10 States That Are Maxxed Out on Credit Cards

Finance.yahoo.com


Here are the top 10 states with the highest bankcard utilization ratios.

10. Louisiana
Average Balance: $3,503
Average Limit: $16,257
Average Utilization: 21.55%

Louisiana comes in last on our list, with a decently low average balance per consumer. The Bayou state could benefit from asking their credit card issuers to up their limits though — a tactic that can lower your utilization without forcing you to cut spending.

9. Texas
Average Balance: $4,072
Average Limit: $18,857
Average Utilization: 21.59%

The saying goes that “everything’s bigger in Texas” and that must be true of the state’s credit cards too, as the Lone Star state has the highest average limit of all of the states on our list. The high credit limit doesn’t mean that Texans aren’t spending though, as they also have the third highest balance.

8. South Carolina
Average Balance: $3,786
Average Limit: $17,351
Average Utilization: 21.82%

7. Oklahoma
Average Balance: $3,579
Average Limit: $16,396
Average Utilization: 21.83%

6. Arkansas
Average Balance: $3,469
Average Limit: $15,751
Average Utilization: 22.02%

Arkansas takes the prize for lowest average balance of any state that made our list. Perhaps residents of the Natural state could use a new credit card, which can add to their overall limit and decrease their utilization ratio.

5. Nevada
Average Balance: $3,999
Average Limit: $18,047
Average Utilization: 22.16%

4. Alabama
Average Balance: $3,618
Average Limit: $16,085
Average Utilization: 22.49%

3. Georgia
Average Balance: $4,246
Average Limit: $18,520
Average Utilization: 22.93%

Though Texas took the highest average limit of all the states on our list, Georgia wasn’t far behind. The state could try to skim more money off their monthly expenses to cut their utilization ratio.

2. Mississippi
Average Balance: $3,384
Average Limit: $14,644
Average Utilization: 23.11%

Though this state comes in second in our rankings, its residents aren’t charging more dollars, on average, than any other state on our list. The high utilization ratio in Mississippi is due primarily to the fact that its average limit per consumer is very low.

1. Alaska
Average Balance: $4,563
Average Limit: $16,453
Average Utilization: 27.73%

While all of the other states in our rankings stayed below a 25% utilization ratio, Alaska broke that barrier. This should come as no surprise to those who pay attention to Alaskans’ personal finances. The 49th state has recently topped lists of the highest credit card balances and highest revolving account debt. Read more >>

Younger Americans Have More Credit-Card Debt Problems: Study

American credit card holders in their late 20s and early 30s have more debt than older consumers, repay it more slowly and risk dying in debt if they don't curb their spending habits, a new study showed on Monday.

Researchers that people born between 1980 and 1984 have on average $5,689 more debt than their parents had at the same stage of their lives, and $8,156 more than their grandparents.

"If what we found continues to hold true, we may have more elderly people with substantial financial problems in the future," said Lucia Dunn, a co-author of the study and a professor of economics at Ohio State University.

"Our projections are that the typical credit card holder among younger Americans who keep a balance will die still owning money on their cards," she added in a statement.

Dunn, and Sarah Jiany, of Capital One Financial in McLean, Virginia and a co-author of the study, analyzed two large monthly surveys which included data on borrowing and repayment, enabling them to estimate when Americans will be able to repay their credit cards. Read more >>

Delinquencies Rise as Consumers Load Up on Debt

Americans cranked up their use of credit cards in the third quarter, racking up more debt than a year ago, while also being less diligent about making payments on time, an analysis of consumer-credit data shows.

The average credit card debt per borrower in the U.S. grew 4.9 percent in the July-to-September period from a year earlier to $4,996, credit reporting agency TransUnion said Monday.

At the same time, the rate of credit card payments at least 90 days overdue hit 0.75 percent, up from 0.71 percent in the third quarter of last year, the firm said.

While higher, the late payment rate is rising from historically low levels. The lowest late payment rate on TransUnion records going back to the mid-1990s was 0.56 percent, set in the third quarter of 1994. More recently, it was at 0.60 percent in the second quarter of last year.

During the last recession, many Americans reined in spending in favor of paying off debt, particularly credit card balances. The housing downturn also prompted many homeowners to make paying their credit card accounts on time a priority at the expense of other financial obligations, such as their mortgage payments. Read more >>

40 Percent Of Americans Have $500 Or Less In Savings

A survey of about 1,100 Americans finds that more than 4-in-10 respondents admit they don’t have more than $500 in readily accessible savings. The survey is a kind of departure for CreditDonkey.com, a website that compares credit card deals. Not respondents all were poor. Some had big houses, big mortgages or 401(k)s, but still no more than five Benjamins to rub together right now.

Meri Meri Homemade Canning Tags & Labels Set (Google Affiliate Ad)

Jill Michal, president and CEO of the United Way of Greater Philadelphia and Southern New Jersey, reacts to the lack of liquid assets. “It doesn’t shock me, but it does scare me. You know, we often say that the reason so many people fall off the edge in a tough economy is that they’re standing way too close to it, and I think this is a perfect demonstration of that.”

Michal says there’s a lack of training in personal finances. “This is about life skills. It’s not just about arithmetic and reading, but we have to be able to teach the next generation that we have to be able to save for our own futures and we have to be able to save for those risks that could come our way.” Read more >>

Americans Are Carrying More Credit Card Debt

Americans are carrying more credit card debt than a year ago, yet the late-payment rate for card holders remains near an 18-year low, an analysis of consumer-credit data shows.

The average credit card debt per borrower in the U.S. grew about 6 percent in the second quarter from a year earlier, credit reporting agency TransUnion said Tuesday. At the same time, the rate of payments at least 90 days overdue inched higher to 0.63 percent from 0.60 percent in the same period last year, when the rate hit the lowest level in 18 years. Card delinquencies sank to 0.56 percent in the third quarter of 1994, the firm said.

The April-to-June figures reflect how consumers have been managing their credit card use since the start of the last recession toward the end of 2007. Many borrowers have taken steps to save money and whittle down their debt. Among homeowners with a mortgage, many have made credit card bills a priority over their home loans and other financial obligations. Read more >>

Get Ready To Pay Surcharge Every Time You Pay With Credit Card

Federaljack --
Visa and MasterCard know there is nothing that American consumers love more than fees and surcharges. That’s why the credit card companies are reportedly looking to do away with longstanding rules that prohibit merchants from adding on extra costs to customers who pay with credit.

According to the Wall Street Journal, it’s about time for the credit card networks and card issuers to settle lawsuits involving the swipe fees charged to merchants. As part of this settlement, which involves more than 50 suits filed during the last seven years, it’s possible that merchants will be allowed to tack on surcharges for customers who want to pay with plastic.

The plaintiffs — which include grocery biggies like Kroger and Safeway — allege that credit card providers have long conspired to collude on swipe fees, effectively removing any competition from the market and squeezing exorbitant fees from merchants, which they have then been forbidden from passing on to customers.

In 2011, the hotly debated Durbin Amendment to the Dodd-Frank financial reform legislation attempted to severely limit the swipe fees banks charged merchants for debit card transactions. In the end, the average fee was cut in half, but the amendment did not affect credit card transactions. Read more >>

One in Five U.S. Households Have a Negative Net Worth

About one in five U.S. households owe more on credit cards, medical bills, student loans and other debts that aren't backed by collateral — so not including car loans — than they have in savings, checking accounts and other liquid assets, according to a new University of Michigan report.

"Some families have not been able to make substantial headway," said Frank Stafford, an economist at the U-M Institute for Social Research and co-author of the report, in a statement.

Average savings levels have gone up since 2008. But the U-M research showed that there had been no improvement in financial liquidity between 2009 and 2011 — except among families with more than $50,000 in savings and other liquid assets. Families who could afford to save more money often did so because they feared the worst. More...

Survey: One-Third Don’t Pay Bills on Time

More than half of adults nationwide — 56 percent — have no budget and one-third don’t pay all of their bills on time, a financial literacy survey shows.

The survey, released Tuesday to recognize Financial Literacy Month, also revealed that 39 percent carry over credit card debt from month to month; two in five are saving less than they were a year ago and 39 percent have no day-to-day savings.

For the first time, the survey looked at how people use pre-paid debit cards. The results revealed that 72 percent use pre-paid debit cards to keep from spending money they don’t have, and 73 percent believe the cards are safer than carrying cash. More...

Consumer borrowing surges in November

Image via Wikipedia

Consumer borrowing surged in November by $20.4 billion, the Federal Reserve said Monday. That's the largest monthly gain in a decade.

Consumers took out more loans to buy cars and swiped their credit cards frequently to purchase holiday gifts.

The Fed's category that measures credit card debt rose by $5.6 billion, the most since March 2008. Its gauge that tracks auto loans increased $14.8 billion, nearly matching July's gain that was the biggest since February 2005.

The third straight monthly increase in overall borrowing marks a departure from the more thrifty habits practiced during and immediately after the recession, when credit tumbled and the savings rate climbed. More...http://www.usatoday.com/money/story/2012-01-09/November-consumer-credit-surges/52469942/1

Man jailed for cashing Chase check at Chase Bank - loses car and job

Image via WikipediaBy Eric W. Dolan/Raw Story
A 28-year-old construction worker was mistakenly thrown in jail after trying to deposit a check at a local Chase bank, and the whole ordeal ended up costing him his car and job.

KING5 reported that Ikenna Njoku of Auburn, Washington received a home buyer rebate from the IRS, which Chase Bank sent him in the form of a $8,463.21 cashier's check. When he tried to cash the check, a teller at his local Chase Bank suspected it was a forgery and took it, along with his driver license and credit card, to contact bank support.

When he arrived at the bank the next day to get his money, he was arrested for trying to cash a fraudulent check and thrown in jail.

The following day, on Friday, Chase Special Investigations realized the mistake and left a message with the police department. But Njoku ended up staying in jail until Monday morning.

In the meantime, he was fired from his job for failing to show up to work and his car had been towed from the bank's parking lot and was later sold at an auction.

A year after the incident, Chase has yet to apologize to Njoku.

“It’s one thing to make a mistake,” Felix Luna, a Seattle attorney who offered to help Njoku, said. “It’s one thing to make multiple errors of judgment like Chase has made and then, once you realize that your error has caused such harm to somebody else, to just ignore it for a year. I think he deserved better. I think all their customers do.”

Massive Bank fee ripoffs on reloadable prepaid debit cards

Image via WikipediaLast year, Michael Abukhader's 12-year-old son, Jacob, received a $30 NASCAR prepaid Visa card from an aunt who thought it would provide a convenient way to give him cash for birthdays and other events. But once Abukhader, who lives in Queen Creek, Ariz., reviewed the terms of the card, he closed the account.

The card charged a fee of $6.95 for the first purchase, plus a monthly fee of $5.95. Other fees included $2.50 for a withdrawal from a non-network ATM and $4.95 to replace a lost or stolen card. Abukhader explained to his son that after six months, the $30 card would contain a negative balance.

For Jacob, who was initially excited about having his own credit card, "It was a cold, cruel lesson about credit and fees and 'buyer beware,' " Abukhader says. "It was very sobering." Read more...

Credit Bureaus to Include Your Income on Credit Report

KAREN BLUMENTHAL
Look Who's Peeking at Your Paycheck
You may think your income is private information. But the credit bureaus may have your number.

And starting in February, your income—as estimated by the bureaus—may be used to help determine whether you get a new credit card.

Tuesday, the Federal Reserve issued its final rules related to last year's Credit Card Act, which, among other things, will require credit-card companies to consider an applicant's income or assets and current debts before approving credit. To provide flexibility, however, the Fed said that issuers can use "a reasonable estimate" of income or assets based on "statistically sound models."

In hopes of such a decision, the three big credit bureaus have been updating or rolling out products that seek to estimate consumers' incomes, based on information in their credit reports, such as the size and age of their mortgages or the size of their credit limits.

The products also are responding to banks' efforts to tighten credit standards in order to reduce losses and risk. "We look to fill in the blanks where they need the blanks filled in," says John Cullerton, vice president, product management, for Equifax Inc., an Atlanta-based credit bureau.

Credit-card companies can then double-check what we have long reported ourselves against these estimates—which often don't require consumer consent and aren't available to consumers for review.

Indeed, lenders of all kinds are starting to collect ever more financial information from us and about us. Last summer, Fannie Mae began requiring mortgage lenders to verify borrowers' incomes by checking income-tax filings. Instead of simply providing pay stubs and bank and brokerage account statements, home buyers now are being asked to provide copies of their tax returns and are also required to fill out an Internal Revenue Service form known as 4506-T that allows the IRS to release their tax filings to lenders.

Credit scores, which have been long a key factor in whether you get a loan or a credit card, may not be sufficient for many future credit decisions. With the new credit-card law requiring credit-card issuers to consider a customer's ability to pay before opening new accounts, the Fed had proposed requiring people to report their own income or assets when applying for credit.

But retailers feared the proposed rules would squelch their ability to instantly open credit accounts at the cash register because shoppers wouldn't want to disclose such personal information in the middle of a store. Both retailers and the credit bureaus asked the Fed to allow them use alternatives such as the credit bureaus' income estimations instead.

Card companies already are asking for more detailed information in their online applications. Capital One is asking applicants to disclose how much they pay in mortgage or rent payments, how much they have in bank accounts and how much is in their investment accounts. Bank of America and Chase are requiring household income estimates.

In the past, the companies relied on self-reported income information. But lenders already are starting to use Experian PLC's Income Insight product to verify what individuals report, says Brannan Johnston, vice president, income and deposits for the Costa Mesa, Calif., credit bureau.

Experian came up with its estimates by matching credit reports against a deep database of wages and interest and investment income and determining what information about the number of accounts, total credit, payments and other factors best predicted income.

Mr. Johnston says the income estimates also may be used to decide whether to increase a credit limit, since information on credit-card accounts may not be available or up-to-date. In addition, collection agencies have been interested in using the data to determine the most profitable accounts to pursue.

TransUnion LLC, a Chicago-based credit bureau, says most uses of its updated income estimates so far have been used for marketing pre-approved credit cards or other consumer offers, though lenders are also interested in the opportunity to calculate a debt-to-income ratio to see how extended a potential borrower might be.

Experian estimates income to the nearest thousand, while TransUnion offers a range. But both acknowledge the estimates are just that. Experian says that more than 85% of the incomes it estimates at about $35,000 will indeed be below $50,000—but that's hardly precise. Chet Wiermanski, global chief scientist at TransUnion, said it isn't uncommon for estimates to be off by $15,000 or $20,000.

Because the bureaus' numbers aren't exact, the companies say their contracts prohibit lenders and credit-card issuers from turning down customers based solely on the information. The estimates may, however, prompt a request for more details from borrowers, like pay stubs or tax returns.

Equifax, through its Work Number business, also provides employment verification and payroll data collected electronically from about 2,000 employers. Lenders, potential lenders, insurers and debt collectors can access the information without getting an individual's specific consent if they're using it for permissible purposes under credit laws. More...

Consumer Credit in U.S. Drops Record $17.5 Billion

Vincent Del Giudice
Consumer credit in the U.S. dropped a record $17.5 billion in November as unemployment close to a 26- year high discouraged borrowing and banks limited access to loans.

A labor market that’s shed 7.2 million jobs since the recession started in December 2007 is restraining consumer spending that accounts for about 70 percent of the economy. Fed policy makers have said tighter bank lending standards and reductions in credit lines are hampering the recovery.

“Double-digit unemployment is eroding consumer confidence and the uncertainty is prompting consumers to pay down their credit card debts,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “We have not seen such a wholesale reduction in consumer credit since the last time we had double-digit unemployment rate following the early ‘80s recessions.”

The series of 10 straight declines in consumer credit was the longest since record-keeping began in 1943.

Treasury two-year notes gained the most in three weeks after the Labor Department said today that companies reduced payrolls in December by 85,000 workers after adding 4,000 a month earlier. The unemployment rate held at 10 percent.

Stocks, Yields

Two-year Treasury yields dropped below 1 percent, to 0.97 percent at 4:52 p.m. in New York, from 1.02 percent late yesterday.

Revolving debt, such as credit cards, plunged by a record $13.7 billion in November, the Fed’s statistics showed. Non- revolving debt, including loans for autos and mobile homes, declined by $3.8 billion. The Fed’s report doesn’t cover borrowing secured by real estate.

Auto sales in the U.S. climbed in November to a seasonally adjusted annual rate of 10.92 million, up from 10.45 million in October. The pace increased to 11.23 million in December, the strongest since 14.09 million in August, when Americans took advantage of government incentives.

Consumer Spending

Consumer spending increased in November for the sixth time in seven months as Americans took advantage of discounts during the holidays, Commerce Department figures showed Dec. 23. Faster growth in sales and improvement in households’ balance sheets depends on job creation.

“U.S. consumer credit quality remains under considerable stress due to persistently weak labor market conditions,” said Michael Dean, managing director at Fitch Ratings. A report from Fitch on Jan. 5 showed delinquent balances on credit cards at a record level.

At American Express Co., defaults and delinquencies fell to 2009 lows. AmEx was the only one of the “Big 6” credit-card issuers to post November declines in write-offs and delinquencies, the New York-based lender said in a Dec. 15 regulatory filing.

Bank of America Corp. Chief Executive Officer Brian T. Moynihan has said the largest U.S. lender needs to reduce the loss rate on credit cards, which ranked highest among the nation’s six biggest card companies in November. Bank of America’s card defaults are “still very high,” Moynihan, 50, said.

‘Significant Bubble’

“As an industry, we over-lent and customers over-borrowed, and that led to a fairly significant bubble,” Moynihan said Jan. 4 in an interview on Bloomberg Television in Raleigh, North Carolina. “We have to help lead the economic recovery. At the same time, we have to be responsible lenders.”

Banks have responded by tightening credit standards, for consumers and companies. Fed Governor Elizabeth Duke said in a Jan. 4 speech that total loans on banks’ books fell at an annual rate of more than 11 percent in the third quarter. While banks are reducing lines of credit and tightening lending standards, small businesses are also losing their business relationships with banks as firms fail, merge or reduce their loan portfolios, Duke said.

Broken Relationships

“When existing lending relationships are broken, time may be required for other banks to establish and build such relationships, allowing lending to resume,” Duke said.

Britt Beemer, chairman of consumer polling firm America’s Research Group, said in a Dec. 21 interview that if lenders weren’t cutting customer spending limits and rejecting more credit-card applications, holiday sales would have been stronger.

December same-store sales climbed 3 percent, the biggest gain since April 2008, Retail Metrics Inc. said yesterday in an e-mailed statement.

Six Degress of Desperation; Alarming Rise of Abject Poverty

oftwominds.com/blog
What Must Be Addressed: Rising Abject Poverty

While the mainstream media hypes bogus statistics and endless propaganda about the economic "recovery," and Wall Street pockets billions in bonuses, abject poverty is rising while the government dithers away trillions.

CLARIFICATION: Many readers wrote to ask about the specific dates mentioned in yesterday's post. I did not realise I'd cast such an aura of mystery; 12/18/09 is OEX--options expiration, and Bullish market players usually ensure markets rise through OEX.

January 1, 2010 has two significances: Wall Street players will have booked their mouthwatering bonuses for 2009, and thus will be ready to go short to profit from the coming decline in stocks. Also, there will be a lunar eclipse on Jan. 1, and in at least one astrological tradition (Vedic/jyotish), eclipses are not considered positive omens.

I define abject poverty as lacking shelter and sufficient food to stave off hunger. By this simple measure, abject poverty is rising in the U.S. even as Wall Street pockets billions in bonuses, the government squanders $2 billion a day in Afghanistan and trillions more on toxic mortgage securities and other bailouts of the Power Elites.

Yes, there are homeless shelters and food stamps, but the reality of how many are living on the knife-edge financially is not captured in the usual (manipulated and massaged) government statistics.

The reality is better captured by this item from BusinessWeek's December 16 issue:

Almost half (46%) of 2,148 consumers surveyed recently said they weren't confident they could come up with $2,000 within a month in a crisis--from savings, family, friends, credit cards or other sources.

Even among those earning $100,000 to $149,000 a year. almost 25% doubted they could raise it, according to the survey conducted by research firm TNS with academics from Harvard Business School and Dartmouth College.

"We wanted to know if people could fix a broken car or furnace," says Harvard finance professor Peter Tufano, who adds that most studies he has seen measure "how much cash people have... not how much they can access."

The survey results surprised him. "The ability to cope with emergencies is much less strong than we might have thought."

This survey offers a staggering set of implications. Let's grant that we have no idea if the survey was scientific, but we can assume that the academics from Harvard Business School and Dartmouth College would not besmirch their reputations with wildly inaccurate or fatally unrigorous data collection.

Let's follow the idea that 25% of households earning $100,000+ can't lay their hands on a meager $2,000. First off, only about 20% of households earn above $100K. Most households make do on a sum closer to the national median of $46,000.

What does it mean when households not only don't have $2,000 in cash (savings), but they also lack the ability to put their hands on $2,000 from family, friends, or even credit cards?

We can surmise:

1. Their social/family networks are either threadbare or populated by others without savings or credit;

2. Their creditworthiness is near-zero. Either they've maxed out the credit they once had, or their previous credit lines have been cut off in the general reduction of risk/credit, or they are in arrears/default and thus have zero credit.

It's also possible, and perhaps even probable (though we have no data to support this projection) that both are true: most of those in Americans' social networks are in dire straits/hanging by a financial thread and their access to credit either private or institutional is near-zero.

We might even extend our query deeper into social networking, and speculate that many Americans no longer possess a social network populated with people who they could ask for a loan. (A 1,000 "friends" on Facebook might not replace even one real friend.)

We might also speculate that many citizens are now wary of loaning their dwindling precious reserves of cash to anyone, even friends, who they rightly anticipate will be unable to pay back the loan if the economy continues devolving.

Perhaps the cultural ethics of the nation have been so eroded by the endless (and apparently richly rewarding) scams, fraud, embezzlement, cheating and lying that people no longer trust even their friends to act with fiscal responsibility--a suspicion fueled, perhaps, by the very fact that few were able to save even a paltry $2,000 for a rainy day.

Or it may just be that the majority of Americans are essentially one paycheck or unemployment check away from homelessness and hunger, and thus the social networks of most households are populated by others in the same general economic situation.

If so, we might ask: why have so many households failed to save even a modest sum? Let's grant that many households may well have already consumed their savings as job and pay cuts eroded household income. Medical emergencies alone apparently account for a significant percentage of financial ruination (foreclosures and bankruptcies).

But we would be remiss not to ask if some households have done better than others as the bogus prosperity evaporated, and if so, why. The answer is not difficult but it is terribly painful to those embedded in American culture's permanent adolescence: long-term shared sacrifice.

Those of you who reside in states with large immigrant populations probably know families who bought a home, and by combining three, four or even five incomes, paid off the mortgage in a few years. Was this possible if every household worker spent lavishly on consumer goods and the "luxury lifestyle" propagandized by TV? No. It was only possible if all the earners in the household rejected consumerist appeals to squander money and chose instead to sacrifice desires for the greater good, i.e. reducing the mortgage to zero and assemble a substantial savings (six figures in many cases).

Such thrift was commonplace in the post-Depression decades. People did not trust banks, hence my grandmother has six savings accounts, most with modest sums--she owned more savings accounts than dresses.

I remember my first credit card, whch I only applied for after years of accumulating savings. I already owned land before I ever "owned" a credit card. This was common in the so-called "hippie era," which generally distrusted debt and institutions like banks. Hippies paid with cash or barter--at least until they devolved into yuppies.

This is not to suggest every household was financially able to amass substantial savings, but it is an open question to American society: how much credit and cash which could have been saved, with relatively modest applications of sacrifice and restraint, was squandered on "luxury goods," toys and travel?

Yes, the zeitgeist (especially television) encouraged rampant consumption and saving has been disencentivised for years by super-low interest rates. But nonetheless we have to ask how many private trillions were squandered, as a sort of cultural match to the trillions in public taxpayer funds squandered to maintain the financial Elites in their positions of power and privilege.

The responsibility for our financial ineptitude and precariousness runs both wide and deep.

For a first-person view, I turn to correspondent Doug W.:

For 2-1/2+ years, I have been analyzing, discussing and discussing the Economic Maelstrom we are in and it's potential social, political and international relations effects, but yesterday and today I saw an actual effect of this relentless unforgiving Storm.

Because I shut down internet and cable to my house, I use the computer at a branch of the Monmouth County (N.J.) Library System. This is located in an affluent town a few miles south of Red Bank & Rumson (a very wealthy town).

Yesterday at about 4:30 PM, I parked my car near a late-90s Toyota Carmry loaded to the roof with bags, clothes, suitcases and boxes. There was a woman in her fifties --I think--sitting in the car; I thought she was getting ready to leave. I went in to use the computer. When I left at 6:15 PM she was still there. I realized she was homeless. As I drove home, I remembered all the stories I've read in newspapers, on FinancialArmageddon.com, and elsewhere over the last two years about formerly middle-class people losing their jobs and then their homes and living in their cars; I realized how close I have come to that fate.

People who have never known homelessness or financial fear are now shell-shocked by forces they don't understand.

At about 1 AM I woke up (I haven't slept well for more than a year). It was raining very hard and it was cold out and I wondered about the woman at the library; and the countless millions of families and individuals on the edge of financial-economic oblivion around our once wealthy country worrying about what tomorrow will bring.

I realized how lucky I am --even though I must sell (or lose) my home of 24 years-- to have some investments and a home with NO DEBT in South Carolina to which I can retreat.

I just arrived here at the library a few minutes ago...the lady is still sitting in her car in the same parking spot.

Thank you, Doug. As someone who was down to his last $100 in cash during the last Great Recession (1981-82), I know the gnawing anxiety of being broke. (Yet I remain a debt-serf, too, still owing a mortgage.) Maybe such proximity to ruin is what sparked a fiscally conservative mindset in many of us. If so, the unlucky people are those who believed in the fantasy of endless asset-bubbling wealth and prosperity.

Correspondent Michael N. checked in with this account of how many households are balanced on a financial razor's edge:

I'm a part-time mortgage broker (in one form or another for about 24 years) and so I know the typical financial position of people. I can report that NONE of my originated loans have ever gone into foreclosure, but I must add that the majority of the people that I work with live paycheck-to-paycheck. This is for AAA, 6-digit income professionals. This is primarily why I have concluded "no way out" - either for the govt or society. We're in a debt trap.

Thank you, Michael. I am afraid I must concur with your conclusion.

Here is the first step to fiscal solvency and a saner worldview: turn off the TV except when watching quality films and documentaries via DVD. Take a walk outside in Nature; it will change your perspective for the better. (Thank you, Ken R. for this link).

Research how others are living well on absurdly modest sums of money; for instance, CONFESSIONS OF A BOTTOM FEEDER . (Thank you, Phillip H. for the link.)

We as a society have to deal with the rise in abject poverty on the local (decentralized) level. Hunger can be alleviated by the food stamps program, which helps feed over 30 million citizens for $30 billion a year--absurdly cheap when you consider we are blowing $2 billion a week in Afghanistan (gasoline and jet fuel are supposedly about $30 a gallon, delivered to forward bases). $30 billion is a mere 1% of the Federal budget. As Winston Churchill noted, putting milk in babies' bellies is a wise investment in the future--especially when it costs a mere fraction of the $8 trillion lavished on the banking sector Elites.

I have written about this many times recently:

Social Welfare, Socialism and Healthcare (May 19, 2009)

Unemployment: The Gathering Storm (September 26, 2009)

The Return of Big Government and the (de facto) Welfare State (March 17, 2009)

We as a nation must grapple with the difficult issue of providing shelter to millions of citizens. That will very likely involve setting aside secure (seasonal) campgrounds for tent cities and free RV parks, as well as some local control of housing units which have slipped between the cracks of bank/speculator ownership. As in: last previous known owner has 60 days to pay the taxes and bring the property up to livability codes or they forfeit the property to the municipality.

The days when some distant bank/fund owning 1/2,500th of a mortgage securitization can supposedly "own" a real house in a real neighborhood and do nothing but let it rot should end; either the "owner" (whoever that is, when the underlying mortgage has been tranched and sold and the mortgage holders purposefully avoid foreclosing just to avoid taking unambiguous ownership) maintains the property or they forfeit it to the community. Ownership entails responsibility: No responsibility accepted, ownership revoked.

There is no simple solution to rising poverty; the answer is not centralized or top-down. Radical self-reliance works on both a personal and community level.

Meredith Whitney: "Government Out of Bullets"

CNBC.com
The government is running out of ways to help the economy as the US faces major issues regarding credit and employment ahead, banking analyst Meredith Whitney told CNBC.

"I think they're out of bullets," Whitney said in an interview during which she reinforced remarks she made last month indicating she is strongly pessimistic about the prospects for recovery.

Primary among her concerns is the lack of credit access for consumers who she said are "getting kicked out of the financial system." She said that will be the prevailing trend in 2010.

Despite being able to borrow at near-zero percent interest, banks are not taking that money and putting it back into the marketplace. The Federal Reserve said Monday that consumer lending dropped 1.7 percent on an annualized basis in October, the ninth straight monthly decline.

With consumer spending making up about 70 percent of gross domestic product, the inability of even credit-worthy consumers being able to be able to borrow could put a severe crimp in future growth.

"What's so frustrating is you have an administration that is arguing such a populist (ideology) and not appreciating all the unintended consequences that the consumer and small businesses have far less credit," Whitney said.

"You're going to get a situation where you revert from a consumer standpoint," she added, "where those that had bank accounts for the first time, credit cards for the first time, homes for the first time get kicked out of the system and then fall prey to real predatory lenders."

The problems taken together also will pose difficulties for investors.

"I have 100 percent conviction that the consumer is not getting any better and there's not more liquidity," Whitney said. "So if everything touching the consumer is going to be represented in the S&P, then the S&P is going to be under pressure."

The solution, she said, is for the government to take proactive steps that will give consumers more money to spend.

"I don't think you can cut taxes enough to stimulate demand," Whitney said. "For a 2010 prediction, which is so disturbing on so many levels to have so many Americans be kicked out of the financial system and the consequences both political and economic of that, it's a real issue. You can't get around it. This has never happened before in this country."

Massive Bank Protest in Chicago

Rebecca Kelley
If you want bank reform, this protest in Chicago over the next two days, Monday, Oct. 26 and Tuesday, Oct. 27, might be the place where you will want to be. Rally organizers including, Public Citizen, the AFL-CIO, and Change to Win, will be in Chicago tomorrow outside the American Bank Association annual meeting at 11:30 a.m., Oct. 26 at 301 North Water Street.

Organizers say it will be a massive rally to blow the whistle on financial institutions that they say, caused the economic crisis by taking billions in taxpayer bailouts. Protesters say Americans are facing shrinking pensions, risk foreclosures and unemployment, state budget cuts, predatory lending, outrageous overdraft fees, and sky-high credit card interest rates.

Reining in the banks is what protestors are demanding along with oversight, accountability and reforms. The organizers of the rally say they organized the protest now because Congress is taking up regulatory legislation this month that includes the idea of a Consumer Financial Protection Agency.

The New Debtors Prisons

Image by Melody Kramer via Flickr

Charles Hugh Smith
Local government is desperate for new funding but doesn't dare tap the wealthy. So they're busily criminalizing poverty and filling new Debtor's prisons.

Correspondent Jeff Ray sent in this story Milking the Poor: One Family's Fall Into Homelessness (The Atlantic) which is representative of the trend in local government to criminalize poverty for its own enrichment.

Here's the deal. Local government has grown fat in a decade of gargantuan capital gains and real rising real estate taxes. Employees pulling down over $100,000 each are legion, as are public retirees pulling down over $100,000 a year in pension payments. Local government has added 15% more employees even as population grew by a meager 3%. (The numbers may vary in your area but the percentages won't.)

Now the seven fat years are over and local government is not liking the seven lean years. Now that housing has plummeted, so have the tax rolls; capital gains have dried up and even sales tax revenues are crashing. Despite the usual bleatings of hope, the chances of tax revenues recovering are slightly lower than the proverbial snowball's chance of remaining frozen in Heck.

Foreclosures: 'Worst three months of all time' Despite signs of broader economic recovery, number of foreclosure filings hit a record high in the third quarter - a sign the plague is still spreading.

Meanwhile, a perfect storm is gutting public pension funds. More Pain for State's Taxpayers, Cities: CALPERS losses $50B. In order for the State amd local governments of California to meet their future pension obligations (paid by CALPERS, the massive public pension fund), they need to kick in hundreds of millions of dollars more in coming years, even as their revenues are falling.

The conclusion that the medical and pension benefits which were promised in the fat years are no longer payable is anathema to public unions and managerial staff alike, and so the machinery of local government has geared up to stripmine the citizens like a giant trawler stripmines the sea: parking tickets have been jacked up to $60 or more, traffic violations are in the hundreds of dollars, speed traps abound, and as noted in the top story, fees for "crimes" like driving without auto insurance now cost more than the insurance itself.

And gosh forbid if you don't pay on time--the penalties double the original fine and then go up from there.

Is there anything more pernicious, malicious and immoral that this criminalization of poverty to engorge the coffers of local government? If John Q. Citizen defaults on his credit card, he might have to endure harrassing phone calls from bill collectors. But worst case, he can unplug his phone or cancel that number and get another phone number. Fortunately, the bank cannot have him imprisoned (yet).

But local government isn't quite as kind and gentle as the bankers. Mess with their revenues (i.e. don't pay the hefty fines they levy) and they'll haul your carcass into court and then into jail (can't make bail? Too bad. You're a full-blown criminal now.)

Exactly what is the difference between racking up $1,000 in fines off an innocuous violation and being imprisoned for lack of payment and a 19th century-era Debtors prison?

Isn't this part of the reason why the Parisian mobs tore down the Bastille?

Does this make any sense at all, arresting people who can't pay their nonsensically stupendous fines and penalties just so government employees don't have to take a cut in pay and benefits? When did a ticket go from $50 to $300 and up? And why? Does anyone think the cost leaped up "for the public good"?

Is getting nailed for a ticket you can't pay really a deterrent to being too poor to keep your auto insurance current?

Let's follow this all the way to the end. Now that John Q. Citizen is in jail because he was nabbed driving without insurance and a big fat fine is outstanding, aren't the taxpayers throwing away $50,000 to $100,000 a year to process his tortured journey through the Kafkaesque court and jail system with those other "dangerous criminals"?

Hey, the war-on-drugs/prison/gulag pays very well, thank you, and filling cells with Mr. Citizen is just grist for the mill.

Now when Mr. Citizen is released (darn it, we can't get blood from a turnip!), his car has been impounded and he owes the towing yard $1,000 which he doesn't have. So he no longer has a car to get to work, or even drive to an interview.

OK, so maybe he was irresponsible in not setting aside enough money for the car insurance. Is that now a criminal offense? Is this the best use of police officers, judges, jails and the "justice" system? Is anyone being deterred by the ruthless criminalization of poverty? Please make the case for that, local politicos and bureaucrats.

Great work, local government. You've not only stolen the citizen's last few dollars, you've also deprived him of his employment opportunities and livelihood.

Here's a thought: you need more tax revenue? Then make the case to the citizens at the ballot box to pay more. Prove you're not squandering the tax money you're already getting by the boatload. Show us how you're going to spend our money as carefully as we do.

If you really want to stripmine somebody's cash assets, why not start with your local Wal-Mart? I can guarantee you they won't leave town when you enact a new ordinance taxing all retail establishments of 50,000 square feet or more.

Or impose a tax on all homes worth more than triple the median price in your zip code. You want to nail somebody with higher taxes? Then go after the top 5% who still have assets. Don't trawl the streets for the folks who can least afford your rapacious imposition of authority.

Bankers aren't the only rapacious greedheads in this nation. Look no farther than city hall, the county building and the State capitol. Just hope it isn't you who runs low on cash and gets nailed with that $395 ticket which soon morphs into $695 and an arrest warrant.

You can't blame local government avarice on Washington or the bankers. All this greed is homegrown, local and entirely unnecessary. As it stands now, 10% or maybe even 20% of the citizenry will soon have outstanding arrest warrants for what amounts to local government Debtors Prison.

Come November 2010, we can only pray that the citizenry "takes care of business" at the ballot box, and all the incumbent politicos who approved this evil criminalization of poverty get tossed out en masse, regardless of party affiliation.

Pre-approved Credit Card with APR of 79.9 Percent

Image by liewcf via Flickr

The offer is for a Premier card from First Premier Bank, which is based in South Dakota. On its Web site, First Premier says it is the country's 10th largest issuer of Visa and MasterCard credit cards. The site also says it "focuses on individuals who have less than perfect credit but are actually still creditworthy."

A spokesman with the Federal Deposit Insurance Corporation (FDIC) said interest rate limits on bank cards are set by the individual state and not on a federal level. According to information on the South Dakota Legislative Web site, there is "no maximum or usury restriction." In other words, the individual bank can set its own interest rate limits. Read More...

Banks Raiding Accounts to Pay Debts

Image via Wikipedia

Lindsey Rogerson
An increasing number of hard-pressed Scots, struggling with debt repayments, are finding themselves left without money to pay their rent, heat their homes, or even buy food, because their bank is snatching wage and benefit payments from their current accounts without warning.

Money Advice Scotland and Citizens Advice Scotland both confirmed to The Herald that they have seen a considerable rise in the number of their clients being left in extreme financial hardship as a result of set-off. This little known practice gives banks the right to take money without warning from a customer’s account if they fall behind with repayments elsewhere within the same banking group, such as those on a credit card or loan account.

Yvonne MacDermid, chief executive of Money Advice Scotland, said: “We have seen an increase in this [practice] and I think we will see more of this, especially as banks can’t bring in so much money through [bank] charges etc.”

The only way to stop a bank using set-off is to ensure that current account, savings account, credit card and personal loans are all held with separate institutions. However, it is often not possible for indebted consumers to switch banks. Indeed a CAS bureau in the North of Scotland had one client who was threatened with court action by her bank for attempting to move her current account to another bank. This threat was issued after the bank had taken £400 from her account without warning, leaving her with no money to live on.

Kaliani Lyle, chief executive of Citizens Advice Scotland, said: “While setting-off is legal, it can place severe hardship on a client if their bank uses all the wages or benefits that are put into an account to pay towards other commitments. And, as ever, the people who are most vulnerable to this are those who are struggling on the lowest incomes to begin with.

“If someone is struggling with debt, it’s not in anyone’s interest – including the bank’s - to put the client into even deeper financial trouble. We would ask all banks to look very closely at their procedures in relation to setting-off, and to be as flexible as possible – taking clients’ individual circumstances into consideration.”

However, questions have now been raised, by consumer groups, as to whether banks using set-off are in fact breaching their own voluntary code of practice. In many cases money is been snatched from accounts by banks, less than two weeks after a payment has been missed and just days before direct debits for mortgage, council tax and utilities bills are set to come out of a customer’s account. The guidance on the Banking Code, to which all UK banks are supposed to adhere, appears to forbid this.

It says that banks “should acknowledge that income should only be used to repay ‘non-priority’ debts once provision has been made for any ‘priority’ debts. The subscriber [bank] should leave the customer with sufficient money for reasonable day-to-day expenses”.

A missed payment on a credit card or unsecured personal loan is not a “priority debt”. The Banking Code Standards Board is currently investigating 12 UK banks over their approach to set-off, after a catalogue of suspected breaches was sent to it by consumer groups. One such case involved a client at an East of Scotland CAB whose bank moved all his part-time wages and benefits from his account to go towards arrears on a personal loan. This action left the client in financial hardship, with no access to funds for himself or his family. On the face of it this appears to be a cut and dried breach of the Banking Code.

However, the issue of how and when set-off is applied has yet to be resolved and the Banking Code Board will cease to exist at the end of this month when responsibility for bank accounts passes to the Financial Services Authority. The FSA told The Herald it had not written a specific rule which would prevent banks taking money from customer accounts via set-off without prior written notice as it insists they must do in the case of bank charges. However, a spokesperson said that they believed notifying customers about set-off would be covered under its more general “appropriate information“ rule.

“From 1 November the appropriate information rule will apply covering pre-sale, to the sale itself and post-sale. This means that even if a customer has an existing contract, the firm must continue to provide information to enable that customer to make ongoing decisions on an informed basis.”

In addition the regulator said any bank taking money which left a customer unable to meet priority debts or buy food could be held accountable under its treating customers fairly principle, pointing out that it expected banks to be every bit as thorough in identifying financial hardship cases with regard to set-off as it was with regard to the bank charge waiver.

Wells Fargo Sticks it to Card Holders Who Bailed Them Out

Boston Globe:
Wells Fargo raises credit card rates
Wells Fargo & Co. plans to raise interest rates on a majority of credit card customers by 3 percentage points before new rules limiting such increases take effect, a company executive said. “This is something we’ve been contemplating for quite a period of time,’’ Kevin Rhein, group head of card services, said yesterday.

Wells Fargo began advising customers this week that the change takes effect Nov. 30. That’s one day before the chairman of the House Financial Services Committee, Massachusetts Democrat Barney Frank, wants curbs on rates and fees under a new US credit card law to take effect. He plans a hearing today on moving up the date to Dec. 1, from February, to head off increases by card issuers.

Rhein did not comment on whether Frank’s bill had any bearing on Wells Fargo’s decision. The bank is also eliminating over-limit fees, which are imposed when customers exceed their credit limits, he said.

Wells Fargo, the eighth-biggest US card lender, accepted $25 billion from the federal bank bailout program.

Bank of America Corp., the second-biggest US credit card lender, has said it won’t raise rates and fees on customers in good standing before the effective dates of the Credit Card Accountability Responsibility and Disclosure Act, which takes effect in stages.


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Is it any wonder then that Ann Minch staged a DEBTOR'S REVOLT! last month in protest after the interest rate on her credit card was jacked up by 30% even though she made all the payments on time?

Message to Bank of America: I've decided to it's time to take a stand against the banksters' usury and greed! If our founding fathers were willing to sacrifice their LIVES for our FREEDOM, then I can certainly sacrifice my credit score and be willing to be sued. I'm staging a DEBTOR'S REVOLT!
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