Interesting Article on how people are becoming "ruthless defaulters".

[b4freedom]

You may find this article interesting. I do.

http://www.nytimes.com/2009/07/26/weekinreview/26streitfeld.html?_r=1&ref=business

I've been an advocate "ruthless defaulting" for years.

On a side note, I'd personally love to see all of America get up and default on their credit cards just so the credit card companies could die and go away forever.

[poundwise]

I'd love to see people take personal responsibility and pay the debts they agreed to pay except in certain extreme circumstances where it becomes all but impossible to do.

[disneysteve]

I'd love to see people take personal responsibility and pay the debts they agreed to pay except in certain extreme circumstances where it becomes all but impossible to do.

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.

[happygirl]

I agree with DisneySteve on this. I actually cannot stand the fact that people act as if it is unreasonable that the credit card companies expect to be repaid for the money that consumers borrowed from them via purchases made. While I think the interest rates being charged are exorbitant, people should not have entered into an agreement to accept a credit card if they didn't plan to repay the money they used from it along with the interest that comes from using plastic money.

I detest the entitlement attitude that is growing in this country. What ever happened to personal responsibility and accountability for one's choices?

[wincrasher]

I get a laugh when I see people say let the greedy banks and credit card companies go under. They really have no idea.

Credit is the life-blood of our economy. Without credit being repaid there is no money to loan to businesses to operate or expand. There is no money to pay a return on savings. Every income group is hurt by defaults.

The government intervention was a necessary evil. If banking would have collapsed we'd have seen a depression like no other in history. We would have dug a hole we'd never climb out of.

Our economy will flourish if people continue with healthy habits - spending for needs and reasonable wants and saving for the future. Extremes of frugality and reckless spending gets us into trouble.

It will take years for most families to dig out of their over-leveraged states. Hopefully some lessons have been learned.

[b4freedom]

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.

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.

[disneysteve]

b4freedom, everything you say about the system being unfair is true, but that still doesn't make it right for a person to borrow money and then decide not to repay it. That is theft, plain and simple. Whether you like the terms of the lender or not is irrelevant. You agreed to them when you borrowed the money (generic you - not you personally).

I totally agree that the lending industry needs to be revamped and much more tightly regulated, but the bottom line, for me, is that if you take out a loan, it is your legal responsibility to repay it to the best of your ability.

[wincrasher]

Well there is a price to pay for everything isn't there?

This "orgy" of borrowing fueled an unprecedented growth in the economy and created an enormous number of jobs. The problem was it was unsustainable and now we have to pay the piper.

It's our own fault, not the banks.

We expect huge returns on our investments, we expect our houses to go up in value every year, we expect high-paying jobs, cheap credit, cheap gas, cheap health care and college educations for our kids. And not to have to pay much in taxes.

Well guess what? We finished the meal and the bill is sitting on the table. Don't everyone grab for the check at once...

[am_vanquish]

Well there is a price to pay for everything isn't there?

This "orgy" of borrowing fueled an unprecedented growth in the economy and created an enormous number of jobs. The problem was it was unsustainable and now we have to pay the piper.

It's our own fault, not the banks.

We expect huge returns on our investments, we expect our houses to go up in value every year, we expect high-paying jobs, cheap credit, cheap gas, cheap health care and college educations for our kids. And not to have to pay much in taxes.

Well guess what? We finished the meal and the bill is sitting on the table. Don't everyone grab for the check at once...

I'm more than glad to pick up my portion of the bill. Problem is, I didn't order most of the stuff on that bill. Investment gains ... not yet. House values ... not yet. High-paying jobs ... I earned my salary in one of the toughest job markets ever. Cheap credit ... I carry no balances whatsoever. Cheap gas ... I'll pay that part of the bill. Cheap health care ... doesn't seem so cheap when I see it taken out of my paycheck every month. College education ... I paid my own way (WITHOUT student loans).

That's just YOUR list. I'd like to add on to it that I'm really not cool with paying my wages into a broken Social Security system that won't address it's problems & won't pay back what I'm paying in unless some serious changes are made. I'm also not down with the entitlement programs that my unemployed brother-in-law who has been mooching off of for the past year since he's been without a job for 11 months.

Please, by all means, pass me the bill. But I'm only paying for the food I ate.

To the original question, I side with DisneySteve. You agreed to the terms & conditions, now face the music to your fullest ability.

[Radiance]

This is the reason I refused numerous "temptations" to go into settlement with my credit card debt, true they elevated the interest rate to the roof, but I signed they could do that.
True there should be a law that says they can not start charging fees willy nilly. But until such law is in place, I signed a contract that says they had the right to do so.

One of the companies that contacted me was actually Christian based, which matches my believe system. Still and after over 5 different conversations I declined their offer in the bases on morality. True it is not moral and even a sin to charge interests (under the Christian faith). But I knew this when I took and use the credit cards. I just couldn’t get myself to just stop paying to settle later.

True when I separated it was a different ball game, didn’t realize the financial impact but months.
Now Therapy was a necessity I couldn’t afford, so I used the creditor’s money to get help.
Looking back I don’t regret that expense, to me it is like a medical expense. My mental health was at stake. But I do regret others. For other stuff I should have saved the money first and then buy.
Now I am paying back and plan to pay back in full, any bonus, any tax return has gone to pay those credit cards down.
I learned I am not to use credit, but to save the money first and then make the purchase. Better late than never.

[Thrif-t]

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

Who's fault is that? Not the credit card companies.

[disneysteve]

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

Who's fault is that? Not the credit card companies.

Exactly. The CC company did absolutely nothing wrong in that scenario. The fault lies 100% with the borrower who somehow thought it was a good idea to open a line of credit and charge up 80% of the line when the recommended limit for utilization is 30%. Then, the borrower greatly compounded the mistake by not repaying the balance before the promotional rate ended. Again, 100% the fault of the borrower, not the CC company.

[elessar78]

Morally and ethically, I think people should repay their debts. But on the other hand, like B4Freedom said, CC companies have been doing some sinister, deceitful things to their customer—so I just think what goes around comes around. Shame on the people for walking away, but haha to the CC companies.

[cptacek]

Siding with poundwise, disneysteve, et.al, here. Every dollar on that statement was either due to purchasing something, or interest or fees accrued that were in the contract you signed.

If you don't like credit card companies and don't want to give them money, don't use one.