Protect your pocketbook from panicky credit card companies and banks. Even if you pay off your credit card every month you are in danger. (Harvard research included)
The nation’s debt is said to be the handiwork of the president, the political parties and the politicians alike. The frightening statistics throw a pointer in this direction. But are they or the Wall Street only responsible for the mess that we are in? I guess, not. Instead of the blame game, we need to analyze the core problem and seek the appropriate solutions. After the deregulation and elimination of the state usury ceiling by the Congress during 1980-82, Credit Card debt is in perpetual rise in America. This steady rise can be observed since the 1990s. If we look at the credit card debt statistics, you’ll be surprised to find the results:
$ 238 Billion in 1990 $ 445 Billion in 1995 $ 663 Billion in 2000 $ 832 Billion in 2005 and will be over a Trillion by 2010 $1,091,000,000 Trillion projection by 2010(US Census Bureau site)
Ah! Well! Now you can readily blame the American consumer! They are found to spend a lot through their credit cards. It is rather a fact that a certain section of the society does spend exorbitantly, maybe to cure their depression. But the problem is much deeper than that. Here is an instance of one of the real reasons which is not often mentioned. A professor of Law at Harvard University, Elizabeth Warren presented an amazing fact in one of her researches. She says that the life-style of the Americans has undergone a change since the 1970s. The average American today is not spending more on clothing (which is actually 32% less compared to the expenditure during the 70s), food (here it is less by 18%), appliances (it’s less by 52%) and cars (less by 24% per vehicle). These statistics are contrary to the popular claims. Rather, the expenditure is incurred more on the essentials like house (76% more, this is taking into account the inflation rate for the same size home that would have cost during the 70s), healthcare expenditure has risen by 174%, car by 54%(we need more than one), childcare by 100% and taxes by 25%. So, what does this finding actually say? Elizabeth Warren summarizes in her research that the fixed expenses of the average American has actually increased from half to ¾ of their respective earnings.
Therefore, where can we allow letting the axe fall in order to curtail our expenses? Is it childcare, car, health-care or taxes? We can surely shift into a smaller house and lead a lifestyle which is less comfortable in comparison to our parents but may be not the other essentials. So, naturally people started to use their credit cards in order to pay for these essential expenses. According to research findings, majority of the families who were found to end up in bankruptcy had used their credit cards to meet the expenditure for gas and food. This astounding co-relation between the staggering credit card debt and the denomination in the standard of American living during the past two decades ought to move us to seek people solutions. Firstly, we need to control our finances and the credit card companies. If you happen to pay off your credit regularly, you should note that according to the present market situation, you can be also in a great danger. As the banks are cutting on their limits, your credit scores are getting reduced in the manner akin to a snowball effect. According to the Universal Default Law, as your credit score goes down, the other credit card companies are further lowering your limits and your interest is increasing as a result. I had a client who lost 120 point rather rapidly because he had lost some old unused credit cards. He was a regular payer with the best financial spreadsheet! It took me a couple of month’s hard work to get his credit back in shape. So, even you could be in his position. If you belong to the 25% community who happen to keep a credit card balance, you need to be proactive.
1. Know your interest rate. 64% of the Americans belonging to the age group 18-24 are unaware of the interest rates. The adults too are much the same. You need to know your rate and negotiate for a better rate with your bank. Even if they refuse, you need to repeat your request. If you find out your interest rate is high, you need to find out the state where your credit card company is based. The usury law of the state governs the credit card operations; you can easily find the details at www.financialfuturecoach.com.
2. Find Credit Unions in your state. If you find that they do not belong to the usury law state, seek out a bank or a credit union in your state. If your state has an acceptable usury rate get a credit card with a local bank or credit union. If you are in one of those which have no caps like South Dakota, New Hampshire, etc you need to acquire a personal loan for a fixed interest.
Basically, ‘We Americans’ need to change and be vigilant. If the entire nation moves our money to a fixed loan we will be able to pay our obligations back and spend our hard earned money not on 33% interest and fees, but on the essentials where we need to spend it. Big banks do not care about us, they care about their profits. You need to be prepared to defend your finances. Educate yourself, read about it read my book or others, just learn how to defend yourself from the next Tsunami (as Mr. Greenspan said) My book "Give yourself the credit you deserve “( $15)explains in detail everything that the present day American young or old, poor or middle-class or rich need to do in order to protect themselves from the financial turmoil created by its bank.