in the trap. The cycle will continue because your available credit decreased your score goes down even more. You have to pay more interest which makes it harder to pay off principle. More fees start getting added. And the trap continues.
But the trap has grown into other areas of your life and force even more expenses onto you. For example, if your insurance policy is based on credit then your premiums start to go up. And forget about fabulous job opportunities because the employer sees you’re a deadbeat with deadbeat credit. I guess people with bad credit can’t work hard.
The problem isn’t that a few people are bad and fall behind. The problem is that MILLIONS of Americans have fallen into this trap. More Americans have probably fallen into this trap then haven’t. Pre-2007, how many frugal people were out there? Very few. You and I are/were in a minority. A laughed at minority.
The last 25 years has been nothing but a credit orgy. And the result of the credit orgy is an America with more debt then worth. We’re on the verge of bankruptcy: our governments, our corporations, and our people.
And what is the solution (so far) to putting a stop to this credit orgy? Giving banks making high risk loans (making bad decisions) billions of dollars in hopes that they will re-start the cycle of allowing customers to further extend their available credit (aka, make more bad decisions).
And who pays for this? You and me! We saved (and made good decisions) and now we have to pay for the repeatedly bad behaviors of the non-savers via increased taxes to pay for bailouts, via the loss of property values, and via the loss in value of our retirement and pension funds.
And the cycle will continue… …Until it collapses. …Until credit is no longer easy. …Until the financial slaves all walk away.
It might be selfish and immoral of those people to walk away but it’ll help put a stop to this ridiculous cycle of easy credit (and it’s the only way that they can gain any leverage with the banks and credit card companies).
It’s also very wrong for our government to take on a moral hazard by bailing out bad banks and not expect the people to respond in kind with their own moral hazard by walking away particularly when those bad banks continue to profit off of America's decline.