Wednesday, May 31, 2006

Truth In Advertising?

Issuers of creditcards obviously are above the law. Watch some of their commercials on TV. The ads have nothing to do with opening accounts for creditcards. They have everything to do with promising that you are financially smart if you open your account with the company advertising. They use premiums such as putting a 1% amount of each purpose in a savings account, but they fail to tell you about the fees you will most likely pay that will more than offset that savings. There is a lot of psychological manipulation in these ads. I wouldn't be surprised if they have spent millions on psychological research to come up with these approaches. Protect yourself and hit the mute button on your TV when these ads come on. Creditcards will make you business savvy, creditcards will make you sexy, creditcards will make you smarter, creditcards will make you wealthy, creditcards will help you save more money, creditcards, creditcards, the magic financial panacea to your financial problems.Write the TV station and complain about the deceptive ads.

Tuesday, May 30, 2006

Trends in Creditcards

1. Industry Consolidation. In the 1990s there were 10 issuers of creditcards. Today, we are down to 5. The business hasn't been growing lately, so the issuers of creditcards are trying to steal business from each other. Now they are buying out competitors, and that means less competition. That is bad news for customers.

2. Growth in Small Charges. To grow the outstanding balances on creditcards, there is going to be more of a push to allow small charges. An MSN Money column says, "Research firm TowerGroup predicts the volume of small electronic payments -- 'micropayments' -- will grow to $11.5 billion by 2009 in the U.S. and $40 billion globally." Why do you think so many people have creditcards in their wallets, creditcards in their drawers, creditcards next to their phones, creditcards in purses, and more creditcards coming in the mail? Issuers of creditcards are pushing to replace cash. This is another trap to avoid.

3. Credit Card Fraud. Security of your account information is poor. Visa found only 17% of the 231 large merchants it questioned were following payment card industry guidelines regarding customer data security. You hear about some kind of identity theft every day in the news. This is a compelling reason to avoid creditcards altogether, and to monitor your credit report using an alert service to notify you when your credit is checked.

In addition, the issuers of creditcards are always updating their bag of tricks to trip you up into defaulting - so just close your account - or eventually get duped.

Sunday, May 28, 2006

The Wise Use of Credit?

Here is a short film from 1960 to teach about the wise use of credit. (Windows Media File) It seems that things have changed a bit. Banks don't rely on Character, Capacity, and Capital anymore. They issue creditcards to anyone who will have them. They now target those who have just filed bankruptcy - not to help them, but because they know they can't file bankruptcy again for a long while.

The movie suggests that wise consumers read the fine print. We simply don't do that anymore. Creditcards are issued based on signing the disclosure, which serves as the contract. Creditcards have a clause that says you agree to the terms of their contract that will be forwarded after the account is opened, with the creditcards in the mail. If you ask to see it before you open the account, they will refuse to disclosue it. So a wise consumer, according to this movie, would refuse to open the account.

The movie suggests that we borrow to make large purchases instead of saving for them first, but acknowledges that some people do. It is funny how they didn't even mention creditcards. It is also interesting that mortgage terms were as much as 25 years! Today, they can be interest only - or perpetual for a lifetime. It is easy to see that our standards have deteriorated. Lending has become predatory, because the banking industry can't be profitable unless it makes more money off the loans it makes. Creditcards have become the cashcow of banking. That means making riskier loans to justify higher charges, in combination with changing laws to boost collection power. Creditcards are the key today for banks.

Saturday, May 27, 2006

What is Money?

I'm having fun with these old films. This one is about Money (Windows Media File). When you watch this you'll hear the narrator tell you that money has to be something of value, and that our money is backed by gold and silver in the treasury. Folks, our money is simply a promissory note based on the faith in our government to redeem it for it's face value. Our fractional reserve system has diluted the gold and silver backing to 10% of the face value. I have even heard that it is possible that those reserves no longer exist, and the currency is simply backed by faith. The gold and silver are supposed to be collateral for the certificate we use to exchange it for goods and services. It has turned into a promissory note instead. Our money is based on debt. That debt is never really paid, and is cancelled, in part, by printing more money.

Why has the government done this? So they can print more money when they need it, and use a hidden tax called inflation that everyone pays equally, rich or poor, in the dollars they spend. By printing money, they skim off the value of the money already in circulation. That is the problem with a fiat currency, which is what this is called.

Friday, May 26, 2006

Learning our Lessons

Not many years after the depression, the solution to addressing the problems of life's financial emergencies was to borrow as illustrated in a movie from 1935 called "Financing the American Family"(Windows Media File). Seems we didn't learn our lesson from the depression. This is our banking system is leveraging its political power, setting the problems we have today in motion. Lending to families to pay off houseold debts, as portrayed in this film, is the solution for them to get out of debt. Are we morons? Borrow money to get out of debt? That is like an alcoholic having a martini to beat his alcohol addiction.

This sounds a lot like the pitch for mortgage loans today. They lend us money to get out of debt, while "responsibly" reminding us to live within our means, we are enabled in our addiction to living beyond our means. This is like giving a drug addict a fix, while telling him to stop using drugs. Then encouraging him to come back for more when he gets into trouble again. "We're here to help.", they say. This paradigm has gotten out of hand, now they issue creditcards to people in bankruptcy. Highschoolers are encouraged to carry creditcards. College students are not grown up unless they have at least one or more creditcards.

Thursday, May 25, 2006

Borrowing Power

Take a look at this old TV commercial. (Real Audio File) It starts out with a shady character that ends up being the hero of the commercial. Think maybe this was a Freudian slip? The shady characters of banking have convinced us that using credit cards is necessary, and that borrowing money to buy things is not only necessary, but financially savvy.

Wednesday, May 24, 2006

Needs vs. Wants

One of the major problems we have in our financial education these days is distinguishing between needs and wants. Our banks have greatly influenced our financial education by posing as the expert source for learning money management. That is like letting the fox watch the Hen house. They are going to encourage us to borrow money, use credit cards, spend everything we make to boost the economy.

Here is a video (Real Audio File) that is an excellent example of how we are mislead. This is the video's claim: Shopping is a necessary part of everyday life, full of choices and decisions that can greatly impact our lives. This film delvs into why we shop the way we do, and what we can do to be smarter shoppers. Despite the fashion sense of the two main characters, this film contains great lessons like determining your wants versus your needs.

The truth is this video leaves you believing that the secret to distinguishing between needs and wants lies in the fact that you might or might regret the purchase when you get home. If that isn't a way to encourage uncessary spending, I don't know what is. A "need" isn't what most people think it is. A need, in the economic sense, is used for survival - Food, Clothing, and Shelter. It isn't designer clothes, a dinner at and expensive restaurant, or a million dollar home. It is merely the basic product that provides the necessary function to satisfy that need. Everything else is what we want.

The video is correct in the sense that we do make buying decisions based on psychological desires to attract the opposite sex, or fulfill our dreams. That is where we get into trouble, and that is the motivating factor that is leveraged by advertisers. That is how they have turned wants into "needs" in our minds. They've confused us, and we make poor economic choices as a result.

Tuesday, May 23, 2006

Debt Counselors Need Counseling Too!

It is pretty ironic when the place you go to get financial counseling, the very government approved agencies that become your financial guide when your in trouble, get in financial trouble themselves. That sure instills confidence doesn't it? Maybe they just don't get it. They have faith in this flawed fiat currency method of money management - it just doesn't work. What do you expect? The banks are the source of grants, and they are essentially pressuring the agencies to push people away from bankruptcy, even when it is justified. So they have to keep coming back. We may have to watch the whole charade collapse, leaving bankrupt households with a legal barrier to bankruptcy, because there is no court mandated counseling available, and we let them spiral into our homeless population.

Just stay out of debt folks, for all practical purposes there is no safety net since the new Bankruptcy Law has taken effect. Only if you are fortunate enough to navigate your way through the mire, will you get the fresh start you need. That is getting more difficult every day. It isn't worth the risk.

Monday, May 22, 2006

Tricks of the Trade

Credit card contract formation methods should be illegal. You are asked to sign the agreement before you see it, by signing the application. What are they hiding?

Here are some especially problematic terms that can be in your contract: Two-cycle billing. This uses two months of balances to come up with the average daily balance. It can be a big problem for borrowers who only rarely keep balances from one month to the next, because they'll end up paying two months interest for one month's debt. Universal default. This means your card company could raise your rates if you're late on somebody else's bill somewhere else.

If your credit history profile changes at all, they can view that as a signal to raise your rates. Over-limit fees. If you have a $5,000 credit limit and you use your card to buy something that costs $5,010, don't expect the charge to be denied. Instead expect your issuer to charge you a fee of $30 or more. Maybe you think that's worth it for the convenience.

Due times, not just dates. Many, if not most, issuers now consider a bill late if it arrives on the due date after a certain time of day -- typically before the mail is delivered. Then you can get busted for being late, a situation that can jack up your rate to levels over 20 percent and add another $30 or more in fees.

-- Crunch your own statements. Issuers say they could end up spending as much as $57 million to provide customers with customized minimum payment and balance disclosures, but most customers say that's what they want, according to a new report from the Government Accountability Office.

Individualized disclosures like that would let you know how long you'd have to make those minimum payments before you'd bust your balance to zero, and how much you'd pay in interest in the meantime. Don't hold your breath waiting for those statements. Go to an online calculator such as the bankrate Web site to get your own answer.

Go to the Reuters website for the full story.

Friday, May 19, 2006

Asset Protection

Often times, the reason we find ourselves deep in debt is due to a catastrophe of some type. According to research done at Harvard University, 50% of bankruptcies are due to medical bills. This means we must plan ahead for these unexpected events. One way to do this is to do some asset protection. This is especially needed if you get a judgment against you that could wipe you out.

We live in a very litigious society, and high-net-worth individuals are good targets. So the secret to real asset protection? Don't own or control anything. This isn't as simple as it sounds, but a book written by Jay Adkisson, "Asset Protection" is one of the best I've found. Be cautious, because there is a lot of illegitimate strategies that could land you in jail, or at least in the poorhouse. Jay is a highly respected attorney that is combating the fraud at his website This is an area where you have to stay one step ahead of legislators and court rulings, because the law is extremely creditor friendly.

Wednesday, May 17, 2006

Student Loans Just As Bad

Most people think student loans are a good investment. What they don't know about Sallie Mae, student loan guarantees, could be hazardous to their careers and financial future. Be sure to watch the video at the link I've provided here.

To quote Elizabeth Warren, "It's a market in which the protection goes to the lender. And the students get served up like turkeys at the Thanksgiving dinner."

Credit Card Calculator

One of the things that people need to pay closer attention to is how long it would take for them to pay off their credit card balance. Of course calculating this assumes you stop charging to your account and make the same payment every month until it is paid off, which is something that would only happen in a perfect world. But this calculation does give you a sense of what that debt is costing you. Here is a calculator. When you see how long it is going to take, add up the total dollar amount of the payments, then subract out the amount of the original charges, and you have the interest you paid. If this doesn't get you mad, something is wrong.

Tuesday, May 16, 2006

Secret History of the Credit Card

It has been awhile since I mentioned this, but it is an excellent introduction to the problems of using credit cards. Frontline really does some hard hitting journalism, since they are not as sensitive to advertisers than news on the typical commercial TV stations. This report is shocking, if you have never heard about "Universal Default."

Monday, May 15, 2006

There is Hope

For those of us in debt, sometimes it seems like we can never overcome the monster that rules our lives. It is possible though. See stories of those who have. Dave Ramsey's Financial Peace University is a way to have a support group that helps you overcome the behaviors that keep us in debt. If you don't want or need a group, he has this plan and how to make it work for you in a book.

Saturday, May 13, 2006

Opt Out of Credit Card Junk Mail

If you are not using credit cards, you probably still get loads of junk mail of preapproved credit cards, especially if you have just filed for bankruptcy. Go here to find out how to stop the madness, and remove the temptation to open an account "just for emergencies."

Friday, May 12, 2006

Don't Think Debt Is A Problem?

The Center for American Progress has just released a report that finds:

  • Debt has expanded by 30.3 percentage points to 108.4 percent of
    income – the first time since the Federal Reserve started conducting
    this survey that debt exceeded income.
  • Despite low interest rates, debt payments surged to new highs. In
    2004, the typical family spent more than 18 percent of its income on
    debt payments – the largest share since the Federal Reserve started
    collecting these data.
  • The share of heavily indebted households continues to rise. The share
    of households with debt payments greater than 40 percent of income
    rose from 12.8 percent in 2001 to 13.7 percent in 2004.

As a society, we are getting caught in a death spiral of debt. Save yourself before it all comes crashing down. Get out of debt!

Thursday, May 11, 2006

Gold at $700 an Ounce - What Inflation?

This message reached my inbox today from Downside DC, a grass roots effort to hold Congress accountable to the laws they create.

"Gold reached $700 an ounce on Tuesday.
The media, being economically ignorant, mentions oil, Iran, and sunspots as possible causes.
We're just kidding about the sunspots. But it is important to note that no one in the media knows to mention an increasing money supply as the most likely cause of soaring gold prices.
However, the Federal Reserve, at least, must be concerned about an increase in the money supply because . . .
  • They raised the interest rates at which banks borrow from the Fed yesterday
  • They've stopped reporting M3, the best indicator of monetary inflation

We're not trained economists ourselves (though we did sleep at a Holiday Inn Express last night), so what follows is merely our layman's understanding. And if we're wrong, someone will surely correct us, and we'll let you know. But, as we understand it, there are two ways the Fed creates new money . . .

Method #1:
Banks borrow from the Fed using outstanding loans as collateral. The Fed issues an order to the Treasury, new money is printed, and loaned to the banks. The banks then loan out this new money to their customers. These new loans, in turn, can be used as collateral to borrow yet more money from the Fed. When the Fed thinks the money creation caused by this pyramiding of debt is moving too fast, they tend to raise their interest rate to the banks. This gives the banks less incentive to borrow from the Fed, which slows the bank portion of the inflationary spiral. This is what happened yesterday.

Method #2:
The Fed buys government bonds, and the Treasury prints new money to give to the Fed to finance these purchases. So this new currency stays at the Treasury, the Fed gets the bonds as so-called collateral to "back" the new currency, and the Treasury uses the new currency to pay the government's bills. (Yes, our currency is "backed" by debt, and not by real assets like gold.)
Eventually all of this new currency works its way through the entire economy bidding up prices for food and gas and everything else. Including the price of gold, which is the best hedge against inflation, because it is very scarce and has instrinsic value. So . . .

Gold hits $700, the Fed raises interest rates, and stops reporting M3. What does it all mean? It probably means the money supply is soaring and the Fed wants to slow the portion of it that goes through the private sector (the banks), but maintain the portion that is helping fund the government.

Why does the Fed want to maintain the monetary inflation that funds government? Simple . . .
Congress has two ways to fund its deficits. Borrow money or print it. Increased borrowing equals increased demand for money. Increased demand for money drives up the interest rate Congress pays to borrow. This increases the debt still further. The Treasury fights this by printing new money, using inflationary Method #2. But this lowers the value of the dollar. Big lenders, like China, respond by increasing interest rates to compensate for inflation. Either way, the government's interest expense is bound to soar as long as deficits continue to mount.
The Fed is trying to hide this for as long as possible by not reporting M3. Problem is, the gold price gives them away.

The price of gold does not lie. But it is a late indicator.

And you can bet that gold is also being bid up right now because investors no longer have M3 to give them advance warning of monetary inflation. They're hedging. And all of this is very destabilizing.

The best way to stop this viscious cycle is to return to sound money -- dollars backed by gold reserves so that new dollars can only be created as fast as the gold supply increases, which is always very, very slow. Barring that, we can gain some increased stability by making the Fed report M3 again. This could be very important to your economic well-being, which is why we keep harping on it. Congressman Ron Paul has a bill that will do this, and we need to keep hammering on Congress to pass this bill. Hit them again! You can do so here.

Credit Card Signature

When credit card companies try to collect from you by taking you to court, they rely on your signature on the application as proof that you agreed to their contractual terms. First of all you didn't see the terms before you supplied your signature, and second they can't be sure it really is your signature. They didn't make sure it was.

John Hargrave at decided to test the signature security on credit cards. You might find this shocking. If that isn't enough, he did it again, which was even more shocking than the first.

Think the credit card companies are worried about fraudulent charges? Think again.

Tuesday, May 09, 2006

New Movie Documentary about Credit Cards

There is a new movie that is probably being sold on video and/or DVD that would be good for anyone interested in this topic to see. the website is There are some interesting clips on the website. If you think credit cards are a necessary financial tool that you can't live without, you definitely need to see this.

Why Credit Card companies are Loan Sharks

I haven't mentioned this in awhile, but I think it is worth mentioning again. If you think you understand what is in your credit card agreement, you are mistaken. There are a wide array of tricky twists and turns in the agreement that many attorneys have difficulty decifering. One such twist is called "Universal Default" which means that when the credit card company periodically checks your credit score, if it drops from the last time, you have defaulted on your agreement and all bets are off. Your premiums are canceled, your interest rate goes sky high, and whatever else they can take away from you is taken because you didn't uphold your side of the agreement. See more about this in a story done by Frontline and PBS called "The Secret History of the Credit Card."

Monday, May 08, 2006

Teenagers Under Attack

Teenagers are targeted by credit card companies. They are being taught to become dependent on having a credit card, and that it is a sign of maturity to have and use a credit card. As a result they learn to live with debt. As I mentioned before Junior Achievement is telling 1st graders that credit cards are money. We are grooming future candidates for bankruptcy.

Friday, May 05, 2006

Credit Card Companies Target The Bankrupt

According to a report from Los Angeles NBC Channel 4, credit card companies are sending credit card offers to those who have filed bankruptcy. This just goes to tshow you that they want to find people who will default. As mentioned in previous posts, they make 75% of their profit from people who default. That is probably why they pull tricks like creep the due dates on accounts so that people who don't pay attention, assume it is due the same time every month and get caught with a late payment. That late payment defaults you on the agreement and your interest rate goes up, you get high late fees, your miles are cancelled, and you lose any premiums you might be getting. This is nothing short of predatory loan sharking. Why is it legal?

Thursday, May 04, 2006

If You Are Getting Sued - Know What To Do

You likely will not find an attorney to help you get out of paying a debt - they don't do that. They'll defend you, but the first thing they'll do is negotiate a settlement, even if you don't owe the debt. That is fine, if you can afford to settle. If you can't you will have to defend yourself and force the creditor to prove you owe the debt. In the case of credit cards, they are hard pressed to do this according to strict court procedure, and if it is a collection agency that purchased the debt it is even harder for them to prove. You must use this as your defense, that they must prove their case. A great resource for this is a book titled "Beating Up On Debt Collectors" Click here for the book

There is also a book you might consider called Thou Teacheth My Hand To War

Mental Hurdles that Oppress Your Checkbook

Most of us are fairly ignorant when it comes to making financial decisions. No one is born with the skills. Fortunately educators are responding to this in various states. However, they are letting the fox in the hen house. Here is an example of how the subtle nature of these programs teaches kids to be consumers, not savers. Banks are teaching our kids how to manage money - do you think they are going to teach them that credit cards are to be avoided? Somebody needs to teach our kids not to borrow money.

Wednesday, May 03, 2006

Is Your Back Against the Wall?

Are you at the point where you have creditors hounding you? Not the original creditors, but its been long enough that your account has gone to collection agencies? And you can't seem to find the resources to pay up? In that case, it may be best to start enforcing your rights as a debtor, and hold them off as long as possible. Here is one of the best resources I've found to do that - better than hiring an attorney (who will be seeking a quick resolution). Cick here for the Book

Tuesday, May 02, 2006

How to Sell Stuff to Pay Off Debt

What I did to raise money to pay debts was to go through my house and find things I could sell to get the money I needed. Click here for eBay! It is free to sign up, and they have free tutorials on how to list items. If you need to raise money to pay off debts, you need to consider this easy way to turn stuff in your house into money to pay off debts.

Monday, May 01, 2006

Utah Moves Against Consumers

Here is a sign of the times.  Utah passes a new law that bars class action suits against credit card companies.  Are you mad yet?