Tuesday, June 16, 2009

...and the deadbeat goes on...

The numbers are in for the month of May, and U.S. credit card lenders got stiffed by a record number of Americans.

Why this comes as a shock to anybody is a mystery, since for the last decade lenders have been passing out cards along with the freshman orientation packets on college campuses and including them as prizes in boxes of Cracker Jacks. When you hand out lines of credit to individuals that any sane person wouldn't trust with a burnt out match, you've got to expect that some of them are going to have all the sense of solemn obligation of a three year old at her birthday party. "Okay, they've trusted me, and now it's time to be responsible and pay them bac... Ooh! A pony!"

Of course, part of the whole collapsing bubble in which we're trapped right now is that Counting Chickens Before They Hatch has become the newest fad in the financial sector, with whole teetering edifices built on imaginary numbers generated by loans with less hope of being paid back than the Washington Nationals have of winning the World Series...


Wolfwood said...

Sounds like those unhatched chickens are coming home to roost.

Anonymous said...

T quote the great political thinker, Professor Lee of Rush University:

"You don't get something for nothing. You can't have freedom for free."

Of course, something for nothing is the operating principle of the Democrat Party and thanks to the Media part of the culture now.

Don't worry, someone will pay it. Oh, wait, that someone is me.

Shootin' Buddy

Carteach said...

Wolfwood.... that presents a heck of a mental picture!

Tam.... no sweat, as 'The One' will make those nasty credit card companies and banks just go.... Oh look at the shiny thing!

Tango Juliet said...

And just think of the example being set for future deadbeats.

Responsibility is sooooo 20th century.

BryanP said...

Considering how hard it was for me to get my first credit card back in the late 80's I am bewildered by the current practice of throwing them at everyone and their dog.

Funny thing is, once I became determined to get (and now stay) debt free, you couldn't pay me to carry a balance on a credit card. But then I'm weird that way.

Jim said...

I posted a rant on the subject myelf this morning, but it's more about Abdul, Yuri, and Chaing than it is about Tom, Dick and Harry. Once in a while I just wake up feeling international.

To bring it home, my Visa bill couple of weeks ago had a balance due of about sixty bucks. However the "minimum payment due" was zero, because Chaste Manmitten sympathized with my plight in these very difficult times.

Actually, I'm going to let them get away with this once. A month's interest on $60 should come to about a buck, and I'll pay it in order to get my name out their file marked: "We don't make much off this jerk so let's cancel him next time he's 5,000 miles from home."

Anonymous said...

When I read in the news that the average credit card debt per household is somewhere around $9,000, and I know that I and several friends have no credit card debt, I figure that somebody's in Really Deep Doo-doo.

Estimated "walk away", just for this year, is around $80 billion in losses.



Anonymous said...

This is why my rates have been going up. Not because I'm a poor risk. My FICO score is near the top of its limit for each of the three reporting agencies.

But the card companies want to make up their losses on my back.

I've been playing the game as much as possible & been paying down as much & as quick as possible. And with what's left over, I've been bouncing from card to card that offers me the lowest rate on transfers (currently 0% for 12 months). So they're still losing, at least for now, more then I am.

B Woodman

Anonymous said...

Making money on credit is an interesting problem. It's not all black and white.

I was in the "rent to own" business for 30 years. At one point we decided that our 40% default rate was too much, and we tightened down on the credit screening. It "succeeded" in that our default rate ended up looking very, very good, plus there was a lot less of the hassle involved with collections and repos.

One little problem though-- we made a lot less money, and pissed off a lot of people. To make more money, you have to lose more money. To lose none is to make very little.

So; you take the bad with the good. It sucks. There is of course a proper balance in there somewhere and the trick is in finding it. -- Lyle

Anonymous said...

Part of the calculation here is where to invest? There's still a lot of money chasing few really good investments. If Visa can eke out a profit with that model, good for them. I prefer the pawn shop approach myself. If I default it my own stupid fault and they have no reason to bitch.

Steve said...

Wait! You mean the Nationals aren't going to wint the World Series?

rickn8or said...

How long/how many times do the credick card companies have to bet burned before they go back to only giving you a credit card if you can prove you don't need it?

(Haven't carried a balance in years, haven't even charged anything since February; yeah, Visa LOVES Un-American me.)

markm said...

Jim: The credit card companies make plenty from those of us that pay in full every month - although the money comes from the merchants that take our credit cards, rather than directly from us. They take out at least 1.5% up front from every transaction. That is, you charge $100 at Walmart, and the store gets $98.50 or less. Then you pay the credit card company $100 in about three weeks. That's a 26% annual return to the credit card company!

And it's low risk, unlike the interest earned on those fools that carry large balances.

phlegmfatale said...

what blows my mind is not that college freshmen will spend on credit like drunken senators. what blows my mind is that we have a president who will spend on credit like a drunken senator.

Scary stuff.

Jim said...

markm: I agree the CCCs make plenty off folks who carry no balances; it's just that they don't think plenty is enough, and I've heard a few credible tales of of some of them dumping customers who pay no interest or, especially, late fees, over-limit fees, etc.