How US Debt Slaves Get Trapped by “Deferred Interest”

But over the next 2 months, they’ll try to prop up US retailers and the entire global economy.

Credit cards play a huge role in what the US retail industry hopes will be a $682-billion splurge by Americans over the holiday selling season. Already, total revolving consumer credit outstanding – mostly credit cards – has reached $1 trillion, up 5.4% from a year ago, and will surge over the next two months, as US consumers try to prop up the global economy by going deeper into debt.

So the consumer finance industry is proffering its services via store-branded credit cards to make this happen. It’s not doing this for the love of the US economy but to extract its pound of flesh from consumers who don’t make enough money to pay off their credit card balances every month – the very debt slaves that carry the $1 trillion on their backs – and who don’t read the fine print. For them, the finance industry has a special money extraction tool: “deferred interest.”

When consumers are at the cashier or online, they may get offers of 0%-financing and a discount on the first purchase if they sign up for a store-branded credit card on the spot. A study by WalletHub of the financing options offered online by 75 large US retailers found that all retailers that offer store-branded cards with 0% financing use “deferred interest” clauses:

Deferred-interest financing is like a wolf in a sheep’s clothing, pairing an enticing offer – something like “no interest if paid in full” or “special financing” – with a clause that allows the deal to turn ugly if you make the slightest mistake. Paying your bill a day late or owing even $1 when the promotional period ends would enable the issuer to retroactively apply finance charges to your entire original purchase amount, as if the intro rate never existed.

These “deferred interest” clauses are “commonly found in the fine print of retailer payment plans,” it says. They’re easily overlooked in the heat of the checkout battle. But they specify that high interest rates – up to 29.99% among the credit cards studied – may be applied retroactively to the full purchase amount back to the purchase date if one of these two common things happens:

  • Customer misses a monthly payment, or
  • Customer doesn’t repay the full balance within the 0% intro period.

When WalletHub surveyed consumers, 53% said that the biggest draw of a store-branded credit card is 0% financing.

But of those consumers who understood how deferred interest works, 61% said it’s unfair, 50% said it should be illegal, and 67% said they wouldn’t sign up for such a plan.



WalletHub found that 88% of all deferred-interest credit cards in its study were issued by just three banks:

  • Synchrony Bank, which GE spun off in 2015 (32%)
  • Comenity & Comenity Capital Bank (32%)
  • Citibank (24%)

The regular interest rate that is applied retroactively on the original purchase amount ranges from a low of 8% APR to a high of 29.99% APR (at Zales, among others), with the most common range being between 15% and 25%.

Even the low end (8%) of this absurd scale is already high in this low-interest rate environment. But charging nearly 30% APR, when banks pay depositors between 0% and 1.25%, and applying this sky-high rate retroactively under certain conditions to purchases made with “0% financing” shows the extent of the broader interest-rate rip-off.

The disclosures on deferred interest, including when and under what conditions the regular APR kicks in retroactively back to the purchase date, are often hard to find. So WalletHub came up with a “transparency score,” ranging from 0 to 10:

Generally, these two key pieces of information are present somewhere on the retailers’ websites or online disclosures. However, in many cases, the information was difficult to locate and understand. Since most consumers do not look far beyond a tag line advertising, “0% interest,” “no interest if paid in 12 months,” or “special financing for 6 months,” for example, the farther away the key information was from the tag line, the more misleading we considered it to be.

Additionally, we considered the size of the font used to list the key terms in determining the “readability” factor. If the information was buried in a terms and conditions page, readability was automatically scored at zero since the size of the font does not matter if the consumer has very little chance of finding the information.

In WalletHub’s “transparency score,” a number of retailers scored a “10,” including Apple, Kay Jewelers, Home Depot, and Dell. Others were scattered across the spectrum. Pottery Barn and West Elm scored a “0.” They were “the least transparent retailers regarding the use of deferred interest for the second consecutive year.”

People who cannot pay off their credit card balances on a monthly basis generally have little or no savings, no margin of error, and are borrowing to make ends meet. They’re the ones that carry $1 trillion in credit card balances on their backs. And they’re vulnerable.

Delinquency rates on credit cards are already ticking up. In October, Citibank disclosed that it boosted reserves for consumer-loan losses by the most in over four years. Its credit card delinquency rate with North-American branded cards rose to 2.84% and is expected to rise further, CFO John Gerspach told reporters.

He particularly fingered store-branded credit cards. When these customers fall behind, the lending relationship has a “higher propensity” to deteriorate so quickly that Citigroup has to write off their debts, he said.

So happy holiday shopping season – and a nod of appreciation to our debt slaves that will do their best to prop up the US retail sector and the entire global economy over the next two months, and to the lenders that make this miracle possible.

But Sears risks running out of money just before the holiday selling season. Read… Sears Holdings Exhausts its Last Credit Facility




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  78 comments for “How US Debt Slaves Get Trapped by “Deferred Interest”

  1. mean chicken
    Nov 2, 2017 at 2:12 pm

    More likely deferred default, in hopes new bankruptcy laws can be enacted before the ball drops.

  2. Thrasymachus
    Nov 2, 2017 at 2:25 pm

    These *deferred interest* store-branded credit cards can be used strategically as a *deferred cash flow* option. I bought a MacPro for $1400 through Apple’s partner Barclays. I had 18 months to pay it off without interest charges. I paid $100 a month and paid off the computer and cancelled the card. With a Home Depot card, I bought $5000. of kitchen appliances to upgrade a home I planned on selling and paid off the balance from the net proceeds of the house sale. So yeah, to the folks who regard credit cards as *new found wealth* the deferred interest is a honey trap for sure. But for the rest of us it can be a *cash flow* savior.

    • MB732
      Nov 2, 2017 at 2:38 pm

      Agree, but remember all they have to do is post one of your payments, even the final one, a day late and you now owe X% on $5000 regardless of balance.

      Remember almost being taken by one of these years ago and nervously mailing payments way early each month. I’m in the northeast and remit to address was Los Angeles. I suspected remit to for Californians was probably Maine.

      • Thrasymachus
        Nov 2, 2017 at 2:45 pm

        Absolutely. You have to regard your monthly statements as ticking time bombs.

        • Jim
          Nov 2, 2017 at 3:20 pm

          Maybe set up automatic payments to not think about it each month.

        • chip javert
          Nov 2, 2017 at 6:43 pm

          Thrasymachus

          Imagine the horror –

          o Sign up for a deferred credit card of you own free will
          o Buy stuff
          O ACTUALLY HAVE TO MAKE A MONTHLY PAYMENT
          o OMG
          o These credit card people should be in JAIL!

        • RagnarD
          Nov 3, 2017 at 11:10 am

          Yep. I had an “unsophisticated” baby sitter once show me her credit card statement. She had a credit limit of just $250, yet the late fee was $25 or $35 a month, with of course a ~20% interest rate.

          Oh, those brave bankers extending credit to such high risk / low income customers!

          The card companies are kin to the “Sarlacc Pit Monster” in Star Wars. It’s all about having the victim get stuck on the spikes on the pit, and then slowly extracting the vital juices

        • Thrasymachus
          Nov 3, 2017 at 11:20 am

          Wall Street is indeed the Great Pit of Carkoon and credit-card companies are one of the many sarlaccs inhabiting its dark, mucky, life-ending cauldron of prevarication.

      • Drango
        Nov 2, 2017 at 2:58 pm

        The Bank of America app is designed to make it easy to pay the $25 minimum on a credit card bill. I almost forgot that I had to type in the full amount to be paid. If I had forgotten, I would have been hit with a big interest charge on the next bill. The banks will stop at nothing to squeeze every penny out of their “customers.”

        • chip javert
          Nov 2, 2017 at 6:47 pm

          OMG! You actually had to type the amount you wanted to pay. OMG

          Option #2: set up auto-pay for full amount. You will never have to think again.

        • monday1929
          Nov 3, 2017 at 7:58 am

          Chip, the companies take advantage of unsophisticated buyers. I just set up auto-pays on 3 credit cards, and I believe the form for Bank of America had very confusing wording about payment amount. Instead of “pay full amount”(which I wanted to do) or “pay minimum amount” as the choices, they had essentially indecipherable choices/wording which resulted in my selecting the minimum payment- and I am aware of their general habits of chicanery. I had to submit a new form to correct first one.
          I also notice that those most enthusiastic about “personal responsibility” for the poor masses tend to be ok with bailing out criminal bankers when they periodically go bankrupt (as acknowledged by the Federal Reserve, always years After the fact).
          I am trying to promote a “Broken Windows Policy” for Bankers and the Elites; arrest them, anally search them (they are known consumers of cocaine) and jail them for minor offenses to prevent them from becoming kingpins like Jamie Dimon, Robert Rubin et al. In other words, let’s at least be consistent.

      • alex in san jose AKA digital Detroit
        Nov 4, 2017 at 9:59 pm

        MB732 – I can confirm; the mailing addresses for me when I was in Southern California were Maine and Delaware.

    • Jim Graham
      Nov 2, 2017 at 2:50 pm

      That is a couple of ways to play the game.

      IF saving accounts paid any meaningful interest I would consider using “their” money for whatever time I could and have the payments deducted from savings,

      But — seeing as how savings accounts don’t — I pay for the stuff when I buy it — using my PayPal Business Debit Card as a credit card — and I get 1.5% back on all my purchases…

      I win.

      • thelocalpragmatist
        Nov 3, 2017 at 6:44 pm

        Jim
        I use my NRA card, with 1% cash back to the NRA…we all win.

    • TJ Martin
      Nov 2, 2017 at 2:54 pm

      MB732 is right ! If your payment arrives even a day late regardless of when it was sent or what the postmark is dated … you’re screwed .

      I just deal with that little known clause in reverse when I received a contested deposit that was supposed to of been in an escrow account 48 hours after it was due despite it having been postmarked three days before due date .. with the judge ruling in my favor stating to the other party that it was their responsibility to return the deposit on or before the due date … not the USPS’s . Suffice it to say that tardiness not only cost the other party the amount they sent plus the amount I was contesting … but damages and interest as well literally doubling the amount they had to pay in the end .. along with all the legal and court fees .

      And if I .. little Mr Independent LLC businessman can do it … just imagine what the likes of a Barclay etc can do .

    • RangerOne
      Nov 2, 2017 at 5:34 pm

      All phones essentially come with interest free monthly payment buy options these days.

      But the reality is generally that for a few months you just get to pretend you haven’t spent money that you have already committed to spending.

      99% of the time if we are talking about pruchase under $5k I prefer to just lay out the cash knowing that baring an emergency I will probably replenish the cash in under a year.

      I suppose if all your cash is invested it can be wise to take interest free or low interest loans whenever you can.

  3. Ken
    Nov 2, 2017 at 2:44 pm

    In the Atlanta area and I guess other areas . There is a constant stream of “Rooms To Go” buy furniture no interest until 2020 or some distant time in the future.

    • Thrasymachus
      Nov 2, 2017 at 2:49 pm

      I suspect *deferred interest* cards are a godsend for CEOs looking to juice their P/E.

    • Kent
      Nov 2, 2017 at 3:25 pm

      Trust me, the mark up on furniture is high enough to absorb a decades worth of interest deferments.

    • Suzie Alcatrez
      Nov 2, 2017 at 4:18 pm

      By the time you get your Rooms To Go furniture paid off, it’s worn out and it’s time to buy some new stuff.

    • Silverngold
      Nov 2, 2017 at 5:25 pm

      Rooms to Go is a good one. I bought $3k worth of furniture. Making the payment each month. Actually was a day late one time. Flipped out, until I read the fine print. Yep, paid the late fee and no other charges. Almost paid off and only fee has been the one late charge of $35 and it was my fault. OPM (others peoples money) even for the little guy.

      • MB732
        Nov 3, 2017 at 7:39 am

        Yes Silverngold those $35 late fees are a pain in the butt…but deferred interest is different.

        In a deferred interest scenario, say your $3000 purchase had 0% interest for 12 months, but 24% after that (OR if you are late with a payment during the initial 12 months), then interest is retroactive to purchase date.

        For example if you paid $250 per month for 12 months BUT your last payment was a day late, you would be responsible for 2% of $3000 interest from month 1, 2% on $2750 for month 2, etc. A quick calculation gives me $390 interest you now owe, even though you paid back all the principal.

        Some posters have made the point that you can use this system to your advantage and make electronic payments with confirmed receipt dates–true enough…But this business model is looking for borrowers they can entice with a carrot and then beat with a stick.

        • d
          Nov 3, 2017 at 8:11 am

          “Some posters have made the point that you can use this system to your advantage and make electronic payments with confirmed receipt dates–true enough…But this business model is looking for borrowers they can entice with a carrot and then beat with a stick.”

          TRY

          Some posters have made the point that you can use this system to your advantage and make electronic payments with confirmed receipt dates–true enough…But this business model is looking for victims that are not that intelligent, they can entice with a carrot, then milk like a cow.

  4. Jack
    Nov 2, 2017 at 2:57 pm

    I also believe these banks that provide these branded credit cards also do not do a “credit check.” In my past life I knew of several individuals who were bankrupt, had lost everything, yet thru the magic of store credit cards were able to continue the “image” that they were doing fine. They used these cards in the magical sense to show they had credit when they bought a new/newer car, etc. Yes, they paid exorbitant rates but the image was retained. And then they could buy a house with no money down, get a 125% loan and walk away with cash.
    America is a wonderful country!

    • Thrasymachus
      Nov 2, 2017 at 3:11 pm

      In the U.S. the *credit check* is a single database query to a customer’s FICO score. Home Depot approved me online in less than 15 seconds. Interesting re: how your friend built back his credit rating with these cards.

      Wonder what the risk-default numbers are for *store-brand* cards vs. *financial company* cards?

    • Nov 2, 2017 at 3:32 pm

      They do check — with Equifax … hahahaha

      • number1gi
        Nov 3, 2017 at 9:04 pm

        Speaking of Equifax, per a CNBC article dated Sept, 13th concerning Equifax credit freeze request fees:

        “The waiver on locking/unlocking fees lasts until Nov. 21, the last day to enroll for free.
        The company is REIMBURSING CONSUMERS WHO ALREADY PUT A FREEZE ON THEIR CREDIT REPORT.”

        I mailed a written credit freeze request to Equifax via tracked USPS that they received on Sept. 11th. The $7.50 check for their fee was dated Sept. 7th. The rat bast**ds cashed it Oct. 27th. Reimbursing consumers who already put a freeze on their credit report my happy a**!

    • Petunia
      Nov 2, 2017 at 4:25 pm

      Our credit score crashed when we lost our home during the financial crisis and the biggest surprise is that you can still get credit. We were always up front about our situation, they usually made a face, and then gave us credit anyway.

      • Chip Javert
        Nov 2, 2017 at 6:52 pm

        Yes, because credit issued after the default has priority over credit before the default (and you probably did not get a $30,000 line of credit).

  5. Jack
    Nov 2, 2017 at 3:03 pm

    From this website I went to “247wallst.com.” Scroll down and see the same type article on that site.

    • Nov 2, 2017 at 4:34 pm

      WalletHub sends the data to all media outlets, including 24/7 Wall St. and WOLF STREET. 24/7 took some snippets and made an article touting credit cards, titled, “The Best Store Credit Cards for Holiday Shopping.”

      So not exactly, to use your words, “the same type of article.”

    • Sadasivan
      Nov 4, 2017 at 11:01 am

      Thanks for mentionig the site.But many,my not visit the same & thus this article provided exposure,to them.The Comments, from different perspectives are also, of the hghest qaulity.

  6. Rates
    Nov 2, 2017 at 3:23 pm

    The strange thing is that people keep falling for it. It’s hard to sympathize with people who keep asking for it.

    In the end I think everyone’s expecting to be bailed out.

    Debt Jubilee, hurrah!!!

    • Night-Train
      Nov 2, 2017 at 10:05 pm

      Credit is a mine field and I, suppose always has been. So, one best do their best to know where the mines are. Credit is a tool and as with many tools, has good uses and uses that end badly. I guess I have mixed my metaphors, but you get the point. A word to the wise……..

      • TheDona
        Nov 3, 2017 at 11:00 am

        One minefield my daughter has found regarding credit scores is when you have little to no debt your FICO score goes down. She double and triple paid her student loan until it was paid off in a few years….once it was paid off her credit score went down. She keeps no balance nor has ever paid late on her credit cards, has never paid late on her rent or utilities. Has always paid cash for her cars until this year when she traded up and financed a portion and put on autopay. Once the balance went below 20K her credit score went down again.

        We can not figure this out. Does anyone have any experience with this?

        All of the commercials regarding credit score are aimed at Millennials…..is this aimed at keeping them trapped in large debts to keep their FICO score up?

        • d
          Nov 4, 2017 at 12:44 am

          “All of the commercials regarding credit score are aimed at Millennials…..is this aimed at keeping them trapped in large debts to keep their FICO score up?”‘

          The American system runs on being a debt slave that pays on time.

          Unless you owe LOTS, and can prove you pay on time, you are a RISK the way the US system works. As they can not see you giving 80% of you income in rents and interest (Secondary rents).

          Put another way unless you pay lots of “VIG” on time, you are out, as they aren’t making enough from you.

          Your Daughter is doing the “wright thing” for “herself” (Paying low rent/VIG) which in not the “wright thing” for the loan-sharks, and their agents, running the FICO system.

          For those in other countrie,s the US FICO system, is a joke, as it allowed millions to borrow what they simply could not repay, as they had no savings and NO UNENCUMBERED ASSETS, between 2000 and 2008, and it is doing the same again.

  7. Kent
    Nov 2, 2017 at 3:32 pm

    Dang it, I keep getting rejected for these cards because I put a credit freeze on my accounts at the credit reporting companies.

    • Nov 2, 2017 at 3:34 pm

      It’s working!!!

    • joanrn
      Nov 2, 2017 at 7:26 pm

      kent – I have had that happen as well and had forgotten i put a freeze on my credit. More people have frozen their credit due to the equifax breech. I predict less people will fall prey to this type of debt this christmas season. If enough people have put a freeze on their credit to protect themselves, and it affects consumers buying habits during the christmas season, we may actually get regulatory change to protect us from the breech of public trust that equifax perpetrated.

  8. Stevedcfc72
    Nov 2, 2017 at 3:41 pm

    Haven’t you got your huge tax cuts announced to spend on the holiday season now?

    Sorry couldn’t resist.

    Regards
    Steve, UK

    • Wilbur58
      Nov 2, 2017 at 4:13 pm

      I remember when George W sent most of us $400 as a tax refund and it was like, “Wtf is this? Seriously?”

  9. Rates
    Nov 2, 2017 at 5:16 pm

    Apple reported another strong quarter. The Debt Slaves continue their march.

    BUY BUY BUY.

    • Ethan in NoVA
      Nov 3, 2017 at 10:25 am

      Their products are good and last a long time.

  10. Petunia
    Nov 2, 2017 at 5:16 pm

    Most of the tv shopping channels offer what they call flex pay. They break up the payment into 2-5 credit card charges to make it easier for customers to afford items. Some of the items I have seen offered on flex pay are under $20, that should tell you a lot about the state of the economy.

    • d
      Nov 3, 2017 at 4:35 am

      Our local equivalent of Ebay now offers “after pay” (AKA Credit) supported by a credit card company, for all the retailers like me. Who only take payment in full

      On second hand goods sold at internet auction.

      When that promo arrived it instantly screamed to me “DYING retail ECONOMY”

  11. Al Loco
    Nov 2, 2017 at 5:21 pm

    Just like gambling, the probability always favors the house. Rewards and deferred interest can be beneficial to “some” consumers. The fact is the credit card companies are making a boatload so you do the math.

  12. Jas
    Nov 2, 2017 at 5:36 pm

    It’ll be interesting to see how these credit offers go with all of the people who have wisely put a credit freeze on their accounts!

    • chip javert
      Nov 2, 2017 at 6:56 pm

      NEW NEWS:

      If you have put a freeze on your accounts (good for you!), you can lift it to obtain new credit & re-impose the freeze.

      • Ed
        Nov 2, 2017 at 9:09 pm

        Remember, Chip, that the store cards are often gotten at the checkout counter when the sales clerk touts the 0% interest rate. That’s an impulse decision. So I think Jas makes a sensible point.

        What I suppose is likely to make this work for the credit card companies is that the set of people who added a credit freeze and the set of people paying the high rates on store cards hardly overlap. I think for now, the store card profiteers won’t find business any harder.

        • chip javert
          Nov 2, 2017 at 10:57 pm

          Ed

          You make good points.

          Option B: Credit agencies could make it easy (smart phone app) to freeze & unfreeze accounts (banks are beginning to do this for CR/DR cards). This is a huge change to credit agency business model, but allowing hacking of all of everybody’s data (the old model) isn’t really an option either.

  13. chip javert
    Nov 2, 2017 at 7:45 pm

    Joann

    You think big government is going to protect you? This stuff has been going on for 20 years, and you STILL think big government is going to protect you?

    Your government is busy trying to figure out what Russia did and with whom and to whom. They have zero time for you and your need for protection. It hasn’t got the time now (or in the last 20 years) to “protect” you.

  14. DJ
    Nov 2, 2017 at 8:00 pm

    I worked for a major home improvement warehouse for a couple of years. I made sure to tell everyone who was approved for one of these credit cards with deferred interest that they risked having the accrued interest added to their account if they missed a payment or did not pay off the balance in the allotted time. I told them to payoff the balance 2 months early so they had 2 opportunities to correct any errors. I also told them to not put any other charges on the credit card as Sychrony Bank was a horror to deal with not to be trusted.

    • Night-Train
      Nov 2, 2017 at 9:55 pm

      Well done. Unfortunately all do not possess a well calibrated moral compass. Do not go forth in business or any other endeavor with serious consequences assuming such a compass is present with the other party. As Ronald Reagan once said “Trust but verify”.

      I didn’t vote for the man, but the advice has served me well. So, there is that.

  15. Night-Train
    Nov 2, 2017 at 9:44 pm

    Dang! I wrote a three paragraph well thought out reply to Ken’s post above laying out my past observations and experiences with deferred interest deals and hit the wrong button and lost the whole thing. I guess there is a lesson in there with the losing it all in one fell swoop and all.

    But just let me say Caveat Emptor. And with these big outfits today, we are no longer consumers, we are prey.

    Be well all, I bid you good night.

    • Nov 2, 2017 at 10:05 pm

      Too bad. Happens to me too :-]

      If you’re going to create a masterpiece, do so in a word processor, then copy and paste it.

      • Night-Train
        Nov 2, 2017 at 10:11 pm

        Wolf – Thanks for the advice. In this case, I think I out-smarted myself with my limited experience with this Mac laptop keyboard.

        Good evening to you.

    • Jim Graham
      Nov 2, 2017 at 10:57 pm

      Save soon – save often….

  16. Gershon
    Nov 2, 2017 at 10:57 pm

    Riddle me this: How is it that our (Soviet-style) consumer confidence numbers are allegedly hitting exuberant new highs, while every other indicator, especially from mental health professionals, indicates Americans are stressed and anxious as never before over the future of the country and their own uncertain financial futures?

    https://www.bloomberg.com/news/articles/2017-11-01/americans-are-officially-freaking-out

    • Jim Graham
      Nov 2, 2017 at 11:54 pm

      IMO

      To understand that you need to have been married to a person that had happiness only when she was spending more money than anyone else she knew.

      • d
        Nov 3, 2017 at 4:40 am

        “had happiness only when she was spending more money than anyone else she knew”

        Or

        “had happiness only when she was eating more than anyone else she knew”

        Same disorder. Unhappy, Eat/Spend.

    • MD
      Nov 3, 2017 at 5:15 pm

      Well as you have surmised, statistics can be made to provide any answer that’s required, merely by asking leading questions and targeting whom you ask.

      Another factor is that people feel ‘more confident’ basically because the value of their house (ATM) has gone up.

      More confident to get even further into debt, that is.

      To politicians, this is a sign of prosperity. To the critical and rational thinker, it’s a sign of big trouble ahead.

  17. alex in san jose AKA digital Detroit
    Nov 3, 2017 at 1:46 am

    Things like this scare me to death. Years ago I wanted a TV (I was home injured for a while) and my friend suggested rent-to-own and I’d have no part of it.

    I see a lot of these things as the rent-to-own business model. Charge a high price but you can have it right away – pay later at 39% interest rate, high fees for the slightest delay in payment or any other breach of their arcane rules.

    I had a car loan long ago that kind of worked in a nefarious way; if I waited until it was just before due to pay the bill, realized I was paying a couple hundred more a month. If I paid it right away, I saved that much. So I used to get that check sent out the same day I got the bill.

  18. a.hall
    Nov 3, 2017 at 3:18 am

    This “Deferred Interest” Scam is exactly the same as the 2007/8 “Teaser Rates” on Sub-Prime Mortgages ; 5% for 2 years then 8% or 9% or higher for the rest. Sub -Prime Mortgages were Targeted at the Poorer People; Unemployed or Single Parents; The Higher the Risk of Default the Higher the Yield or Payback.

  19. Ro
    Nov 3, 2017 at 3:42 am

    Credit. Debt. Spend. Save.

    Enjoy each day and stop the madness!

  20. Mshinemd
    Nov 3, 2017 at 10:23 am

    I remember a time when it was shameful to buy on credit (showing my age), before credit cards. I never see economists factor in the rise of credit cards as one of the most important things leading to vastly increased debt over the years and the rise of the consumer society. I wonder how they have influenced our thinking and social trends and I think they clearly have and not for the better.

    • Anon1970
      Nov 3, 2017 at 1:47 pm

      I have been using credit cards prudently since the late 1960’s when I was in college. I don’t think I ran up my than $5 or $10 in interest charges in nearly 50 years, even as I earned several thousand $ in free plane rides and cash rebates. It is too bad that so many youngsters manage to leave school with such a limited knowledge of basic arithmetic.

      • Roger
        Nov 4, 2017 at 9:03 am

        I started using a credit card in the early ’70s. I have never paid one dime of interest. I did, however, pay the full amount a day too early (e.g., paying on 4/30 instead of sometime in early May). For that “error,” I incurred a small penalty from MC. That was my only actual expense of using credit cards. I’m obviously debt averse. I remember my father saying, “If you can’t pay cash, you shouldn’t be in the store.” Too many people these days are addicted to shopping. I don’t buy things that I don’t really need. I have a seven figure portfolio and I drive a 2002 Saturn. It’s still reliable.

    • MD
      Nov 3, 2017 at 5:11 pm

      Basic arithmetic is not the problem.

      Massively increased living costs (primarily housing) coupled with depressed wages and job insecurity, forcing people to live paycheck to paycheck and rely chronically on credit, are the problem.

      Your comment trivializes the issue and is not helpful. It IS NOT merely an issue of ‘personal responsibility’, much as the right wing is keen to paint it as such.

      This ‘head in the sand’ denial will finish us.

    • Michael Fiorillo
      Nov 5, 2017 at 3:39 pm

      Mshinemd,

      I think the “shamefulness” of credit to which you refer is a vestige of the Depression – I experienced it in my family and witnessed it elsewhere – and an era when families could largely cover their expenses out of wages.

      However, wages have been stagnant for forty years, and wages for high school grads have declined.

      If you are still trying to maintain a mass consumption-based economy amid flat or declining wages, “easy” credit is the only alternative.

      There are other benefits benefit to the creditor class in this arrangement, since “credit-disciplined” working and middle classes are more easily kept politically quiescent and subordinate, as well.

  21. Nov 3, 2017 at 10:54 am

    Just got a HELOC offer for VA qualified from NewDayUSA, they’ll let me borrow 100% of my homes appraised value, minus the mortgage balance, and they will pay for the appraisal. I can use this money to consolidate my credit card debts. Is it 2007 all over again? Wait I just heard George Bush say the economy is strong for the umpteenth time.

    • Anon1970
      Nov 3, 2017 at 1:55 pm

      It sounds like Ameriquest Mortgage has risen from the dead.

  22. Enrique Bermudez
    Nov 3, 2017 at 11:50 am

    Store cards……

    I always felt sympathetic to the poor schmuck checkout clerks who would routinely badger me about signing up for one of the damn things. As if working a retain checkout counter is not bad enough an existence, you have to try to aggressively push such godawful harmful crap at people.

    • Petunia
      Nov 3, 2017 at 1:04 pm

      The sales people get a bonus for each person they sign up and each email address they collect.

  23. raxadian
    Nov 3, 2017 at 1:49 pm

    Always read all the text before signing is a rule people tends to ignore so much it isn’t funny.

  24. Mike B
    Nov 3, 2017 at 3:02 pm

    Chitty Bank.. ROTFL,, Of Course, color me not the least bit surprised.

  25. MD
    Nov 3, 2017 at 5:07 pm

    Usury is a word that has been dropped completely from the lexicon, along with ‘greed’ (which is now ‘aspiration’; conveniently not a mortal sin so one can ‘aspire’ to lots and lots of money and still get a place in Heaven! Handy! After all, you’re just ‘bettering yourself’ and God approves!).

    However, when usurious lending practice is the primary – possibly the only – economic driver for a country’s economy, then some truths are too big to allow to surface.

    So best to change ‘the narrative’, and in Stalinesque fashion expunge the word completely, thus preventing and debate or discourse about said lending practice.

    Job done. Until next collapse and social upheaval. But HEY it’s backstopped by the state isn’t it – so no worries!

  26. Jimbo
    Nov 9, 2017 at 8:30 am

    Its simply a numbers game for the banks. they know a % of people wont pay off in full on time (it happened to me once). I would be interested in knowing what that rate is of people who don’t pay in full on time. The retailers win because they get their money up front and attract customers they otherwise might not get.

    One of biggest parts of scam is most banks don’t put when you’re limited offer rate ends on statement and many that do have it in a not noticeable place until very late in the cycle. You often have to call to get date. Then Home Depot gets hacked and you have double trouble.

    Rule of thumb should be if you can pay it off when you buy it and want to use the float to improve temp cash flow it is probably ok. If not you should think twice about doing it. Of course, if your made in China fridge gives out 2 months after warranty period, what are most consumers going to do?

    I took the AMazon enticement to get $50 off a purchase by signing up for their card..which gives you 5% back on every purchase. But they still wanted to charge me 20% even with a credit score approaching 800. I paid the balance and cancelled it.

    Banks operate like crack dealers with credit. Hooking the young in an instant gratification society. Most large banks and the government are largely legal organized crime syndicates

    • Thrasymachus
      Nov 9, 2017 at 9:54 am

      >Banks operate like crack dealers with credit<

      More like *Mafia loan-sharks* for home improvement. My deal was *no interest* if paid in full within *promotional period*. I charged $5,000 of appliances and had two years to pay off the *purchase balance*.

      Meanwhile, interest was charged to my account from the *purchase date*. The APR: 17.99% – 26.99%. I had a 800+ credit rating. Yes, these are rates competitive with Don Corleone.

      Even so, if you have the discipline like you and I do to make promotional purchases and then pay off the purchase balance within the promotional period, then it becomes an *interest free* loan for up to two years. If you don't have the discipline (or wherewithal) to pay off the purchase balance, you are a victim of extortion.

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