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Galactica
June 17, 2009 4:19 PM
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Let me go ahead and cover the forthcoming comments now:

\"Why would anyone carry a balance on my credit card?\"

\"I have A+ credit and pay off my balance every month.\"

\"If you use your debit card for anything you're a complete idiot.\"

Ready...set...go!

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3 replies
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varro
June 17, 2009 5:28 PM
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@Galactica: Also:

\"You should have a six month reserve fund.\" (Never mind that six months of reserve money might not be enough now...)

\"That's what you get for having a B of A/Chase/Wells Fargo card!\"

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econobiker
June 17, 2009 4:22 PM
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@Galactica: Thanks for the humor in the trenches...


I did love the guy at the end of the article- 75 year old gas station owner with 4 cards and a total of $112,000 in credit for $3,000/month payments. What part of business management did this guy forget?

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Galactica
June 17, 2009 4:26 PM
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@econobiker: Sometimes the comments are so hard to read.

I wonder if it's hard to post comments all the way up there on their pedestal?

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Easton21
June 17, 2009 5:22 PM
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@Galactica: Agreed. Anyone reading Consumerist knows all about credit cards and debt without some jerkoff giving a self-righteous lecture.
I doubt I'm alone when I say that I enjoy reading the comments from the people who actually went through the process as opposed to the people who despise the people who went through the process.

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Joshua Willis
June 17, 2009 4:22 PM
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This isn't anything new. After letting an account go unpaid for 6-9 months, they will usually negotiate a payoff. It of course wrecks your credit, but then if you're in this position you probably shouldn't be using that credit to begin with.

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u1itn0w2day
June 17, 2009 8:48 PM
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@Joshua Willis: So true .


@varro: Can't forget the taxman but maybe that should be part of the lesson .


I understand those going through a true unexpected hardship but I've seen too many simply live way beyond their means wether it be luxary cars,vacation homes,spending habits or just BAD investments . I've seen too many throw caution to the wind and even before the last year or two were already walking a thin line .


You know what though I've also seen people declare bankruptcy after living years high on the hog regret or were mad they had to declare it but they too had more problems than a bad economy .


I don't like the way these credit card companies are crying victim because they have to deal with bad debt and yet it was their exhorbitant fees and interest that pushed many over the edge - they literally pushed the envelope trying to get away with as much as they possilby could as well .


Sooner or later things will have to be dealt with though .

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Galactica
June 17, 2009 4:27 PM
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@Joshua Willis: A reduction in interest rates probably wouldn't though, and it'd save you a ton (based on your balance) in monthly payments.

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kepler11
June 17, 2009 4:27 PM
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I'm going to hazard a guess here -- the people who benefit from this aren't going to be too scrupulous about reporting the taxable income. Yet another way that the people who follow the rules have to pay for the ones who don't?

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GeekyRobotGirl
June 17, 2009 6:44 PM
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@kepler11: That is actually rather insulting. The people who benefit from this are generally the ones who want to pay off their debt, or at least as much as they can, instead of filing bankruptcy or trying to weasel out of the whole balance by dodging the creditors forever. People don't usually go this route simply to get a \"discount\" on their balances, since it involves damaging your credit by not paying for several months.

We all know that better decisions could be made in the first place, but most admit that plenty of the time good people get caught in bad situations and end up in a tough spot. I've been there, made a mix of stupid decisions and bad luck that I have hopefully learned from, and I had to settle with a couple of credit card companies. And yes, I did report the correct amount on my taxes the following year.

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HogwartsAlum
June 17, 2009 8:33 PM
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@Fukurobo:

How does that work, anyway? The payments you don't pay are counted as income? I don't understand that.

BTW your GIR avatar is cute. :)

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Jeff180
June 17, 2009 8:55 PM
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@HogwartsAlum:
Picture it like this - the credit card company gives you $10,000, but you only pay back $4,000. Even though it was already spent on goods, that's an extra $6,000 in your pocket. You were \"given\" the $6,000. The IRS views this as taxable income.

Similar to paying $5 to win a $10,000 lottery. That's $99,995 in income.

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GeekyRobotGirl
June 18, 2009 2:10 AM
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@HogwartsAlum: Jeff180 explained it pretty well. I can see where they're coming from with that idea, and it is easier to pay the tax than to pay the entire balance, but as someone who has gone through it, it also kind of sucks to think that a lot of that \"income\" you're being credited with is full of lots of interest and fees and penalties. But I guess some would say you knew you were getting into those when you signed up.

And thanks! I adore GIR. :) Invader ZIM was another great show that ended far too quickly for my taste.

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HogwartsAlum
June 18, 2009 8:06 PM
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@Fukurobo:

I too loved Invader Zim.
\"I love this shoowww!\"

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Jeff180
June 17, 2009 8:56 PM
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@Jeff180: Bad math in my lottery example - I meant $9,995 in income.

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Rectilinear Propagation
June 17, 2009 6:07 PM
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@kepler11: How the heck did you arrive at that conclusion?

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varro
June 17, 2009 5:29 PM
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@kepler11: The credit card company will send you a 1099-C, and report it to the IRS and state revenue department.

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Joshua Willis
June 17, 2009 4:34 PM
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@kepler11: The CC company reports it to the IRS, so the people who benefit damned well better report it...

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Segador
June 17, 2009 4:45 PM
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...Cat warms up to slowly-moving sunpatch.

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Alexander Saites
June 17, 2009 5:03 PM
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I find myself far more interested in the picture of teh kittah.

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HogwartsAlum
June 17, 2009 8:34 PM
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@Alexander Saites:

That's the \"OMG-just-got-detz-shrinked-Yay\" kitteh.

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Jfielder
June 17, 2009 5:05 PM
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I had to settle on one of my credit cards before. I just got myself into a bad spot and couldn't pay it all off. They cut 60 some percent of my debt off, and told me I had to pay the remaining amount in 4 monthly payments. Which was a bit hard, but it was worth it. I was able to get things back in order, two years later my credit score is almost right back to where it was. Needless to say, I've learned my lesson.

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ChuckECheese
June 17, 2009 5:11 PM
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In Phoenix, there is this hideous morning show called \"Better\" where they have repeatedly have a guy representing/ hawking debt settlement services through his company, Freedom Debt. I wrote Better to tell them that these companies usually cause more problems than they solve. I also referenced Consumer Reports' recent article on debt settlement companies. In reply I got a form letter. The Freedom Debt people must be paying to be on the show.

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speedwell (!)
June 17, 2009 5:45 PM
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@ChuckECheese: Here in Houston, there's a skanky lawyer who helps people to a ruined credit rating a la debt settlement program. I worked for him as a temporary for a while, cleaning up his database. His whole strategy was just to let your credit rating go to hell while telling the credit card companies you were represented by a \"lawyer\" so they couldn't directly harass you. Every time he got a communication from a creditor, he'd just stuff it in a file folder. After a few months, he would check the folder to see if any creditors violated the Fair Debt Practices Act or could be persuaded to settle for pennies on the dollar. If the creditor still insisted on getting paid, back into the file they would go.


When I asked him when I could expect my month-overdue signing bonus that was actually written into my contract, he fired me on the spot and called the police to have me escorted out. Just goes to show you how much of a sociopath he was. Is.

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Megalomania
June 17, 2009 7:33 PM
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@speedwell, avatar of snark: well, I would imagine that for a lot of people the credit rating is at the bottom of their priorities by the time they would turn to a guy like that. It sounds pretty effective though if he was preventing his clients from being contacted, and while the approach of ignoring them until they were willing to settle for pennies on the dollar, but I have to say, waiting for FDPA violations is a damn good plan. Pity he was a complete asshole to his employees though....

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ChuckECheese
June 17, 2009 6:52 PM
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@speedwell, avatar of snark: One of my dirty little secrets is that a year ago, like you, I worked temp for a debt settlement company, perhaps the largest one in the U.S. Kelly didn't tell me what it was before I went to work there. It was quite the eye-opener. I worked in their accounting department, so I got to see everything, from cash flow to customer complaints to hush-money payoffs, etc. Their filing was a shambles. They had 14,000 clients and only one half-time kid working in the file room.

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Skaperen
June 17, 2009 5:21 PM
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If you have a big balance on your credit card and are able to keep up payment on the minimum amount, then do that. Do not pay down your balance. The money you would pay it down, put that in some kind of savings. This gives you an emergency fund source. If you pay down the credit card, the bank is today far more likely to reduce your credit limit or even close your account. Then you'll be without an emergency fund source because you gave it to the bank.

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Skankingmike
June 17, 2009 5:22 PM
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I will have no credit card debt in 3 months.

would've been sooner but I'm buying a house.

Now if only paying off your student loans was that easy :P

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HogwartsAlum
June 17, 2009 8:35 PM
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@Skankingmike:

Ick. I don't have a card but I'm starting the loan payment thing. I'm just sending a little payment until I can make it bigger. Plan, schman.

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RStui
June 17, 2009 5:59 PM
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Be on the lookout for repayment \"plans\" too, though. One of my cards matched my payment on a one-time deal, up to $500, and another put me on a year-long \"program\" with automatic minimum payments and a 0% APR. I was in relatively good standing with both card companies, too, only late on a couple payments in the year.


I've definately noticed a thawing of their attitude towards \"repayment assistance\", and it's no wonder. If they can knock off a portion and make it more likely the rest will be paid, the incentive is there to take action.

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RStui
June 17, 2009 6:00 PM
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@RStui: Also, there was no \"hit\" to my credit report that I could see from either action.

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billlnv
June 17, 2009 6:46 PM
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I just negotiated a deal on my credit card. They are going to make the payment for me for the next two months and then I will only make a half payment for the following four months and they will make the other half payment for me. They are also going to reduce my interest rate to 0% during this time. This is not going to reflect on my credit record either. the worst that could happen is that I would have to report it as taxable income which is not as bad as having to make the payments.

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dancemonkey
June 17, 2009 7:14 PM
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The credit score hit is a problem, but if you are behind on payments try this first. I've done it with two cards and my wife with one.

Call and ask for a hardship payment plan. If they don't transfer you to another department, then hang up and try again. Front-line CSRs aren't going to get you the deal you want.

A hardship plan typically reduces interest drastically (in my three cases, 5%, 2%, and 0%... 0% was on the card with the highest balance and highest interest), and they typically are based on a 60-month payoff. One drawback is that you must close the account, but if you're in this pickle that is probably for the best.

Your APR is slashed to almost (or exactly) nothing, in turn your monthly minimum is slashed to at least 1/2 or less or what it was, and there is no negative effect on your credit score.

Another drawback is they may require a direct debit from your checking account to get you signed up, but you can call outside of 24 hours before a payment is due to hit to have the date changed, if you ever find yourself in a bind.

Another benefit is that you do not have to get caught up on back-due balances, and all overlimit and late-fee charges stop immediately. They may try to convince you to get caught up, but it's never a requirement to get onto the plan. If you can't afford it, don't do it.

I've been paying for bad credit decisions I made in my early 20s, and getting into the hardship payment programs was a recent necessity. It works great, just make sure there's money in your account when it's supposed to be or they hit the big reset button on your account!

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Hector De Jesus
June 17, 2009 9:13 PM
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@dancemonkey:

I never let anyone get access to my checking account via automatic debit. That's just asking for trouble and neither the banks or the creditor have the answer...

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dancemonkey
June 18, 2009 2:08 PM
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@Hector De Jesus: Good policy. It was actually optional for a couple of the creditors to have auto-debit, but knowing the financial pickle I was in and knowing how I got into it, exercising the option to send in my own payments was really no option at all.

It's not that I'm disorganized or miss payments, it's that I was afraid the money wouldn't be there at all given the opportunity.

So I figured let them take it out themselves and we'll just have to make our new budget using what's left.

Kind of like attaching wages I suppose, except you have the option of turning off the spigot if straits get dire.

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sharkzfanz
June 17, 2009 8:16 PM
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Great Idea about the hardship plan!!!!

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SacraBos
June 17, 2009 8:27 PM
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Actually, if you can document the amount of interest you've paid, and it's more than the actual debt, couldn't you use that as a basis to prove that you've not gotten $X dollars of \"taxable income\"?

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Hector De Jesus
June 17, 2009 9:10 PM
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I love to see articles like this. I recently ran into some financial problems with a GE Bank card that I was using for medical expenses. I was laid-off from my job with about $800 left to pay on it (was $3000) and even though I called in advance to let them know of my issues, they raised my rate and my balance went to almost $2500. I was amazed. Nonetheless, I stopped paying that bill and ended up settling the debt for $800. So about the same amount that I was supposed to pay.

My credit took a hit and they'll send me a 1099 for the difference but there is no way that I wouldn't be considered to be insolvent after all this.

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Mary Marsala with Fries
June 18, 2009 2:22 PM
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@kepler11: Big surprise to no-one: Your hazarded guess is stupid, uninformed and reveals an obvious arrogance and lack of compassion.

Got any more guesses?

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Waverly V Phillips
June 18, 2009 5:58 PM
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I guess my concern would be to make sure all agreements are in writing.

Oh another note what the heck is wrong with that cat in picture. Looks like somebody just put some Antifreeze in his Fancy Feast.

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pinkbunnyslippers
June 18, 2009 10:01 PM
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Soo...I don't pay my bill for 6 months and end up getting my balance worked out for either nothing or next to it. Or, I try to scrape together the money each month, working responsibly toward paying off the mess *I got myself into in the first place*, and basically get penalized for it in the form of higher interest rates because I can't pay anything but the minimum.


Wow, that doesn't sound eerily parallel to the current housing mess at ALL.


/sarcasm

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barretjack
June 8, 2010 8:34 PM
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finally the law has come into effect where the creditcard companies can no more ripe me....as they have been doin that for almost 4yrs now.

*****
Jack Barret

card Deals

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