Unintended results of new bankruptcy law...hurts credit card co.'s

[AnnInLa]

http://clarkhoward.com/shownotes/index.html

Bankruptcy law scaring people in paying down debt

The credit card industry was patting itself on the back when the new bankruptcy law it has been pushing for finally got passed recently. But the banks and credit card companies may soon regret what they wished for. The new bankruptcy law has gotten so much publicity that people are scared and they’re paying down their credit card bills at an unprecedented rate. People are realizing that there is no second chance with this new law. If you borrow a lot of money, you’re going to have to pay it back now. And people don’t like paying money back, so they’re being more careful with credit. MBNA, for example, has already had a decline in profits of 94 percent. Capital One has also seen its outstanding balances decline. As a result, these companies are going to flood your mailbox with solicitations for cards. It’s a move of desperation, and you don’t want to get involved. So, keep paying down your debts and let the credit cards reap what they sow.

((Am SO glad that I cancelled my MBNA card! Take THAT MBNA!))

[Stephanie]

1. I just paid off the last bit of MBNA

Will cancel it as soon as the payment clears. Take that! And they really were the worst of the bunch, changing around my payment due date and then charging a late fee, "accidentally" changing my interest rate from 5% to 18% without notice or justification - they will never have me for a customer again.

[lenidog]

13. Chase Manhattan is even worse

They can bump your interest rate up with out telling you if you pay any of your bills late. That means if you pay you phone bill late once they can bump up your rate.

[LiberallyInclined]

42. "Abusing the system"

I think it was a chaqse manhatten exec who was once quoted as saying that the people who pay off their balance every month are "abusing the system"...i never saw my mother-in-law get so irate as when she heard that...

[leftofthedial]

2. As soon as I pay mine off

I'm cutting them all up

I'll never do business with an American credit card company again

[spinbaby]

4. Really?

What alternatives to American credit-card companies are there? What have you found?

[leftofthedial]

9. what alternatives do I need?

cards from banks in company with more responsible usury laws

[RebelOne]

6. You will only be cutting off your nose to spit your face.

You need at least one credit card. If you order online, it is safer to use a credit card. That way is you have a dispute, you can go through the credit card company. Do not use a debit card on Internet purchases.

And if you ever want to rent a car, you cannot without a credit card. Almost all car rental companies do not accept cash or debit cards.

[leftofthedial]

10. then Murka's rental car companies

just lost a customer too.

[flamin lib]

14. Yeah, and debit card transactions cannot be challenged.

Transfer is instantaneous.

Was laid off 5 years ago. Out of work for two years looking for a job that didn't exist. Started my own business and financed it the only way I could--credit cards. I now have $140,000 in plastic debt and after three years am finally making enough to begin paying it down. If every penny of profit goes into paydown it looks like 3-5 years.

All I can say is without credit cards I wouldn't have a house, a car, or a business. I hate the bastards, but they kept me alive.

[Pawel K]

34. debit card transactions can be chanllanged, in my bank at least

I have Bank of America.

[nonconformist]

39. If your debit card has a Visa or Master Card logo

It's protected from fraud in basically the same ways a traditional credit card is.

It's a pain in the ass, since the money comes out of your account and it could take awhile to get the money returned to you, but you can contest charges with most debit cards.

Plus, you can rent a car, hotel room or anything else you would need a regular credit card to do with a debit card. Shopping online might be more of a risk than you want with a debit (although I think it's as if not safer than using one in a brick and mortar store), but you can buy pre-paid cards if you're concerned and don't want to keep a credit card for online shopping.

Personally, I'd suggest keeping ONE major credit card with the best terms you can find and paying off the balance monthly or bi-monthly.

[lenidog]

15. I do use a debit card all the time

I just set up a account for it and thats all I use that account for. No needs a credit card for day to day life.

[MadHound]

22. You don't need a credit card friend.

I've lived my entire life without one, and haven't suffered. Gee, if I purchase something online, I send them a check. If I need to rent a car, there are companies that don't require a credit card, but do with a deposit instead. My credit rating is great, I've had no trouble getting a mortage, and I don't have to worry about interest rates, a lot less worry about ID theft, and I'm not feeding the beast.

The notion that one NEEDS a credit card is simply hype put out there by the banks and credit card companies. One can go through life perfectly well without one.

[area51]

25. credit card

But a credit card could come in handy if you need medical treatment. Need I remind you that we have extremly expensive/unaffordable medical treatment here in the U.S.

[MadHound]

27. Well, I suppose I'm fortunate that I have pretty good insurance

Through my work. My wife also has good insurance through her work. But even if that were not the case(and there have been times when it wasn't) I still wouldn't want a credit card. I would either borrow from friends, or a personal loan from a bank, or go without rather than start charging up a card. That is the number one way of falling into the bankruptcy trap.

Sorry, I just don't see the need for one.

[MadHound]

23. You don't need a credit card friend.

I've lived my entire life without one, and haven't suffered. Gee, if I purchase something online, I send them a check. If I need to rent a car, there are companies that don't require a credit card, but do with a deposit instead. My credit rating is great, I've had no trouble getting a mortage, and I don't have to worry about interest rates, a lot less worry about ID theft, and I'm not feeding the beast.

The notion that one NEEDS a credit card is simply hype put out there by the banks and credit card companies. One can go through life perfectly well without one.

[chalky]

26. Re: rental cars--actually, that's not true

I've been CC free for 5 years. A couple of years ago I had to rent a car while my hooptie was in for repairs. They accepted my debit card. They put a $200.00 up front charge on my account, but reimbursed my account for any funds not used when I returned the rental.

[tanyev]

3. HA-HA!

[TlalocW]

5. Hahahahahahaha!

Fantastic!

I'm currently paying mine off. My Discover is being paid off at a rate of $300 a month. I hope I'm one of them hurting the credit card companies.

TlalocW

[BattyDem]

7. I'm doing everything I can to pay off the cards I have.

I received about 10 credit card applications in the mail last week and I ripped them all up. I have a new rule: no more buying on credit unless it's an emergency, such as health issues, car trouble, etc. All online purchases will be paid for by check or check card.

I've spoken to several people who are also making every effort to pay off their credit cards and limit their spending to cash or check.

The bankruptcy law is about to turn around and bite the corporations in the ass! :evilgrin:

[flamin lib]

18. Don't rip them up! Compare interest rates and transfer high

rate balances to low rate cards. Keep moving money around until you have all your debt at 4-5%.

Use the enemy against himself! How sweet!

[BattyDem]

20. I've done that in the past

The rates offered on the new cards haven't been lower ... so far. ;-)

[TexasSissy]

8. It was actually a giveaway to the health care industry. And

they are smiling, indeed, since health care costs are one of the primary causes of filing bankruptcy, they are NOT discretionary, and they are no longer allowed to be included 100% in individual bankruptcies.

Let's see...first "he" adds millions to the non-health-care-covered group in America, and then he allows health care providers to pull the plug when the families can't pay....and now, he takes away any shelter from a family that is overwhelmed with medical bills from a disease. Pretty nifty trick, huh? And all in just a few short years. The health care providers are very, very happy.

And who will these things affect? Mainly the poor bozos who voted for *, ironically.

I can rest easy, though, that I didn't vote for him. Not my fault.

[Maclilly]

11. I filed last week

Screw Bush and these companies. We were in the right position at the right time. We have just enough equity to protect our home and our Corp business. We are getting rid of $139,000. I will never buy a car on payments again or get a credit card. I am out of the mainstream. After this election and this Bankruptcy law We give up. We are going to live for us and ours. Until Democrats start standing up for us I am out of the economy.

[HereSince1628]

12. Is that a typo...a 94% drop in profits?

While I'd love to see the usurious credit card companies put out of business that seems like too much of a drop to attribute to the bankruptcy bill.

[Stephanie]

21. That figure seems to be correct!

I love it!

---------------------

http://www.thestreet.com/_tscrss/stocks/banking/10219019.html

MBNA Hit by Customer Paydowns
By Matthew Goldstein
Senior Writer
4/21/2005 2:28 PM EDT

Shares of credit card giant MBNA (KRB:NYSE - commentary - research) were getting squeezed in Thursday trading, after the company announced a 94% decline in first-quarter profits and offered a dismal earnings outlook for the rest of the year.

The Delaware-based card company's stock plunged $3.70, or 16%, to $19.41.

***

MBNA said its earnings were "impacted by unexpectedly high payment volumes'' from its U.S. customers. The move by customers to pay down their credit card bills, particularly on high-interest-rate cards, reduced the dollar value of managed loans in MBNA's portfolios.

Card companies don't make as much money when customers either pay their bills on time or pay down their outstanding credit card debt.

The faster paydowns forced MBNA to revalue its interest-only strips, a type of security it uses as a hedge for its securitization business. The downward revaluation resulted in a $206 million loss in securitization activity, which is why MBNA reported an 8% decline in "other operating income'' compared to a year ago. In the quarter, other operating income totaled $1.78 billion.

[BigBearJohn]

16. I paid off ALL my credit cards and cut them up except for 1 (to rent cars)

[wakeme2008]

17. I am thinking it is the Whole economy thing got people scared.

People looking at their jobs and saying, maybe tomorrow I will be Outsourced, so they are playing down their CC so that if need be they could live on less money...

[annabanana]

19. A nice Big Fat Karmic Ass Munch for the CC Companies!

Good.

[Nordmadr]

24. I just paid off three of my four credit cards and cancelled them.

I feel truly liberated. The Capital One rep. even tried like hell to get me to not cancel the account. Right at the beginning of the conversation I said to him, "You are not going to convince me to keep this account open", yet he continued with his attempts anyway, stating, "Well, I am going to try, it's my job".

This was after being transferred from a person that was clearly not American and had their voice being paased through some sort of device that I am told actually reduces the accent for foreign English speaking customer service folks outside of the U.S. It gives the voice a distinctive robotic sound. Kind of freaky.

Guess credit card companies can't afford the $8.00 an hour they would have to pay workers in the U.S. They wouldn't be able to pay out millions of dollars in bonuses to management if they did.

What a time we live in. I guess at least it isn't boring. Unfortunately it is exciting for all the wrong kinds of reasons.

Olaf

[Walt Starr]

28. "Instant Karma's gonna get you..."

"Gonna knock you right on the head"

[Larkspur]

29. I just paid off one credit card and my last 2 will be paid off this

December. My Yuletide present to myself. When I thought my mother was moving in with me in 1997-8, I had to spend a lot of $ fixing up my new duplex for her. Unfortunately she died in Jan. 1998, and I was stuck with the credit card debt.

I'm using Debt Management service, Incharge, formerly Profina, to help me pay down my debt. They negotiate with the credit card companies to reduce your interest rate. After I'm done paying off my final credit card debts, if I decide to get a credit card, I may choose Bank of America. They were the only credit card company that reduced my interest rate to 0%. That was really nice of them. The others reduce their rates anywhere from 1-5%.

[northzax]

33. I did my own negotiating

and have 1% from MBNA and 0% from CitiBank. Chase isn't playing yet, unfortunately.

[Larkspur]

37. Chase is my worse one

They wouldn't go below 11%. After I got the 1 card paid off this month, I directed money from that CC account to my #1 target -- my Chase account. Bank of America I'll pay off last since I'm not paying any interest on it.

Good luck with your negotiating. Maybe you should set up a Debt Management company. You seem to be a tough negotiator.

[lateo]

30. I paid off all of mine this year.

When I got my tax return back I sent it to all of them and paid them off completely.

/que evil laugh...

[Yavin4]

31. Don't Use A Credit Card For Medical Expenses

If you're worried about medical expenses, just save more money, and if, God forbid, you do have a medical emergency which requires you to spend a lot of money, then work out a deal with the hospital. It's going to be a lot better for you financially if you do.

Using a CC will only make things worse and bring more stress into a stressful situation.

[aeolian]

32. my debts to CitiCorp should be paid off before the year is out

and man, does it feel good.

:evilgrin:

[Daphne08]

35. My husband paid off his two credit cards last month!

[donkeyotay]

36. Ha ha! I love unintended consequences

Poor little credit company has a 94% drop in profits! Ha! I use a credit card that I pay the balance on for convenience... but not any more. I'm actually changing back to using cash when I would have used the card for convenience. Why give them the cut when they've shown themselves to be so hostile to the welfare of the American people?

And, as someone here already pointed out, if I have a medical emergency, I'm not putting a cent of it on my card. The hospital and doctor will have to work out a payment plan or go after me directly and take the heat for directly bankrupting a working still over medical care. Care... hmmm. They should call it Health Don't Care.

[AzDar]

38. Hubby and I got ourselves in a real mess when I was pregnant in

2002...Put on TOTAL bedrest in my fourth month,hubby had to take an extended leave of absence with NO pay to take care of our 5-year-old as well as me (insurance wouldn't pay for a full- time nurse!)Paid for just about everything on credit cards...mortgage, food, medical.
We ran up some hellified bills and have been attempting to pay them off; but since Congress saw fit to pass this "reform", we are going to file chapter 7 before time runs out to do it.So essentially, the credit card companies unchecked greed in getting this legislation pushed through is forcing our hand, and now they WON'T get paid.

[nonconformist]

40. YAY!!!

This makes me smile to no end.

Watch though - not only will they get even MORE aggressive in their lending practices, but fees and interest will be on the rise to attempt to recoup their losses. Hopefully that will cause even more people to pay down their balances and use their cards less. HAHAHAHAHA.

Wow, 94% decrease in profits. Thousands donated to lobbyists to get this passed. Snubbed by consumers. Worth it? HA.

[Just Me]

41. PLUS, since folks can't start over they will be less likely to buy, buy,..

,...buy. They'll be holding on a bit longer to that car and avoid getting a second mortgage and slow down spending what they don't have. If ya' think about it, not only is the credit industry gonna hurt more, other industries will suffer a bit, as well.

[shanti]

43. yep, capital one here

i paid all of them last may (have one emergency card with no balance), but they DO flood my mailbox with offers about every other day now. they include those "checks" too, which i hate, cause they can be stolen from mailboxes. i shred ALL offers now.

i was going to use their postage paid envelopes to send junk back to them, but noticed a small disclaimer on the back that said that if the envelope was "tampered" with, you "could" be prosecuted. dunno if there are any teeth to that, but...:shrug: