February 13, 2009

Credit Card Problems- The System is Broken

In the years since I graduated from college I have grown to be quite wary of late night and early morning telephone calls because invariably they only come when there is a problem. The sole exception that comes to mind are the early morning telephone calls that I received about the birth of nieces and nephews, those were pretty cool and worth losing sleep over.

But aside from those moments the primary association I have with the odd hour telephone call is not positive. They have been notices of death or illness, not good news. So when the phone rang at a little past ten I was instantly on guard. The caller ID was restricted so for a moment I was hesitant to answer it, but then concern got the best of me so I picked it up.

It turned out that a dear friend was on the line and in need of a friendly ear. He made some small talk and then launched into a story about bad his finances are and how he can't pay his bills. I felt for him. He has a good work ethic and has always worked hard, but during the past few years he has been laid off a few times.

Each time it happened he picked himself up and did his best to go and find a new job. In between he did what he could to support his family. What little savings he had was quickly eaten up and he found himself using the credit cards to try and get by. They didn't go for fancy meals, vacations or luxury cars.

They were used to purchase groceries, pay tuition for his children, buy clothing for them and other things of this nature. In short, they helped to cover necessities. Gradually he developed balances on them and though he did his best to try to pay them off the odd jobs he worked didn't pay enough to prevent them from becoming maxed out.

When he called me he was in a panic. He didn't have enough money to pay all of his bills. He was a week late in paying one of the cards and had received two calls from them asking when they could expect payment.

During the second call he explained his situation to the bank and asked if they could work with him. They gave him two options in which his account would be frozen and he'd be asked to pay a set amount each month to pay off the bill.

He told them he couldn't afford the amount he was quoted and asked if they could extend the term so that he could pay a lesser amount. The representative told him no and that because he was late in paying his interest rate had been raised to more than 28%.

He reiterated that he wanted to pay them, that he wasn't trying to shirk his responsibility. He said that if it was a $100 less a month he could afford to make the payments. They turned him down and he asked what he should do.

In turn he was told that if he continued to withold payment the card would go into default and he'd probably gain more options. He told them that he didn't want that to happen, that he was willing to pay and couldn't they work with him. And again they apologized, but said that policy was policy.

I could hear the anger and the frustration in his voice. When he told me that they system was broken I had to agree.

When the banks got into trouble they went to the government to receive aid. When he went to the bank asking for them to grant him some assistance he got a poke in the eye and a kick in the pants.

Even better, his tax dollars are part of what is helping to fund the banks bailout.

I have heard and read a lot of comments about how people need to be responsible and that we should let the chips fall where they may. It may sound like a good idea to let things lie, but sometimes you need to be there to give people a hand up.

There are more and more stories about middle class families like my friend who are in serious financial distress. I don't have the answer, but I think that if we don't find ways to help we are all going to end up paying the price.


chosha said...

They say fear is the mind killer, but in my experience debt is also pretty effective. I get a little closer to debt-free each week and it's like slowly coming out of darkness into the light. I really sympathise with your friend. It's a surprisingly easy situation to get into and so very hard to leave.

He should enquire about debt consolidation, which will likely result in a lower interest rate than he's getting on the cards and a lower monthly payment overall. But if it isn't accompanied by cutting the credit cards in half and never using them again, it won't save him - it will make things impossible. I really hope he can get it worked out.

The Misanthrope said...

I am so sorry to hear that story. It is criminal how the banks have encouraged people to live beyond their means. What is worse now is that we have to help the banks who refuse to help us unless, the government makes them help. I wish we had a good alternative to banks.

Michael said...

debt is pretty debilitatiting, for the pocketbook and the psyche.

I find it amazing, and twisted, that when this guy asked for help arranging payments, to avoid default, he was told that going into default would gain him more options.