Wednesday, October 22, 2008

The next stage in the banking crisis: Credit card defaults

Credit card defaults skyrocketing, says Izvestia On The Potomac. So banks are reluctant to lend still, because they're worried about covering their credit card defaults.

Furthermore, the banks are doing another stupid thing: increasing interest rates on credit cards that *aren't* bad, in hopes of increasing their cash flow. Of course, this also makes those credit cards harder to pay off, which in turn increases the default rate. I had one credit card go from 8.9% to 19.9% within six months despite no change in my underlying credit score and no lates or defaults on any payments. I paid it off, but how many people are living paycheck to paycheck and would not be able to do so?

Folks, it's going to get worse before it gets better. And by the end, we're all going to have to divest ourselves of some very cherished illusions. No more free lunches, no more something for nothing, we're all going to pay, and pay hard, before this is all over. H.L. Mencken said, "Democracy is the theory that the common people know what they want and deserve to get it good and hard." Well, folks, for 28 years we pretended we could avoid this day, but now we're gonna get it good and hard, deservedly or not. So bend over, folks, here it comes!

-- Badtux the Finance Penguin


  1. Thank goodness -- and smartness! -- Mrs. Bukko and I are able to pay off our cards each month, even though we have four-figure (and occasionally 5 when it's o'seas holiday time) billing cycles. We know what we've got, and we know how to balance it.

    At a gut level, I've never been able to glom how people go on sprees with plastic. Somehow, they just don't understand that every dollar they put on "charge" is another monkey riding their monkeyback. But the, people don't understand that each piece of pie they eat will be added to their hips. They don't understand that each person they feud with at work, or each person they hump outside the confines of their current relationship, will come back to bite them in the arse. (Not literally, but they might like that.)

    The principle of "If you do something, there will be consequences" does not seem to be hard-wired into many human brains. It seems like a bug in our psychological source code.

    FWIW, even with a solid-gold credit rating in the U.S., even with proof of a steady job inside this country for years, even with showing bank loan officers details of high balances in a Swiss bank account, I cannot get a credit card here to save my life. Why? Because I'm an immigrant.

    They always ask "Are you a citizen? What? You're here on a work visa? You don't have permanent residency rights? Why, you might flee the country at any time! No credit for you!" When we bought our Prius in 2006, we had to pay AU$44,000 in cash to get it, f'rinstance.

    So fuck the fucking bankfucks. They can issue cards to Aussies, many of whom will default as the times continue to get tougher. I hope they do. I've got the Skid Roper and Mojo Nixon song "I Hate Banks" running through my head now.

  2. I only had 2 credit cards. One I kept because it had an automatic payment on it every month and it seemed like too much trouble to change it to the lower interest card. It was only about $20. So I kept the card. Until last month when I discovered the interest had been raised to almost 24%!

    I don't carry a balance, but that wasn't the point.


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