[Leanan]

This blog is about the upcoming change in credit card rules:

http://www.dailykos.com/story/2005/8/20/173341/766

In October, many people will find their credit card payments have doubled. (Probably not coincidentally, right after the change in bankruptcy laws goes through.) Banks are preparing for mass defaults.

Talk about a perfect storm. A change in bankruptcy law that makes it harder to declare bankruptcy. Credit card payments doubling. And likely record-high prices for winter heating, whether for heating oil, natural gas, or electricity. It's going to be a long, cold winter.

[DantesPeak]

Thanks for the update.

I don't think the impact of the doubling of payments, and the new bankruptcy law, going into effect in October can not be under-estimated.

Per the Federal Reserve, in the last five years years ending in the March 2005 quarter, total household debt has gone up 50%. In addition, at the same time, net national savings has dropped to 0% (none) in July, and the narrow money supply, M1, which is moostly checking accounts, has declined at a 2% rate over the last six months. All the while, inflation has continued.

Increasing debt payments when debt payments were already increasing for debt repayment and higher interest rates will be devastating - there is no savings to fall back on so consumer expenses will be immeadiately cut.

[Armageddon]

i have thought about this recently also. doesnt look good

[53convert]

he higher credit card payments are not mandatory. Not all banks will be increasing rates. But you should be ready just in case.

The change happens in October and your monthly minimum payments could double.

As I understand it from a banking friend, if they do up the payments it will be gradually for the very reason listed in this post. They dont want to force bankruptcy.

[AirlinePilot]

I just talked with a friend of my brother in law who works for a bank in Virgina and he said the same thing. While the ability to up the min payments will exist, it will happen gradually over time. It doesn't make sense for the credit companies to have numerous defaults right away. I don't see it as being a huge deal due to this. I may be wrong, I'm sure

[ohanian]

$this->bbcode_second_pass_quote('', 'a')lthough all in all, I think this is a good thing, it could hurt my bottom line if I weren't paying attention. Whey do I think it's a good thing? Because too many people don't understand that when they pay the minimum due, they are NEVER going to pay off their credit card. Many people are math illiterate, and think that the credit card companies are telling them how much they should pay, not how much they have to pay to pay off the cards in 20 years. This is part of how so many people, especially young people, end up deeply in debt. It happened to me in college, and I am not even remotely math illiterate.

[savethehumans]

So basically, the new rules mean that banks will NOT get MORE money from the debtors, who can't pay their CURRENT minimum payment, much less TWICE that amount!

Smart, Bush. Smart, banks. That's REALLY gonna work!

[Leanan]

I think this will affect most credit card users. As noted in the link I posted above, many banks are reluctant to say what they'll be doing, possibly because they don't want people to declare bankruptcy before the change in bankruptcy law takes place. But three of the biggies have already said they will be doubling the minimum monthly payments.

$this->bbcode_second_pass_quote('', 'S')o far, MBNA, Citibank and Bank of America have announced they are doubling minimum monthly payments on credit card balances from 2% to 4%. Others are expected to follow suit quickly. To some cardholders, that could be seen as a good thing. To others it could be devastating.

[MD]

Our bankruptcy courts are already overloaded. I wonder how big the wave of last minute filers will be?

[FoxV]

the credit card issue is just part of the winds of the October perfect storm. I find it amazing just how many issues are now conspiring to arise in October

$this->bbcode_second_pass_quote('53convert', 'A')s I understand it from a banking friend, if they do up the payments it will be gradually for the very reason listed in this post. They dont want to force bankruptcy.

[I_Like_Plants]

Lots of ppl have gone from say $80k a year (a mere living wage in California) to $40k or even $30k, and have been making up the difference by "taking equity out" of their house. If house prices merely level off it will cause a crash.

[SpaciousDreamer]

Article from NYT: Debtors in Rush to Bankruptcy as Change Nears
(link)

Excerpt: "Here in Idaho, the soundless wave of Americans going broke washes up at the clerk's office in bankruptcy court, with nearly 20 fresh declarations of desperation every working day.

There is the Moore family of Boise, Kevin and Linda, listing a $10 cat and a $5 toaster among their meager assets against a medical bill of more than $18,000. There is Delores Hawks, going into debt to learn a skill, and never getting out because of endless credit card interest on the self-loan that once looked so manageable. . . .

Families with children are three times more likely to file as those without, according to studies done by Elizabeth Warren of Harvard Law School and others, and more than 80 percent of them cite job loss, medical problems or family breakup as the reason. . . .

Consumer groups say the law will only make matters worse for the large number of families who are not abusing the system. They say families will be stuck in "debtor's prison without walls," as the Consumer Federation of America, which fought the new bill, calls it.

Many economists and legal experts say that once all provisions of the law take effect in October, bankruptcies should fall again. And some experts say people will be caught in an endless cycle of debt repayment."

[I_Like_Plants]

I'm using the plan a lot of advisors use cute names for like "Debt Destroyer" which is to pick one debt, pump all I can into paying it down, when it's gone, pump all I can into the next, etc. Meanwhile just pay enough into the others to keep them steady. I'll generally tack an extra $50 or so onto the min. payment on the others. If the others go to this new scheme, I just pay them the min. payment which may leave a bit less to pump into the one I'm concentrating on.

It does leave less slack though, if your min. payment on something is $200 and you can afford for the time being to pay 'em $250, that's ok, but if that account goes to a min. payment of $400 which you can't afford at the time that can make things ROUGH.

I know people are in a really pissy mood right now, I don't know what it is, maybe it's this.