So it hit him pretty hard when Chase told him it was doubling his monthly minimum payment rate on a card (on which he's carrying a $7,500 balance) from 2.5 percent to 5 percent of his total balance. The leap from payments south of $200 to $375 could be a budget-breaker. He called Chase customer service on several occasions and went as high up the escalations ladder as he could manage, but they told him nothing could be done — even though he has other Chase cards that aren't getting monthly minimum hikes — and the change would take effect in 45 days.
A balance transfer isn't an option because his other cards are maxed out and no new card he applies for will give him a limit of more than $500. He's too scrupulous of a guy to ever go into negotiations to lower the bill or even consider declaring bankruptcy. Obviously you can tell from his financial situation that he's not exactly a financial wizard, but he's no dope, either. Just a middle-class guy who has ground his way through decades of modest work for modest pay in retail and clerical jobs, busting his hump — and nest egg — along with my mom to put three kids through school. (Although it is frustrating how he ignores my money-saving advice I'm always dropping on him — Cut the land line, old man!)
Dad suspects Chase's strategy is to make it so he can't afford his minimums, forcing him to miss a payment so his balance starts to skyrocket, and I think he's on to something there. Any brilliant advice for my dad out there?
(Photo: me and the sysop)
]]>@downwithmonstercable: Leave her alone!!!! Geez.
]]>@zidan: Chichis!!!
]]>"He's too scrupulous of a guy to ever go into negotiations to lower the bill or even consider declaring bankruptcy."
It bears repeating, so here's my first bit of advice to help your old man: can your judgement of him if that's what it is. Second, educate him to view this entire affair as a business transaction: just business, they have no moral high ground. I would look at the specifics of a bankruptcy with him or at least negotiate that down (and not through a CC company funded outfit like CCCS that has the CC companies dictating terms & refusng to offer right downs, stop paying them & do it yourself after they sober up). Do not make another payment if it will not work out Loan him you brass balls for a while if need be, time for survival mode!
]]>Maybe Obama and Congress should up Chase's minimum payment due on the bailout money taxpayers loaned them.
Paybacks are hell.
]]>@downwithmonstercable: Ok, this picture isn't exactly a "feast for the eyes", but I find the picture of a live .22lr round pushed into a credit card more lame. I haven't seen that one in a while.
]]>Best suggestion I've seen is the credit counseling suggestion. That's the most likely to get the minimum payment change rescinded, plus it'll give him some tools for managing/paying down the rest of his debt.
]]>@krom: They usually do give you an out in the fine print to send a snail mail letter to an obscure Utah address declining the terms and then closing your card for everything but payoff only. If the card is used and even 1 cent is charged, their contract terms usually say that the letter is invalidated and the new terms apply.
Oh, and you better copy the letter and send it registered, return-reciept as proof since I am sure the card company would have no trouble losing unregistered letters if there is profit involved...
]]>Years back Chase would not combine credit limits and balances on two cards I had from them. One card was a Chase to begin with and the other was a card from a bank/company which Chase had bought out (Providian maybe?). Chase didn't want to combine limits since two cards provide more chances for over limit or past due payments which equals penalty fees and big profits for Chase.
I was able to transfer most of the balances to another company and then pay off and close the two Chase cards...
]]>@joshmayfield: Nah I'm not going that far, and I'm exaggerating a bit for dramatic effect. But really, this picture in general is kind of gross. It just reminds me of the girls in high school that thought they were hot stuff but were totally nasty, and wore skimpy clothes to flaunt what they had. I guess it's a combination of the pic being gross and the memories of these girls that it conjures up in my head that make me dislike it so much.
]]>They want to make sure that, if the customer is paying more than the minimum _somewhere_, it's with them, in other words, ensure that they get their $ back first.
]]>@mac-phisto: And your second response is definitely a huge real risk associated with taking a 401(k) loan, ESPECIALLY in an economic environment like this where lots of people's jobs are not secure. That is their biggest drawback, IMHO.
]]>@jenl1625:
So long as the minimum payment is higher than the monthly interest charge, it will _eventually_ pay off the bill, although if your minimum payment is 2%, and the APR is 22.99%, it'll take a very very very long time.
]]>@krom:
In short, no.
They do provide you with an out: pay off the balance and close the card. This is a revolving credit so, in theory, every month is a new loan, and, by keeping the debt outstanding, you're agreeing to a change in the terms of that loan.
]]>*saves the pic before Consumerist retires it*
]]>Tell him to not pay his bill for 3 months.... get it sent to a collection agency and then have his bill reduced. Sure he'll have to pay taxes on it but given his income level it wouldn't be much of a hit.
]]>That woman has no business trying to foist images of herself onto other people.
]]>I added [cache.gawker.com] to AdBlock, but sadly that will break when gawker stops hosting consumerist's content and another filter will be needed.
]]>This part of the legislation that was passed (that Consumerist actually reported on). Everyone's minimum payments are going up.
Federal government wants us to actually be able to pay them off before we die so they have now mandated the minimum payment allowable.
]]>Is there anything banks can do (aside from forgiving the debt) to make it right?
I know I am not answering the actual question posed by the article, but solution of the problem should start with recognition of the problem. And the problem is not the evil banks, but the consumers who spend too much money. I don't get this feeling from the article.
]]>Appropriate? Well, he did charge the money so he is liable, but these people broke their contract with him by changing the terms willy nilly. Screw 'em.
]]>Don't the new changes coming up require that the lender charge enough of a minimum payment to eventually pay off the bill? I know that law's not in effect yet, but I would think we'll be seeing more of these "ack! I was making my minimum payment until they raised the percent" kinds of stories coming up ...
]]>that's great news... i'm going to see CCCS on wednesday, actually... i have about $12k in debt and have been making more than the minimum payment every month (never missed one). i haven't used my CCs in over a year, which has enabled me to cut my debt down by over $4,000 but that rate would have been much quicker if over 40% of my payment weren't going towards interest alone. sounds like CCCS will be able to help, given your experience. i'd always assumed CC companies have no incentive to help someone like me, since i'm making my payments on time.
]]>Paying off Dad's balance might be too big a burden. Can the three siblings come up with the monthly increase? $60 per month per sibling would cover the difference between the old payment and the new payment.
Furthermore, if you hold the combined payment to $375 per month and don't add any new debt to the card, in a little over a year the balance will drop to the point where the 5% minimum payment is back to the amount Dad can afford. The rate on the card was not provided - I assumed 18%.
Of course, this will only work if a) Dad doesn't add to his CC balance, and b) Everyone chips in and the CC company gets paid on time, every time.
]]>2. If your parents paid for all 3 kids to go to college, why not pool your money together collectively and paid this debt for your parents?
3. If that's not a possibility, it sounds like your dad is going to have to find out the hard way what a world of shit he's going to be in if he misses a payment. Too bad he doesn't seem the type who would be receptive to Dave's Ramsey The Total Money Makeover.
4. Why can't dad get a second job until the balance is paid off?
]]>@Rectilinear Propagation: I'd rather see the snake head in the broccoli than a gross cleavagey girl.
]]>401(k) loans collateralize your account, they don't liquidate it.
]]>The credit counseling option was a good suggestion but may or may not be successful because he already has a low rate and Chase is trying their damnedest to screw him out of it. Some folks have even posted on other forums that Chase was more than happy to CLOSE those accounts and lose the business just to get rid of the unprofitable accounts. I like the suggestion about the kids helping dear old Dad out and either paying off the balance or paying the extra his minimum payment is increasing by (with the stipulation he give up the card of course). Either way, he's free of Chase sooner rather than later and can tell them to kiss his unprofitable keister.
]]>in a market like this, that means getting bottom dollar for investments that may rebound in the time it takes you to pay it back, meaning that your investment in (say) 5 years may not be worth the same (even with the interest you paid back to yourself).
it does depend on individual circumstances. for example, i took a 401(k) loan to payoff a car. it reduced my monthly obligations by ~$200 b/c i was able to drop my full coverage insurance down to liability. it made sense for me. still, if i were in this situation, i don't know that i would make that decision.
credit card debt is UNSECURED. why secure it with your retirement? god forbid something happens, you'll need that money to survive, not payoff dischargeable debt.
]]>Also, it's not like it's a photo of some dead animal in someone's food. It's a photo of a person. You don't need to be protected from the sight of people, do you?
]]>@johnva:
He owes $7500 on one card, the others (don't know haw many) are maxed out. He debt is a lot more than $7500 and this payment doubling could make it more difficult to pay the others. Then he ends up with the default rate on all of them.
I agree that credit counseling is in order.
@Rectilinear Propagation: I mostly surf consumerist at work. And while we are a multi-billion dollar international corporation, apparently we cling to XP SP2 and IE6...
]]>1) when i did it i was a better risk than the stock market.
2) my interest rate is 4%
3) i aggressively set the pay off time for 20 months (making sure i had enough left to live off of) as I'm sure my job is secure for at least that time (nothing is a 100% but without perfect knowledge of the future I think this is a valid assesment)
4) the money to pay out the loan comes out of my paycheck before I even get a chance to touch it. Good for me, no temptation to spend it.
biggest risk is if i lose my job and i don't see myself being more screwed by that than if i went with a credit counseling service.
]]>So, I'm paying it off and closing the account. Their loss in the long run..instead of getting the 3.99, they get no further interest from me.
]]>@johnva:
Bingo.
Most advisers don't recommend that borrowing because they have no faith that the consumer is actually disciplined enough to stop using credit cards.
They do that because usually, they're right. I'm just saying, perfect world, if we're holding nothing sacred and making the most economically efficient decision, a 401(k) loan is likely the easiest and most cash-efficient decision.
]]>Also, from what I get from the article, it seems as if Phil's father is just like many of us - he works hard but he isn't always the most knowledgable about finances. It's never too late to learn. But if he won't listen to his own son's sound advice, that's his fault.
]]>If that's true, it doesn't sound so bad to me. Most "financial advisers" (a group with a less than stellar track record) probably just don't advise that because it tempts people not to pay it back. But I think it would depend on individual circumstances.
]]>@Chris Walters: He's too "scrupulous" to attempt negotiation. I suspect what this really means is that he is too ashamed.
I would think that Chase would much rather negotiate than force this guy into bankruptcy. I hope his children can talk him into going this route.
There's not enough information about the man to determine if bankruptcy is a good option at this point. I think it's something that should be kept on the table, however. I've been in this situation before myself, and from my perspective, it reduced my quality of life worrying about all that debt. I got out of it without going that route, but I was young.
]]>Just because they don't *say* "you can opt out of this by doing X", doesn't mean you aren't legally entitled to do so.
IANAL etc.
]]>I've heard it said that these debt counsellors don't do anything you can't do yourself, but I found otherwise. My banks wouldn't work with me, much like the problems the OP's dad is having. The banks take it far more seriously when they hear from one of these organizations.
]]>this, however, is not one of them. this debt sounds like it's 100% unsecured. why should he compromise his retirement when he could discharge some/most/all of this debt in bankruptcy (as a last resort, of course)?
if the lender is unwilling, & a counselor is unable, a person should seek protection under the law before tapping their "golden years" income.
]]>It's a safe assumption that a general-purpose 401(k) loan is cheaper than his credit cards.
@czadd:
Unless he's close to retirement, it's likely that the costs of bankruptcy are higher than the potential lost retirement income.
]]>Definitely a Myspace angle, though it doesn't accomplish the purpose of a Myspace angle, which is to make the subject look better
Please, please don't use this picture again
]]>Negotiate that interest rate/payment down as much as you can! You'll be saving the credit card company's soul!!
]]>@downwithmonstercable: Yes please. Every time it comes up the comments turn into Titgate all over again. It's not a flattering picture. please make it stop.
]]>@Jaynor: No, its not. Unless you're really into Myspace-ish "selective angles".
]]>I paid off all my debt quickly when I saw all these new regulations actually being passed. Sure they are good for us in the long run, but I'm now afraid that credit card companies will become even more sneaky and find new and devious ways to rip us off. These companies are worse than the crooks who commit petty crimes every day. Just look at Madoff, do you think he was able to perpuate his fraud for so many years by himself? No, the corruption goes all the way to the top of most of these fortune 500 companies. Everyone is in on it as long as the money keeps rolling in the door every is quiet and turns a blind eye to the blatant lies.
My advice to your dad, avoid debt at all costs, pay off your balances as quickly as possible, and don't give these crooks a penny more in interest. They are getting rich off of all of our own conspicuous consumption. The american consumer ignorantly lets him/her self be raped by the consumerist culture of America.
It's sad really, the rich get richer and the poor get poorer. If the middle class continues to shrink this country is going to end up in communism.
]]>@downwithmonstercable: It's kind of hot - in an odd way.
]]>Either way, it's sad to see that your father is in such a state of financial hardship. I think declaring bankruptcy at this point is really the best thing to do if he's maxed out on his credit and can't get by without it.
]]>He needs to consolidate that debt at a lower rate and burn up those cards. I'd consider a 401(k) general purpose loan well before bankruptcy - current interest rates are low and it's better than sitting on the treadmill. Also, close the credit card accounts. Tanking his credit score is probably a good idea in this case to prevent future borrowing.
]]>One of my least favorite as well...I need eye bleach.
]]>No guarantees that this option will be found. But I've received such an opt-out along with a notice a few years back informing me of an interest rate hike.
If you do find it in the find print, take it! If not, ask nicely about the possibility of making such an arrangement. Cancelling an old line of credit will have adverse effects on his FICO score, but it sounds like it's probably already pretty bad and likely to get far, far worse if some immediate action isn't taken.
If and when he succeeds in securing his existing payment structure in exchange for closing the account, encourage him to find a way to pay even 10% more than his minimum payment.
On that note, a way you can help him out financially while not totally bailing him out, thus still affording him some pride and financial empowerment, would be to offer a matching dollar amount on his payment above the minimum.
So if he succeeds in keeping his minimum monthly payments around $180/month, and he can come up with $200/month, you'll throw in another $20 to the bill making the payment $220.
]]>He's too scrupulous of a guy to ever go into negotiations to lower the bill...
check the pride at the door. being in debt is not indicative of your personal success! as a society, we mostly measure success based on how much money & stuff a person has, but that's just a charade. even the rich hit some bumps along the way - look at donald trump - he's filed personal bankruptcy TWICE (so far)! it still doesn't keep him from blasting his face all over television. why? IT'S BUSINESS!
that said, bankruptcy is a last resort. call up chase (et al) & start negotiating! you are not alone & they frequently work with people in trouble. the worst they can say is NO. & if that's the case, maybe it's time to start looking for a credit counselor (though you have to be awful careful who you select). here's some important info --> [www.ftc.gov]
if you decide on credit counseling, be sure to use an approved counselor for your state on this list --> [www.usdoj.gov] , that way if bankruptcy is necessary down the road, you've fulfilled the pre-bankruptcy requirement.
& if you go thru all that & are still falling behind, maybe it's time to consider the big B. if that's the case, seek advice. consult with MULTIPLE lawyers/advisors to make sure it's within your best interest & to ensure that your interests are protected.
]]>It's about a couple with the same problem. I found a credit counseling site that says Chase actually has a pretty lenient program for customers who are having trouble making payments, so if you dad enters a credit counseling program he may be able to negotiate a lower minimum monthly payment.
]]>Maybe he can do what I'm about to try and do: get an unsecured loan from his bank or credit union for the amount he has on the credit card. Pay off the credit card using the loan money. If he thinks he can resist spending any more on the card, keep it open to keep his credit score up.
I figured it out and for my high balance, I will pay the same amount I'm paying in minimum payments now on a loan and it will be completely paid off in five years. Suffice it to say, I have a huge balance on my CC.
Now to see if I can get an unsecured loan for that amount. *fingers crossed*
]]>The CU I belong to (Verity in Seattle) has a free financial counseling service that'll work with your creditors to reduce payments or interest rates, but you have to agree to close your card accounts in order for them to help.
Personally, I'd rather pay off the cards and close them and have a set three or four year payment plan with the credit union.
]]>@B: Already beat you to it
]]>Can we please retire this picture already?
]]>It's just a person with a credit card. Sorry we can't all be beauty queens.
]]>It would be much easier and better to just stop spending more on the credit cards immediately, and find a way to refinance the debt so that it's cheaper to carry while it's being paid off. Whether that's a bank loan, balance transfer, or loan or gift from family, $7500 is not enough to declare bankruptcy over.
]]>It got to the point where most of my payments were barely covering interest. Rather than jump on the bankruptcy train, I signed up for one of those consumer credit counseling services. You know, the kind that brag how they can get your rate to 0%? Well, it wasn't that low, but the rates were lowered enough and the accounts were closed so I couldn't spend any more that I was able to unbury myself in about 3-4 years. And I'm proud to say that my credit score right now doesn't really reflect at all that hole I dug myself into and crawled out of.
Before looking at bankruptcy, have him check into CCCS. At least you and your siblings' help with his debt will get it paid down quicker.
]]>Dad might not listen to you (how much did you really listen to him when you were growing up?), but he might be open to something at the AARP site. It includes a link to a PDF that has the sort of info usually found here at Consumerist regarding restoring credit and financial counseling. [www.aarp.org]
]]>ditto. I'm trying to eat over here.
]]>"He's too scrupulous of a guy to ever go into negotiations to lower the bill or even consider declaring bankruptcy"
Ummmmm, who is being scrupulous for exactly? The company that is hiking up his minimum payments so they can gouge him even more?
Screw scruples. Declare bankruptcy.
]]>Yep, tell him to stop spending more than he earns. Even better yet, tell him to spend less than he earns.
]]>Please...can we just delete this picture out of the database of pictures that get used? I hope to never see it again.
]]>![[cache.gawker.com]](http://cache.gawker.com/assets/images/consumerist/*/credit.png){kind=link}