The Next Credit Crunch
Aug 27th, 2007 at 9:51 am by Susie
There are so many different ways for them to screw you. For instance, did you know many credit companies now state in the small print that if you’re late with another, unrelated bill, they can increase your interest rate because you’re a bad risk?
Now that the easy money in home mortgages is all but over, consumers may soon be caught in a financial squeeze with their credit cards.
That’s the worry among some economists and credit counselors as home lending has shifted abruptly into low gear this summer. That leaves homeowners owing big sums to Visa or MasterCard without an important escape hatch — the ability to pay down the plastic by dashing off a check from their home equity line of credit or rolling the debt into a new, bigger mortgage.
“You’re not going to be able to get that mortgage loan. You’ll be stuck with the higher interest credit card debt,” warns Carl Steidtmann, chief economist with Deloitte Research. “We will have to live within our means. I know it’s a troubling phenomenon. But we’re not going to be able to spend at levels well above our income levels.”
[...] Americans earned a smaller average income in 2005 than in 2000, the fifth consecutive year of decline, the government reported recently. That occurred even as the cost of health care increased for many U.S. workers, and the burden for funding retirement continued to shift onto their shoulders.
Meanwhile, median home prices in the U.S. have increased from $119,600 in 2000 to $213,900 in 2005, a 79 percent increase, boosted in part by middle-class families that have paid premiums to purchase homes near good schools.
“The real problem lies in the basics: Median-earning families simply don’t have enough money to pay the mortgage, buy health insurance, pay for transportation and day care and still put groceries on the table,” said Elizabeth Warren, a Harvard law professor and author of “The Two-Income Trap.”
“Others can make it day to day, but when a child gets sick or the transmission falls out of the car or there’s a cutback in overtime, their cushion is so small that they can’t manage even the smallest mismatch between expenses and income.
“Families have been making up the shortfall with credit and someday, perhaps someday very soon, the credit music will stop.”
Welcome to the new world of debt peonage!
I saw this coming from a mile away. Credit card companies and banks need to get the money back somehow so it will be through higher fees. The pain is real and its being felt by merchants and consumers alike due to the irresponsible practices and policies of the card issuers.
They got us into this mess in the first place and now they want to pass on more fees. One example is the biggest hidden credit card fee, the interchange.
Fight back with us at UnfairCreditCardfees.com
Yeah. And when the “credit music” stops, the government will bail out the banks. Again. Credit card companies will write off the bad debt as the cost of doing business, which will empty their wallets of imaginary wealth. Then, Uncle Sugar will step up and save their hides by creating more imaginary wealth in the form of easy credit. It’s how things are done now. There’s no need to make any more credit card payments, really. It’s all taken care of, folks. (Note to commenter #1: You’re only a peon if you give a crap.)