Wednesday, March 12, 2008

Card Companies Get Tough(er)

Several credit-card companies have now decided that when it comes to helping out folks who are working through debt problems with credit counselors, well ... all bets are off. Here's the BusinessWeek story:

BusinessWeek: Too Much Debt? Too Bad

The stinger is right here:

Until recently issuers often agreed to ratchet down interest rates permanently, to as low as 0%, for those working with credit counselors. That has been a critical concession, says the industry, since it makes monthly payments more affordable and helps ensure the principal is getting paid down. But now some credit-card companies are balking. Discover Financial Services, (DFS) counselors contend, won't cut rates below 17.9% for clients, while Capital One Financial (COF) is holding firm at 15.9%. At least 5 of the 13 largest issuers are offering smaller breaks on rates than they did five years ago, according to a study by the Consumer Federation of America.

So there's a couple of companies to avoid, or balance-transfer away from, if at all possible. But I think the overriding moral of the story is this: "When banks get squeezed, you lose."

Hat-tip for pointing out the article goes to Elizabeth Warren and her post at:

Credit Slips: Credit Squeeze

On an additional note, I find it interesting that Steve Rhode, president of and sometime radio host, in commenting on Warren's article above, says that:

The reality is that creditors call the shots when you get into debt, they change the terms with little notice and then control access to what solutions you have access to if you should fall on hard times.

I'd say that upwards of 70%-80% of DMPs [debt management plans] do not lead to full payments and satisfaction of debt. Many people just pack it in along the way and go bankrupt and other just wander off.

Wow. A failure rate of seventy percent or more? That's downright nasty.

One thing's certain: If you're a consumer who's carrying wheelbarrows of debt, the pressures of repayment can mount quickly. And if you turn to them, debt-management plans may not be able to offer the amount of help that they once could.

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— Posted by Michael @ 9:10 AM


I actually got enrolled in one of these programs 2 years ago. I was in a rough spot and did some really stupid things w/ credit cards. I actually enrolled in a normal program where the cards received a payment every month, but dropped out to enroll in another one that would "cut your payments in half!" I realized a month into it that they would just collect money from me, stash in their account and not pay the card. Then when I had enough cash they would just reach a settlement. That was too dishonest for me, so I opted out, forfeited about 400 bucks, and reenrolled in the safer plan.
They got most of rates down to 9.9%, but a couple are 15.9% which was still better than when I tried calling them myself. So far no problems, and now that I have a plan and a budget I'm hoping to have everything taken care of in the next 12-18 months.

Anonymous projoe1979
, at 1:07 PM, March 12, 2008  

I just think when you're in debt, you should be attacking these credit card payments and not worrying about the next credit card.

I'm a true believer that credit cards are only made for certain people that can use them, not abuse them.

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