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The Death of the Credit Card Economy

 
 
Reply Mon 1 Sep, 2008 11:51 am
Car leases, student loans, no-money-down mortgages, and high credit limits are vanishing.
Quote:

The most revolutionary notion in commerce today is one of the oldest. If you want to buy something, you may actually have to pay for it. We are reverting from a "borrow and buy" economy to the "cash and carry" model of our grandparents.

This shock to the system may further damage the already-fragile psychology of the consumer. Writing a check or deducting the price of a pair of shoes directly from your bank account packs a much more potent emotional punch than charging the pair of Allen Edmonds loafers on your American Express platinum card. Chalk it up to a concept called "the pain of paying," said Dan Ariely, the author of Predictably Irrational.
 
cicerone imposter
 
  4  
Reply Mon 1 Sep, 2008 11:56 am
It is NOT the end of the credit card economy.
Letty
 
  3  
Reply Mon 1 Sep, 2008 12:08 pm
@cicerone imposter,
Craven, do you and C.I. know the history of the cash and carry economy?
Phoenix32890
 
  1  
Reply Mon 1 Sep, 2008 12:14 pm
@Robert Gentel,
And that is a good thing. In my lifetime, I have seen the fallout from too much credit.

When I was young, there were limited credit cards. Department stores and gas stations had their own cards. And of course, there was American Express and Diner's Club, but they were for the rich people. There were no such things as Master Card, Visa or Discover.

When I was in my early 20's I was under the misapprehension that there was a difference between a credit card and a charge card.I had a couple of what I thought were charge cards from department stores. So, when I got the bill at the end of the month, I paid it. Since I thought that I had to pay the whole thing, I never went over my head when it came to shopping.

I can remember when things started to change, in the late 60's. The first one that came out was aptly named, "The Everything Card", which I believe later became "Master Card". By that time I was married to a man who had been trained as an accountant. Need I say more? I didn't dare go bananas at the sales. In fact we always lived UNDER our income, which will stand me in good stead in my old age.

For awhile we used a debit card, but we started hearing stories of people who had their identities stolen via the debit cards, so we stopped. Now all of our credit card bills, as well as other various and sundry monetary obligations, are taken out automatically from our bank account.

Except for the mortgage on our first house, we have never owed anyone a nickel. My son, who naturally is of a later generation, laughs at what he considers my frugality. We have argued this issue many times. I am by no means deprived, and I don't have to worry about bills.
0 Replies
 
cicerone imposter
 
  1  
Reply Mon 1 Sep, 2008 12:14 pm
@Letty,
No, but I do understand today's economy that's increasing on eBay, Amazon, and other internet sales threads. I also still see many people using their credit cards in stores and restaurants - today. I use my credit card often; at Kaiser, and at gas stations, and at retail stores now-and-then.
0 Replies
 
Robert Gentel
 
  3  
Reply Mon 1 Sep, 2008 12:19 pm
@cicerone imposter,
I agree, and don't see this economic downturn changing that. What I find interesting is that the economic downturn is deep enough to make people claim this, and what the psychological impact of leaner credit will be.
cicerone imposter
 
  1  
Reply Mon 1 Sep, 2008 12:23 pm
@Robert Gentel,
Those with too much debt or a poor credit rating will not have the ability to borrow as in the past. That will certain depress our economy, because that's what is happening now with our housing market and retail business. To what degree this will impact our economy and how long is a question for the experts, but I'm guessing it's going to last at least two more years - minimum.

There is some hope in the housing market; some people who couldn't qualify in the past are now seeing opportunities because of the lower prices and qualification for the mortgage. It's going to be a balancing act between those two issues; those who can't keep up with their mortgage payments, and those who are now qualified to buy homes.
0 Replies
 
Letty
 
  4  
Reply Mon 1 Sep, 2008 12:30 pm
@Robert Gentel,
To all. At one time, Americans did everything on credit, but not the plastic kind. Finally, a young man decided to try his luck with a cash and carry grocery store. Needless to say, it didn't go over too well with a public who was used to being able to charge now; pay later. Finally, when someone got a load of groceries and became indignant with the owner for not trusting his credit, the owner said no credit, but I will give the groceries to you.
cicerone imposter
 
  1  
Reply Mon 1 Sep, 2008 12:44 pm
@Letty,
Letty, I'm afraid those days are long gone; the honesty and trust of people in general has changed - not only in small communities, but in almost all large cities. Pay later for some never came.
0 Replies
 
Phoenix32890
 
  1  
Reply Mon 1 Sep, 2008 12:57 pm
@Letty,
I remember as a kid, having a "Chargaplate" from a department store. Actually it was my mother's, but we used to fight when we went shopping together. She gave me the plate at about age 12. The deal was, that if I bought something that she did not approve of, I would return it, with no arguments. The arrangement worked out very well. (I still have the Chargaplate, and use it on my key chain).

As I remember, all you had to do was show the plate, and the clerk would write the number down. You didn't even have to sign anything. I could just imagine what would happen now.

Funny thing though. Lately I have noticed that in Walgreens you do not have to sign the credit slip if the charge is less than $50-. I am not sure if that it only in the prescription department, because that is the only place that I shop in that store. I am not crazy about that policy.

Anybody here remember C.O.D. (Cash on delivery) You could buy something, and then pay for it when it was delivered. I once knew someone who would go shopping, have the stuff delivered COD, and then refuse to accept the package. The stores must have caught on, because I don't think that anyone sells COD at retail now!
0 Replies
 
hamburger
 
  2  
Reply Mon 1 Sep, 2008 02:51 pm
@Letty,
letty wrote :

Quote:
To all. At one time, Americans did everything on credit, but not the plastic kind. Finally, a young man decided to try his luck with a cash and carry grocery store. Needless to say, it didn't go over too well with a public who was used to being able to charge now; pay later. Finally, when someone got a load of groceries and became indignant with the owner for not trusting his credit, the owner said no credit, but I will give the groceries to you.


is that what the british called "putting it on the slate" ?

when i was growing up in germany , it was quite common for the housewives to do their shopping throughout the month and settle the bill at month-end .

well-to-do families always had their individual "charge accounts" with a variety of stores , and it was customary for the "husband" to settle and pay all bills - sometimes grudgingly - at month-end .
some old german movies - and american movies too , i just remember - show scenes where the husband questions his good wife about all the expenses incurred . usually she has him all befuddled quickly and he pays up - still shaking his head - BIG GRIN .

the fellow cutting our lawn "refuses" to be paid every week . he told me that he much prefers to submit a detailed bill at the end of every second month - and it suits me fine too .

personally we are bombarded by american credit card companies (their subsidiaries in canada) to PLEASE accept their credit card : 6 months @ .9% , 12 months @1.9% , you name , we can have it .
as soon as canada introduces the`no-call list ` , we`ll put the kibosh to that !

credit works well for us !
hbg
Letty
 
  2  
Reply Mon 1 Sep, 2008 03:05 pm
@hamburger,
Use of credit cards is a convenience, hbg. Where I live, there is a quick stop shop owned by G.J. Patel. He won't take credit cards nor checks, but if I don't have the cash, he simply allows me to get the stuff I want and pay him later. He trusts me and I trust him. He is East Indian, and he and his wife are so dear.

I own one credit card and pay it in full every month. One is enough, methinks.
cicerone imposter
 
  2  
Reply Mon 1 Sep, 2008 03:09 pm
@Letty,
I usually have two credit cards, because not all businesses takes the American Express card. Actually, I have three; the third is a debit card that I use to withdraw money from ATM machines at WAMU.
Letty
 
  3  
Reply Mon 1 Sep, 2008 05:14 pm
@cicerone imposter,
C.I. , you are right. American Express is not taken everywhere and once I got stuck with the tab when we were supposed to be the dinner guests of a certain young man. Don't use a debit card; too paranoid and I quit using an ATM machine a long time ago. My word, buddy. WAMU is my mortgage holder. Have fought with them on more than one occasion and AT&T as well. Think I'll win? Very Happy
hamburger
 
  1  
Reply Mon 1 Sep, 2008 05:43 pm
@Letty,
i use the debit card ONLY at our bank - preferably inside !
hbg
0 Replies
 
cicerone imposter
 
  2  
Reply Mon 1 Sep, 2008 05:49 pm
@Letty,
Letty, We had major renovation done to our home, and we borrowed money from WAMU on a home equity credit line - in addition to depleting our cash to somewhat uncomfortable levels. Since we owe them more than we have in their bank, I feel very secure, but they've screwed up on the auto pay on our equity loan. They've been contacted four times on this already, and found out last week that they didn't make the auto pay on schedule, so I have to visit their bank again tomorrow to complain about their incompetence! It's really tiresome, but we got a good interest on the loan.... I also use the debit card at their bank's ATM and no place else.
Letty
 
  1  
Reply Mon 1 Sep, 2008 06:15 pm
@cicerone imposter,
C.I. That's the very problem that I have had with WAMU. I tried for seven months to get auto pay. What's wrong with that bunch? My loan is very cheap per month so I'll just keep mailing it in.
0 Replies
 
chai2
 
  2  
Reply Mon 1 Sep, 2008 07:01 pm
I use a credit card for everything I can, and I mean everything. I accumulate enough points over the year to get 5 or 6 hundred dollars worth of gasoline.

I pay it off in full each month.

I used credit to remodel, probably about 50K, and didn't pay more than a hundred or so in interest, and maybe a hundred in fees in the years it took to pay off. I played the "year at no interest" to my advantage, not theirs.

I'm not the sharpest knife in the drawer, and if I can do it, anyone can. It's not rocket science.


Already fragile psychology of the consumer? Whose fault is that?

Does no one know what accountability for your own actions means anymore?
Robert Gentel
 
  2  
Reply Mon 1 Sep, 2008 07:12 pm
@chai2,
If you use a credit card but pay it off each month you aren't really using credit, and certainly are not a typical American. There's nothing financially wrong with using credit cards like debit cards like you do (hell it's smart!) but many Americans are using credit cards like an extra salary that they just don't have.

The more the credit tightens the more worried I am about the economy given that so many people count on the credit being there to survive.
chai2
 
  2  
Reply Mon 1 Sep, 2008 08:16 pm
@Robert Gentel,
au contraire

I'm using credit, not letting them use me.

back to the "pychologically fragile" quote of that writer...what does that mean?

Unable to find something other to do but shop and buy needless items?

Perhaps keeping credit cards out of some peoples hands is the best thing that could happen to them.

As far as the economy, yes, there will be a big impact while these pychologically fragile people learn to live within their means.
 

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