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Wednesday, November 24, 2004 9:17:35 PM
Frontline: The Secret History of the Credit Card
Last night's Frontline had an episode on Credit Cards.
Of interest was the fact that 140M Americans use credit cards, that 90M carry a monthly balance, and that 50M, like me, are considered deadbeats because we pay off the balance each month.
The companies rely on things like your FICO score (how likely you are to pay off your balance) and the credit services - which provide the details on what you are or are not paying off. Say you have a credit card at "Nickel&DimersBankofCanada" and you miss a car or mortgage payment -- or even if you missed a credit payment 4 years ago at a different bank, out of no where Nickel&Dimers can flip your low single digit rate into a high double digit rate - literally anytime they want.
But what struck me the most was a round table of about 5 typical card users. Their statements absolutely baffled me. The common theme was - even though they have enough to pay off their balance, they feel more comfortable to pay down the minimum amounts - just so they keep their nest egg secure. Of course stupid talk since they are eating at that very nest egg with monthly charges. All of them agree "gotta have the ipod.. or that dress.. or .. or.." over paying their debt down.
A question came up - "why don't the banks show on the bills if you pay the minimum payment it will tax X years and Y months to pay it off."
The industry insiders basically laughed by saying "that piece of information would be useless and always a changing number - and not everyone pays the absolute minimum each and every month.
The same stupid people at the table said "Sure.. that would be good to know.. it probably would give me more of an incentive in paying it off".
WTF?? Like they can't see that paying a minimum balance and accumulating 20% interest each and every month isn't a good thing?
One of the consultants to the card company was the one that suggested "lower the minimum" from 5% to 2-2.5%.. that will encourage people to adopt the cards and people will pay that lower minimum and carry the balances longer.
One family - wife and husband both lost their job - after years of paying off their cards; they missed a payment and their rates took off - they ended up carrying an $80,000 debt across 10 cards before going bankrupt.
Finally the average American household is carrying a CC balance of $7500 to 8000..
Check out: http://www.pbs.org/wgbh/pages/frontline/shows/credit/
Plus 8 thangs a CC user should know..
Even Benny Stein is in this.. has about 2-3" of cards in his wallet - uses all of them - loves the frequent miles, and as he puts it "the banks don't make a dime off of me..."
B
Last night's Frontline had an episode on Credit Cards.
Of interest was the fact that 140M Americans use credit cards, that 90M carry a monthly balance, and that 50M, like me, are considered deadbeats because we pay off the balance each month.
The companies rely on things like your FICO score (how likely you are to pay off your balance) and the credit services - which provide the details on what you are or are not paying off. Say you have a credit card at "Nickel&DimersBankofCanada" and you miss a car or mortgage payment -- or even if you missed a credit payment 4 years ago at a different bank, out of no where Nickel&Dimers can flip your low single digit rate into a high double digit rate - literally anytime they want.
But what struck me the most was a round table of about 5 typical card users. Their statements absolutely baffled me. The common theme was - even though they have enough to pay off their balance, they feel more comfortable to pay down the minimum amounts - just so they keep their nest egg secure. Of course stupid talk since they are eating at that very nest egg with monthly charges. All of them agree "gotta have the ipod.. or that dress.. or .. or.." over paying their debt down.
A question came up - "why don't the banks show on the bills if you pay the minimum payment it will tax X years and Y months to pay it off."
The industry insiders basically laughed by saying "that piece of information would be useless and always a changing number - and not everyone pays the absolute minimum each and every month.
The same stupid people at the table said "Sure.. that would be good to know.. it probably would give me more of an incentive in paying it off".
WTF?? Like they can't see that paying a minimum balance and accumulating 20% interest each and every month isn't a good thing?
One of the consultants to the card company was the one that suggested "lower the minimum" from 5% to 2-2.5%.. that will encourage people to adopt the cards and people will pay that lower minimum and carry the balances longer.
One family - wife and husband both lost their job - after years of paying off their cards; they missed a payment and their rates took off - they ended up carrying an $80,000 debt across 10 cards before going bankrupt.
Finally the average American household is carrying a CC balance of $7500 to 8000..
Check out: http://www.pbs.org/wgbh/pages/frontline/shows/credit/
Plus 8 thangs a CC user should know..
Even Benny Stein is in this.. has about 2-3" of cards in his wallet - uses all of them - loves the frequent miles, and as he puts it "the banks don't make a dime off of me..."
B
"When you have to shoot, shoot. Don't talk."
Tuco (The Good, the Bad and the Ugly)
"An umbrella with holes is better than no umbrella at all."
Dr. Alexander Elder on using stops.
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