Partners - Stock market, economic and political commentary by Patricia Chadwick

The Looming Credit Card Crisis and a Call to Arms

The American Express ‘invitation’ (I wrote about yesterday) to, as they said, “a relatively small number of card members who have sizable balances and little spending and payment activity” may just be the tip of the iceberg.Why are they doing this?It is not out of the goodness of their heart.It is very likely because when they see a large balance with only minimal monthly payments and no new purchases, they are probably rightly concerned that the borrower may have fallen on hard times and may soon be unable to make the monthly payments.If that happens, then the credit card obligation which is currently an asset on the balance sheet will become a bad debt.So it seems to me that American Express is trying right now to strengthen its own balance sheet, and that is fine. But what is important for credit card holders is that you take care of YOUR OWN balance sheet.What the banks devise as their solution is not necessarily the best solution for you.

If you have seemingly unmanageable credit card balances, you must develop a disciplined approach to managing your personal spending. As a first step, simply put, stop spending!!You don’t need that new pair of shoes or that extra bathing suit.Get a debit card, and for all your new purchases, use ONLY your debit card.Then when there is no more money in your bank account, you won’t buy anything.Don’t worry about what that will do to the economy.It is only your very own economy – the economy of your personal household – that must matter to you now in this time of crisis.

Renouncing your credit cards in favor of a debit card won’t eradicate the horrific interest rates being charged on your credit balances, but it will limit the growth of that indebtedness.Look at each of your credit cards that has a balance on it and find out what interest rate you are paying.You will be shocked.If you have a perfect credit score, and only one credit card, the interest will still very likely be over 15%.If your payment history is anything less than perfect, chances are that you are paying interest rates of well over 20% and yes even possibly over 30%.As long as you make new purchases on your card and also pay the minimum each month, the banks are making a fortune on you.This is their most (maybe only?) profitable business these days, and they don’t want it to end.

There are lots of ads on radio and television indicating that you don’t have to pay those high rates of interest on your credit card and that you can negotiate the rate down with the credit card company.I have tried to speak to those representatives in an effort to share with consumers what they might do to lower their rates.However, as soon as they find out that I pay off my balance, they hang up on me (Really – not even a respectful ‘good-bye’) so I have been unable to test the system.

What is the solution for you?Most importantly, after you bite the bullet and stop buying on your credit card, you need to besiege your Congressmen and Senators and tell them that the rates on credit card debt must be lowered.Be honest and tell them how much credit card debt you have and how much income you make.Shock them into realizing how serious the problem has become.If Congress does not tackle this issue head on, it will be the next crisis of this already serious recession.

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6 Responses to “The Looming Credit Card Crisis and a Call to Arms”

  1. Eric Says:

    Credit cards? Credit cards are for suckers. Debt is dumb cash is king! Dave Ramsey was right all along, if only everyone including our government would have listened.

  2. Todd Bandrowsky Says:

    My advice for people in over their heads with credit cards is to simply not pay them. You have to remember that in any negotiating situation, whose really in the strong position, and its you, not the bank. You have all this junk that you bought with your credit card. The bank has nothing and wants your money. They can harrass you, call you, and even sue you, but nothing alters that fundamental equation.

    So, get some nerves of steel. Just, don’t pay them. Get your primary debts like mortgages and debts under control and put together a realistic budget. While you do this, let the phone ring. What will happens is that your credit score will tank, you will be harrassed, but ultimately, if you have cajones of steel, the banks will come around and most will settle for less. They can make most, if not all, of that interest and fees go away as they know its phony money and what they really want is their principal back. In this environment, now is really the best time to do it.

    You don’t need to give any of these so-called credit services a dime as frankly, the deals you get from them are terrible. Does this plan have its drawbacks? Yeah, you won’t be able to borrow money any more. But, really, is that so bad? You couldn’t borrow money responsibly before, and living with savings rather than debt is infinitely better.

  3. Paul Says:

    This guy above me “Todd Bandrowsky ” is the biggest idiot and people like him are the reason why we are where we are. The banks gave you money you used it now pay it back. Simple!

  4. Spencer Says:


    I have been reading your articles and truly respect what you have to say. I’d love for you to check out this website (I have no affiliation with them). It is a credit card management board game- created by two twenty-five year olds. The young men have been touring high schools and colleges. Thought you’d like to check it out– specking of Amex- Players begin with their entry level gold credit card and cash. As players use their cash and credit wisely (on the game board) they can become eligible to upgrade to the platinum card and then the black card. Plays into the trends of today in a fun way and really is great.


    Just another fan,


  5. sam Says:

    colour me cynical, but any money manager that gives “advice” like this is most likely short the company and not at all interested in the debtors. The people being targeting are already in debt, they likely have little or no credit line left to use, so essentially you are advising them to 1) not pay their debt 2) not take advantage of a $300 cash back incentive to pay back their debt and 3) likely end up entering bankruptcy and damaging their credit. Sorry, but you generosity of spirit is more shallow than your analytical skill

  6. Heartburn Home Remedy Says:

    Hey, nice tips. I’ll buy a glass of beer to that person from that chat who told me to visit your site 🙂