What the new credit card law will mean

Here is an unusually lucid and helpful piece of journalism, explaining exactly what the new credit card law will do:  Credit cards then and now: A look at how the new law changes the rules – latimes.com.

Here is an even more lucid and helpful piece of advice:  DON’T USE CREDIT CARDS.  Stash money in an interest-bearing bank account that gives you a debit card and use that.

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • http://joshschroeder.blogspot.com/ Josh Schroeder

    What is this “money” you speak of and how to I obtain it?

  • http://joshschroeder.blogspot.com/ Josh Schroeder

    What is this “money” you speak of and how to I obtain it?

  • Patrick Kyle

    My grandfather used to say (in regard to credit cards) that credit was a poor man’s trap. After learning some harsh lessons, my wife and I paid of all our cards and cancelled them. We refuse to use them anymore, and only use a debit card now.

    No wonder the Reformers hated usury and considered it one of the worst sins.

  • Patrick Kyle

    My grandfather used to say (in regard to credit cards) that credit was a poor man’s trap. After learning some harsh lessons, my wife and I paid of all our cards and cancelled them. We refuse to use them anymore, and only use a debit card now.

    No wonder the Reformers hated usury and considered it one of the worst sins.

  • Joe

    I don’t think these changes will have a dramatic effect on the banking industry but I always hear the horror stories and I wonder why I never experienced them. I don’t use credit cards for anything but business expenses these days but I used credit cards for close to 20 years (including my college years) and never once got screwed by the man. My pay dates never shifted, if my rates rose to levels I found unacceptable, I would just change companies and transfer the balance. There were no shenanigans. I remember many times (in college) calling my card company and telling them that the check was in the mail but would most likely be a few days late and they waived the late fee.

    Is my experience singular? Did I alone deal with the only honest credit card people? I am sure there are some crooked companies out there, but why a prohibition on college kids having credit? They’re adults – treat them like it. Must banks really be punished because parents failed to teach their kids about personal finances?

  • Joe

    I don’t think these changes will have a dramatic effect on the banking industry but I always hear the horror stories and I wonder why I never experienced them. I don’t use credit cards for anything but business expenses these days but I used credit cards for close to 20 years (including my college years) and never once got screwed by the man. My pay dates never shifted, if my rates rose to levels I found unacceptable, I would just change companies and transfer the balance. There were no shenanigans. I remember many times (in college) calling my card company and telling them that the check was in the mail but would most likely be a few days late and they waived the late fee.

    Is my experience singular? Did I alone deal with the only honest credit card people? I am sure there are some crooked companies out there, but why a prohibition on college kids having credit? They’re adults – treat them like it. Must banks really be punished because parents failed to teach their kids about personal finances?

  • Purple Kooaid

    Prohibition on college kids getting credit cards??? Maybe they shouldn’t be allowed to borrow money for a worthless college degree for which we the taxpayer are securing the debt.

  • Purple Kooaid

    Prohibition on college kids getting credit cards??? Maybe they shouldn’t be allowed to borrow money for a worthless college degree for which we the taxpayer are securing the debt.

  • Josie

    We’ve always used our credit card for everything, paid it off every month. This really helped when someone tried to use the card to make purchases illegally…the credit card company stopped it right away and issued us new ones. We don’t spend what we don’t have, so we have no balance on the card. We’ve even managed to keep this up while living overseas, twice! Nowadays with online payment being so simple I just don’t see the difficulty in this.

    Once someone’s gotten your Debit card…and tries the same scam that could have happened to us, that money is gone, and a little harder to get back soon enough to pay the bills. Also, as far as I know, using a Debit card doesn’t help/hurt with credit scores. Keeping an active credit card does…but not if you simply have a credit card that you don’t use…or obviously, one that you use incorrectly. Also, if you go and cut up your card and cancel your credit, well it shows that you have poorer credit right? Because now your credit limit is less by that amount. So, its funny that I’ve always been taught to avoid using Debit cards…I think Ben Stein & Clark Howard are two folks I remember from years ago on some Dateline show talking about this and giving this same advice.

  • Josie

    We’ve always used our credit card for everything, paid it off every month. This really helped when someone tried to use the card to make purchases illegally…the credit card company stopped it right away and issued us new ones. We don’t spend what we don’t have, so we have no balance on the card. We’ve even managed to keep this up while living overseas, twice! Nowadays with online payment being so simple I just don’t see the difficulty in this.

    Once someone’s gotten your Debit card…and tries the same scam that could have happened to us, that money is gone, and a little harder to get back soon enough to pay the bills. Also, as far as I know, using a Debit card doesn’t help/hurt with credit scores. Keeping an active credit card does…but not if you simply have a credit card that you don’t use…or obviously, one that you use incorrectly. Also, if you go and cut up your card and cancel your credit, well it shows that you have poorer credit right? Because now your credit limit is less by that amount. So, its funny that I’ve always been taught to avoid using Debit cards…I think Ben Stein & Clark Howard are two folks I remember from years ago on some Dateline show talking about this and giving this same advice.

  • Josie

    Oh, and I totally agree with banning the advetising on college campuses. They’re not denying anyone under 21 a card per se…but they must have either a co-sign or independent means (ie. maybe military) of paying the card. This seems completely reasonable to me. That gives the parents the chance to train their young adult in using a card properly, helps him/her build good credit and lessens the chance of unnecesary debts. I know I want to see my son’s credit statement while he’s in college….that’s how my parents and my husband’s parents did it.

  • Josie

    Oh, and I totally agree with banning the advetising on college campuses. They’re not denying anyone under 21 a card per se…but they must have either a co-sign or independent means (ie. maybe military) of paying the card. This seems completely reasonable to me. That gives the parents the chance to train their young adult in using a card properly, helps him/her build good credit and lessens the chance of unnecesary debts. I know I want to see my son’s credit statement while he’s in college….that’s how my parents and my husband’s parents did it.

  • Paul E.

    I think “DON’T USE A CREDIT CARD” is bad advice, Dr. Veith. Using a credit card responsibly (paying off the balance every month) is not a bad thing and something that can help you meet your financial obligations while offsetting the payment for a month (gives you a chance to work overtime to catch up if needed).

  • Paul E.

    I think “DON’T USE A CREDIT CARD” is bad advice, Dr. Veith. Using a credit card responsibly (paying off the balance every month) is not a bad thing and something that can help you meet your financial obligations while offsetting the payment for a month (gives you a chance to work overtime to catch up if needed).

  • ssmith

    I’ll have to side with Paul E. and Josie on this one. Having a credit card is excellent for your credit score, which you will need to have in “good order” to get a mortgage or a car loan… or even rent an apartment in some cases. Of course, the caveat is you must Pay It Off Every Month. (And having a credit card in the case of an emergency is important, too.)

    Using your debit card for online purchases can be fraught with peril if your account gets hacked or your card number gets stolen. Checking accounts have fewer safeguards for identity theft. So we have both: we use the debit card for all our day-to-day purchases (gas and groceries and such) and reserve the credit card for online transactions.

  • ssmith

    I’ll have to side with Paul E. and Josie on this one. Having a credit card is excellent for your credit score, which you will need to have in “good order” to get a mortgage or a car loan… or even rent an apartment in some cases. Of course, the caveat is you must Pay It Off Every Month. (And having a credit card in the case of an emergency is important, too.)

    Using your debit card for online purchases can be fraught with peril if your account gets hacked or your card number gets stolen. Checking accounts have fewer safeguards for identity theft. So we have both: we use the debit card for all our day-to-day purchases (gas and groceries and such) and reserve the credit card for online transactions.

  • http://mesamike.org Mike Westfall

    I’m not sure how I feel about the new credit card regulations.

    On the one hand, I do see a need for us to be protected from those who would take advantage of our human nature that propels us to agree to dig ourselves deep into financial servitude.

    On the other hand, this seem like undue Big Government intrusion into what should be a private agreement between a consumer and his lender. The government could make some basic regulations that just say that the lenders have to state clearly and simply what the agreement is, and the implications of accepting it (like, how long it’s going to take to pay off).

    Consumers themselves could force credit card companies to act reasonably by refusing to honor the terms of the “agreement” (which, in general, has been no agreement at all except an agreement to allow the card issuer to do whatever they want) and not send the payments in till satisfaction is delivered, like we often do when other products or services are less than satisfactory. Of course we don’t do that, because WAY too many of us have been conditioned to fear and tremble at the thought of a ding against the almighty Credit Score.

    Why do we fear the credit score so much? I think we’ve enslaved ourselves to the nanny of consumer credit. We fear that without the good credit score, we’ll become destitute. There have been many times that I’ve considered testing that notion to see if it’s really true, but always I chicken out and decide not to.

  • http://mesamike.org Mike Westfall

    I’m not sure how I feel about the new credit card regulations.

    On the one hand, I do see a need for us to be protected from those who would take advantage of our human nature that propels us to agree to dig ourselves deep into financial servitude.

    On the other hand, this seem like undue Big Government intrusion into what should be a private agreement between a consumer and his lender. The government could make some basic regulations that just say that the lenders have to state clearly and simply what the agreement is, and the implications of accepting it (like, how long it’s going to take to pay off).

    Consumers themselves could force credit card companies to act reasonably by refusing to honor the terms of the “agreement” (which, in general, has been no agreement at all except an agreement to allow the card issuer to do whatever they want) and not send the payments in till satisfaction is delivered, like we often do when other products or services are less than satisfactory. Of course we don’t do that, because WAY too many of us have been conditioned to fear and tremble at the thought of a ding against the almighty Credit Score.

    Why do we fear the credit score so much? I think we’ve enslaved ourselves to the nanny of consumer credit. We fear that without the good credit score, we’ll become destitute. There have been many times that I’ve considered testing that notion to see if it’s really true, but always I chicken out and decide not to.

  • jjustin

    I disagree with Paul E., Josie, and ssmith. My wife and I eliminated our credit cards abuot a year ago. We spend so much less money now that we use our own. It hurts to use cash instead of swiping a card. You only need a credit rating if you want to borrow money. A good credit rating can help one buy stuff he doesn’t need with money he doesn’t have to impress people he doesn’t know or like. . .

  • jjustin

    I disagree with Paul E., Josie, and ssmith. My wife and I eliminated our credit cards abuot a year ago. We spend so much less money now that we use our own. It hurts to use cash instead of swiping a card. You only need a credit rating if you want to borrow money. A good credit rating can help one buy stuff he doesn’t need with money he doesn’t have to impress people he doesn’t know or like. . .

  • Joe

    So jjustin – did you stop carring about your credit rating before or after you bought a house?

  • Joe

    So jjustin – did you stop carring about your credit rating before or after you bought a house?

  • Winston Smith

    When I first applied for a credit card, the bank required me to get a co-signer. I was 23 and employed, albeit at a low-paying job.

    Ten years later, lenders were practially throwing credit card applications at college students. Eighteen-year-olds naturally applied for the cards and, predicatably, started charging beer and pizza at 24 percent interest. Now the lenders are closing the barn door after the horses escaped and punishing those younger borrowers who might be prepared to use their cards responsibly.

    Incidentally, one of the pastors at my church believed that getting someone to co-sign for a loan or credit card was sinful, based on the warnings about suretiship in Proverbs (see Pr. 6:1, 11:15, 17:18, 20:16, 27:13).

  • Winston Smith

    When I first applied for a credit card, the bank required me to get a co-signer. I was 23 and employed, albeit at a low-paying job.

    Ten years later, lenders were practially throwing credit card applications at college students. Eighteen-year-olds naturally applied for the cards and, predicatably, started charging beer and pizza at 24 percent interest. Now the lenders are closing the barn door after the horses escaped and punishing those younger borrowers who might be prepared to use their cards responsibly.

    Incidentally, one of the pastors at my church believed that getting someone to co-sign for a loan or credit card was sinful, based on the warnings about suretiship in Proverbs (see Pr. 6:1, 11:15, 17:18, 20:16, 27:13).

  • Joe

    “Eighteen-year-olds naturally applied for the cards and, predicatably, started charging beer and pizza at 24 percent interest.”

    This is only natural and predictable if parents fail their children and if children lack complete commen sense.

  • Joe

    “Eighteen-year-olds naturally applied for the cards and, predicatably, started charging beer and pizza at 24 percent interest.”

    This is only natural and predictable if parents fail their children and if children lack complete commen sense.

  • DonS

    I don’t think there is a black or white on this one. Some people are capable of good budgeting, and using the credit card as a tool to avoid having to carry a lot of cash, while gaining the benefits of rewards and the ability to easily dispute charges for bad merchandise or service. Others do not have the discipline to do that, know it, and so avoid the temptation. Studies have shown that most people spend more if they use credit cards, even responsibly, paying them off every month, than if they pay with cash. I’m not sure if the same is true if you substitute a debit card for your credit card, because I think there is something to having to pull that hard-earned cash out of your wallet and hand it over that makes you think twice.

    Some of these reforms are good ones, but it is another example of cost-shifting from those who tend to be irresponsible to those who tend to be responsible. We, as a society, seem to have made a policy decision that incentivizes irresponsible behavior and, to some extent, punishes, and even often demonizes, responsible behavior. To say that is not a good policy for developing a better society full of responsible citizens is obviously an understatement.

  • DonS

    I don’t think there is a black or white on this one. Some people are capable of good budgeting, and using the credit card as a tool to avoid having to carry a lot of cash, while gaining the benefits of rewards and the ability to easily dispute charges for bad merchandise or service. Others do not have the discipline to do that, know it, and so avoid the temptation. Studies have shown that most people spend more if they use credit cards, even responsibly, paying them off every month, than if they pay with cash. I’m not sure if the same is true if you substitute a debit card for your credit card, because I think there is something to having to pull that hard-earned cash out of your wallet and hand it over that makes you think twice.

    Some of these reforms are good ones, but it is another example of cost-shifting from those who tend to be irresponsible to those who tend to be responsible. We, as a society, seem to have made a policy decision that incentivizes irresponsible behavior and, to some extent, punishes, and even often demonizes, responsible behavior. To say that is not a good policy for developing a better society full of responsible citizens is obviously an understatement.

  • fws

    Transparency is a very good and legitimate use of the police power of the state. The part of this that are about transparency are excellent. especially telling someone how much they would need to pay to pay off in 3 years and how long it will take making the min payment. most folks cant compute compound interest. fact.

    why aren´t the culture warriors crying about the lack of usury laws in this country?

  • fws

    Transparency is a very good and legitimate use of the police power of the state. The part of this that are about transparency are excellent. especially telling someone how much they would need to pay to pay off in 3 years and how long it will take making the min payment. most folks cant compute compound interest. fact.

    why aren´t the culture warriors crying about the lack of usury laws in this country?

  • fws

    ah. onemore thing. here in brasil interest rates are typically over 300% . a 60 month car loan for $25k ends up being $45k at the end of the loan. crazy. but people buy cars with those contracts because the choice is to not buy a car or save for 10 years….

    but there is cool deal here. Most stores will let you “parcel” your purchase in up to 12 payments with no interest. that means that a $1200 purchase will hit your card for 12 months for $100. Of course if you pay cash you get a 5-10% discount, representing the real interest rate on the “no interest” loan.

    This is the only way most brasilians can afford to have things. and people can´t default here. there is no such thing as bankruptcy. so the high interest rates are not about risk. they are purely about legalized covetousness.

    I buy most stuff now this way down here. 5% interest is a cheap rate to pay.

  • fws

    ah. onemore thing. here in brasil interest rates are typically over 300% . a 60 month car loan for $25k ends up being $45k at the end of the loan. crazy. but people buy cars with those contracts because the choice is to not buy a car or save for 10 years….

    but there is cool deal here. Most stores will let you “parcel” your purchase in up to 12 payments with no interest. that means that a $1200 purchase will hit your card for 12 months for $100. Of course if you pay cash you get a 5-10% discount, representing the real interest rate on the “no interest” loan.

    This is the only way most brasilians can afford to have things. and people can´t default here. there is no such thing as bankruptcy. so the high interest rates are not about risk. they are purely about legalized covetousness.

    I buy most stuff now this way down here. 5% interest is a cheap rate to pay.

  • fws

    dons @14

    the stuff about transparency doesn´t really cost the credit card companies a dime extra except that they probably lose interest because people can see better the hole they dug for themselves.

  • fws

    dons @14

    the stuff about transparency doesn´t really cost the credit card companies a dime extra except that they probably lose interest because people can see better the hole they dug for themselves.

  • Winston Smith

    fws @ 15: “why aren´t the culture warriors crying about the lack of usury laws in this country?”

    Why, indeed? I find it sort of amusing that the cultural conservatives who endorse the death penalty because it is in the Old Testament never talk much about the Mosaic Law’s prohibition against usury, or the Law of Jubilee.

  • Winston Smith

    fws @ 15: “why aren´t the culture warriors crying about the lack of usury laws in this country?”

    Why, indeed? I find it sort of amusing that the cultural conservatives who endorse the death penalty because it is in the Old Testament never talk much about the Mosaic Law’s prohibition against usury, or the Law of Jubilee.

  • DonS

    Winston @ 18 & FWS @ 15: State usury laws are still on the books in many states, but the high inflation of the late 70′s caused Congress to exempt banks from those laws, essentially rendering them obsolete. The problem was they prohibited rates above a certain level (typically 10-12%), which was wholly inadequate in an era where the prime rate was above 15%.

    Should we bring them back? No, I don’t think so. We are not a theocracy, for one thing. Would you also advocate bringing back the stoning laws for sexual sins, as were present in the Mosaic law? I don’t think many people endorse the death penalty because it is in the O.T. Rather, they use that example as evidence that God is not opposed to the death penalty, per se, as many anti-death penalty advocates like to claim.

    Back in the O.T. period, there was no such thing as bankruptcy, and indebtedness which could not be repaid resulted in indentured servitude. This was the evil that was being addressed in the Mosaic law. That is not an issue in our society, and usury laws would simply deny the opportunity of credit to those who might have a desperate need for it, and would otherwise seek it on the black market where there is a true physical danger for failure to repay.

  • DonS

    Winston @ 18 & FWS @ 15: State usury laws are still on the books in many states, but the high inflation of the late 70′s caused Congress to exempt banks from those laws, essentially rendering them obsolete. The problem was they prohibited rates above a certain level (typically 10-12%), which was wholly inadequate in an era where the prime rate was above 15%.

    Should we bring them back? No, I don’t think so. We are not a theocracy, for one thing. Would you also advocate bringing back the stoning laws for sexual sins, as were present in the Mosaic law? I don’t think many people endorse the death penalty because it is in the O.T. Rather, they use that example as evidence that God is not opposed to the death penalty, per se, as many anti-death penalty advocates like to claim.

    Back in the O.T. period, there was no such thing as bankruptcy, and indebtedness which could not be repaid resulted in indentured servitude. This was the evil that was being addressed in the Mosaic law. That is not an issue in our society, and usury laws would simply deny the opportunity of credit to those who might have a desperate need for it, and would otherwise seek it on the black market where there is a true physical danger for failure to repay.

  • http://www.toddstadler.com/ tODD

    Don, you said (@19) that a lack of bankruptcy laws “is not an issue in our society”. Of course, Republicans are not a big fan of bankruptcy laws for the little guy, lest we forget what happened in 2005. Bankruptcy is not as easy an option to get out from under your debt burden as it once was. If we’re going to make it harder to get out of your debt, then fairness would dictate we also make it harder to get into debt. But then, perhaps you think the 2005 bankruptcy bill was also wrong.

    As for your noting that “we are not a theocracy”, it’s good to remember. Remind me what impact that has on, say, debates on gay marriage, and your position thereon.

  • http://www.toddstadler.com/ tODD

    Don, you said (@19) that a lack of bankruptcy laws “is not an issue in our society”. Of course, Republicans are not a big fan of bankruptcy laws for the little guy, lest we forget what happened in 2005. Bankruptcy is not as easy an option to get out from under your debt burden as it once was. If we’re going to make it harder to get out of your debt, then fairness would dictate we also make it harder to get into debt. But then, perhaps you think the 2005 bankruptcy bill was also wrong.

    As for your noting that “we are not a theocracy”, it’s good to remember. Remind me what impact that has on, say, debates on gay marriage, and your position thereon.

  • DonS

    tODD @ 20: I’m not an expert on the bankruptcy bill of 2005, but it seems to me, given the large number of bankruptcies during the current recession, and the number of banks that have failed because borrowers are not repaying their debts, that escaping bad credit choices is still not that tough for the average borrower. Maybe there’s a certain amount of pain in doing so, but it doesn’t amount to debtor’s prison or involuntary servitude, and the pain seems well distributed between the borrowers and the lenders, as it should be, because both parties are usually at fault when a bad loan is initiated.

    “If we’re going to make it harder to get out of your debt, then fairness would dictate we also make it harder to get into debt”. It IS harder to get into debt than it was a few years ago. Tried getting a loan recently? Lending standards have been far too lax in recent years, but banks are learning the hard way to toughen them up. Restricting interest rates for hard money loans is only going to make it tougher for those who may desperately need the money to obtain a loan, forcing them into much more unsavory, illegal, and dangerous options. Besides, we tried usury laws in the past, but they are difficult to implement and enforce, given changing economic conditions and interest rate standards. They are basically unworkable in an economy that is as volatile and public debt ridden as our’s is.

    As for the gay marriage issue, did you forget that we just had that discussion? Exactly how is it theocratic to favor letting the people decide whether to pass laws sanctioning gay marriage? If, in your view, we need to make this wrenching change to our society, against the wishes of a clear majority of its citizens, to avoid being theocratic, then you are saying that the U.S. is presently a theocracy. That is a startling conclusion, to be sure.

  • DonS

    tODD @ 20: I’m not an expert on the bankruptcy bill of 2005, but it seems to me, given the large number of bankruptcies during the current recession, and the number of banks that have failed because borrowers are not repaying their debts, that escaping bad credit choices is still not that tough for the average borrower. Maybe there’s a certain amount of pain in doing so, but it doesn’t amount to debtor’s prison or involuntary servitude, and the pain seems well distributed between the borrowers and the lenders, as it should be, because both parties are usually at fault when a bad loan is initiated.

    “If we’re going to make it harder to get out of your debt, then fairness would dictate we also make it harder to get into debt”. It IS harder to get into debt than it was a few years ago. Tried getting a loan recently? Lending standards have been far too lax in recent years, but banks are learning the hard way to toughen them up. Restricting interest rates for hard money loans is only going to make it tougher for those who may desperately need the money to obtain a loan, forcing them into much more unsavory, illegal, and dangerous options. Besides, we tried usury laws in the past, but they are difficult to implement and enforce, given changing economic conditions and interest rate standards. They are basically unworkable in an economy that is as volatile and public debt ridden as our’s is.

    As for the gay marriage issue, did you forget that we just had that discussion? Exactly how is it theocratic to favor letting the people decide whether to pass laws sanctioning gay marriage? If, in your view, we need to make this wrenching change to our society, against the wishes of a clear majority of its citizens, to avoid being theocratic, then you are saying that the U.S. is presently a theocracy. That is a startling conclusion, to be sure.

  • Joe

    tODD – your comment presupposes that the pre-2005 bankruptcy code struck the right balance on the debt/discharge scale. Without this presupposition, there is no logical reason that we need a corresponding change on the getting into debt side of the scale.

  • Joe

    tODD – your comment presupposes that the pre-2005 bankruptcy code struck the right balance on the debt/discharge scale. Without this presupposition, there is no logical reason that we need a corresponding change on the getting into debt side of the scale.

  • http://www.toddstadler.com/ tODD

    Don (@21), not all bankruptcies are created equal, as denoted by their “chapter” number. Here’s how a CNN Money article (picked from the top of a Google search; feel free to point me to a better one) summarized the changes made by the 2005 bill:

    Individuals filing for bankruptcy usually do so either under Chapter 7 or under Chapter 13.

    In a Chapter 7 bankruptcy, your assets (minus those exempted by your state) are liquidated and given to creditors, and many of your remaining debts are cancelled, giving you what’s known as a “fresh start.” In 2004, over 1.1 million people filed for Chapter 7, accounting for roughly 72 percent of non-business bankruptcies.

    Since many Chapter 7 filers don’t have assets that qualify for liquidation, credit card companies and other creditors sometimes get nothing.

    In a Chapter 13 bankruptcy, you’re put on a repayment plan of up to five years. Any debts not addressed by the repayment plan don’t have to be paid. Last year, there were 445,574 Chapter 13 filings.

    Under the new law, fewer people will be allowed to file under Chapter 7; more will be forced to file under Chapter 13.

    “It IS harder to get into debt than it was a few years ago.” Yes, but that misses the point. It’s harder because economic times are harder. If nothing had changed legally, a time would come again when these practices would return. Besides, there’s getting a loan, and then there’s sinking into debt via credit cards and the credit card companies’ abuses. Not the same thing. The topic at hand is credit cards.

    Also, are you arguing that if we outlaw usurious rates, nobody will be discouraged from obtaining a usurious loan? That everyone who was going to get a legal usurious loan will seek out an illegal usurious loan? Because that seems unlikely.

    You also asked, “how is it theocratic to favor letting the people decide whether to pass laws sanctioning gay marriage?” But I said nothing of the sort — you’re changing the debate. In response to the question of bringing back usury laws, you said we shouldn’t because “we are not a theocracy.” That is, our attitudes towards laws on usury should not be based on God’s attitude towards usury. So my question was: should our attitudes on gay marriage laws be based on God’s attitude on gay marriage?

  • http://www.toddstadler.com/ tODD

    Don (@21), not all bankruptcies are created equal, as denoted by their “chapter” number. Here’s how a CNN Money article (picked from the top of a Google search; feel free to point me to a better one) summarized the changes made by the 2005 bill:

    Individuals filing for bankruptcy usually do so either under Chapter 7 or under Chapter 13.

    In a Chapter 7 bankruptcy, your assets (minus those exempted by your state) are liquidated and given to creditors, and many of your remaining debts are cancelled, giving you what’s known as a “fresh start.” In 2004, over 1.1 million people filed for Chapter 7, accounting for roughly 72 percent of non-business bankruptcies.

    Since many Chapter 7 filers don’t have assets that qualify for liquidation, credit card companies and other creditors sometimes get nothing.

    In a Chapter 13 bankruptcy, you’re put on a repayment plan of up to five years. Any debts not addressed by the repayment plan don’t have to be paid. Last year, there were 445,574 Chapter 13 filings.

    Under the new law, fewer people will be allowed to file under Chapter 7; more will be forced to file under Chapter 13.

    “It IS harder to get into debt than it was a few years ago.” Yes, but that misses the point. It’s harder because economic times are harder. If nothing had changed legally, a time would come again when these practices would return. Besides, there’s getting a loan, and then there’s sinking into debt via credit cards and the credit card companies’ abuses. Not the same thing. The topic at hand is credit cards.

    Also, are you arguing that if we outlaw usurious rates, nobody will be discouraged from obtaining a usurious loan? That everyone who was going to get a legal usurious loan will seek out an illegal usurious loan? Because that seems unlikely.

    You also asked, “how is it theocratic to favor letting the people decide whether to pass laws sanctioning gay marriage?” But I said nothing of the sort — you’re changing the debate. In response to the question of bringing back usury laws, you said we shouldn’t because “we are not a theocracy.” That is, our attitudes towards laws on usury should not be based on God’s attitude towards usury. So my question was: should our attitudes on gay marriage laws be based on God’s attitude on gay marriage?

  • Patrick Kyle

    I read that during the recent economic downturn in Dubai, because there is no legal recourse to bakruptcy, that it became common to find luxury cars abandoned on the street or in parking garages, keys on the dash, and a glove box full of maxed out credit cards left by westerners fleeing the country after it became evident that they couldn’t pay everything they owed.

    We purchased a house and a car without the “aid” of credit cards to ‘bolster’ our credit score. I work too hard for my money to give away significant portions of it for the sake of ‘convenience.’

  • Patrick Kyle

    I read that during the recent economic downturn in Dubai, because there is no legal recourse to bakruptcy, that it became common to find luxury cars abandoned on the street or in parking garages, keys on the dash, and a glove box full of maxed out credit cards left by westerners fleeing the country after it became evident that they couldn’t pay everything they owed.

    We purchased a house and a car without the “aid” of credit cards to ‘bolster’ our credit score. I work too hard for my money to give away significant portions of it for the sake of ‘convenience.’

  • DonS

    tODD @ 23: I’m in no position to argue the merits of the 2005 bill, but even if more folks are forced in Ch. 13 rather than Ch 7, I’m betting they are mostly those of greater means, who have the potential to repay at least some of their debts. Moreover, I would bet that the first debts discharged or modified are those that the bankruptcy courts find to be usurious. At any rate, it is not arguable that many folks are still getting their debts discharged or modified in bankruptcy, and that we do not have debtors’ prisons or involuntary servitude.

    I’m not arguing that those who cannot get a legal usurious loan (whatever the definition of “usurious” is — this is part of the problem of having usury laws) will all go obtain money from a loan shark. But a small percentage will, at great risk to their kneecaps. I’m not a big fan of nanny government, as you may have surmised. So why not let folks be big people and make these decisions themselves? If they make a bad choice, they have options to get out of that choice without horrendous consequence. And their resultant poor credit rating will prevent them from having the opportunity to make that choice again.

    “That is, our attitudes towards laws on usury should not be based on God’s attitude towards usury. So my question was: should our attitudes on gay marriage laws be based on God’s attitude on gay marriage?”

    This is a good question. I am not saying that our laws on usury “should not be based on God’s attitude towards usury”. What I am saying is that we are not in the same position as ancient Israel was, and I’m not convinced God’s attitude toward usury then applies today, sufficiently so as to force us theologically to support modern usury laws. I think that His primary concern was protection of the debtor, who was severely oppressed if he could not repay his debt. We are not in that environment today.

    To your second question, I think we would both agree, based on past discussion, that God views gay marriage to be sin, based on His clear prohibition of homosexual behavior. But, I don’t think either homosexual acts nor gay marriage should be prohibited by law. I am libertarian in this regard — it is not the job of our government to legislate morality. On the other hand, I don’t think gays should be able to impose their morality on the majority, by forcing the citizens, throught their government, to sanction gay marriage. I do not want to be in the position of sanctioning sin. This is why, while I do not oppose legalized gambling, I oppose government-sponsored gambling, such as state lotteries.

  • DonS

    tODD @ 23: I’m in no position to argue the merits of the 2005 bill, but even if more folks are forced in Ch. 13 rather than Ch 7, I’m betting they are mostly those of greater means, who have the potential to repay at least some of their debts. Moreover, I would bet that the first debts discharged or modified are those that the bankruptcy courts find to be usurious. At any rate, it is not arguable that many folks are still getting their debts discharged or modified in bankruptcy, and that we do not have debtors’ prisons or involuntary servitude.

    I’m not arguing that those who cannot get a legal usurious loan (whatever the definition of “usurious” is — this is part of the problem of having usury laws) will all go obtain money from a loan shark. But a small percentage will, at great risk to their kneecaps. I’m not a big fan of nanny government, as you may have surmised. So why not let folks be big people and make these decisions themselves? If they make a bad choice, they have options to get out of that choice without horrendous consequence. And their resultant poor credit rating will prevent them from having the opportunity to make that choice again.

    “That is, our attitudes towards laws on usury should not be based on God’s attitude towards usury. So my question was: should our attitudes on gay marriage laws be based on God’s attitude on gay marriage?”

    This is a good question. I am not saying that our laws on usury “should not be based on God’s attitude towards usury”. What I am saying is that we are not in the same position as ancient Israel was, and I’m not convinced God’s attitude toward usury then applies today, sufficiently so as to force us theologically to support modern usury laws. I think that His primary concern was protection of the debtor, who was severely oppressed if he could not repay his debt. We are not in that environment today.

    To your second question, I think we would both agree, based on past discussion, that God views gay marriage to be sin, based on His clear prohibition of homosexual behavior. But, I don’t think either homosexual acts nor gay marriage should be prohibited by law. I am libertarian in this regard — it is not the job of our government to legislate morality. On the other hand, I don’t think gays should be able to impose their morality on the majority, by forcing the citizens, throught their government, to sanction gay marriage. I do not want to be in the position of sanctioning sin. This is why, while I do not oppose legalized gambling, I oppose government-sponsored gambling, such as state lotteries.

  • http://www.toddstadler.com/ tODD

    Don (@25), you said, “I’m in no position to argue the merits of the 2005 bill,” but then went on to make several assumptions based on it, anyhow. You do realize that the former statement caused me to seriously question all the latter assumptions, yes? Are these assumptions based on any facts you could point to?

    “At any rate, it is not arguable that many folks are still getting their debts discharged or modified in bankruptcy.” Nor is it arguable that many folks are still getting into deep doodoo, debt-wise, from which they are not easily escaping. Where does that leave us?

    Anyhow, I believe you actually made the argument for anti-usury laws when you noted that, if they were passed, only “a small percentage” of people would still risk illegal usurious loans. Isn’t that the point? And after all, don’t loan sharks exist in situations where usury is completely legal, because there’s always someone who’s in too desperate a situation for even a legal usurist?

    You make it sound like usurious loans are a way “to get out of [some other, bad] choice without horrendous consequence”, but I think this misses the point that usurious loans are often anything but a way out of debt. Nor do I think that “their resultant poor credit rating” will prevent people from resorting to usurious loans in the future. Do you really think people charging 50%+ interest on loans are also checking credit ratings? I’m familiar with the institutions in my town that advertise “no credit checks”, and it’s not the ones that offer good rates.

    “I’m not convinced God’s attitude toward usury then applies today.” Why not? Do you think God no longer cares about the oppression of the poor? Even a cursory reading of the New Testament will disabuse you of that notion. So why would God now be okay with what he formerly said was wrong?

    “I think that His primary concern was protection of the debtor, who was severely oppressed if he could not repay his debt. We are not in that environment today.” I really don’t know how you can argue this. Don’t you think people are impacted by debt today? I thought that was a fairly agreed-upon notion.

    Anyhow, you’re in the position of supporting a government sanction on usury right now, per your wording on marriage. After all, you said allowing gays to be married (here I’m refer to the common use of “married”) equals government sanction of sin. Therefore, it must follow that allowing usurious loans to take place equals government sanction of usury, as well as greed.

    Of course, the whole notion of government sanction of sin is an interesting one. Are you okay with the current situation where you (“through your government”, as you say) are sanctioning the sin of divorce? That sin is far more rampant than homosexual marriage ever will be, I submit. The government sanctions many more sins than that, of course. Are you okay with all of them?

  • http://www.toddstadler.com/ tODD

    Don (@25), you said, “I’m in no position to argue the merits of the 2005 bill,” but then went on to make several assumptions based on it, anyhow. You do realize that the former statement caused me to seriously question all the latter assumptions, yes? Are these assumptions based on any facts you could point to?

    “At any rate, it is not arguable that many folks are still getting their debts discharged or modified in bankruptcy.” Nor is it arguable that many folks are still getting into deep doodoo, debt-wise, from which they are not easily escaping. Where does that leave us?

    Anyhow, I believe you actually made the argument for anti-usury laws when you noted that, if they were passed, only “a small percentage” of people would still risk illegal usurious loans. Isn’t that the point? And after all, don’t loan sharks exist in situations where usury is completely legal, because there’s always someone who’s in too desperate a situation for even a legal usurist?

    You make it sound like usurious loans are a way “to get out of [some other, bad] choice without horrendous consequence”, but I think this misses the point that usurious loans are often anything but a way out of debt. Nor do I think that “their resultant poor credit rating” will prevent people from resorting to usurious loans in the future. Do you really think people charging 50%+ interest on loans are also checking credit ratings? I’m familiar with the institutions in my town that advertise “no credit checks”, and it’s not the ones that offer good rates.

    “I’m not convinced God’s attitude toward usury then applies today.” Why not? Do you think God no longer cares about the oppression of the poor? Even a cursory reading of the New Testament will disabuse you of that notion. So why would God now be okay with what he formerly said was wrong?

    “I think that His primary concern was protection of the debtor, who was severely oppressed if he could not repay his debt. We are not in that environment today.” I really don’t know how you can argue this. Don’t you think people are impacted by debt today? I thought that was a fairly agreed-upon notion.

    Anyhow, you’re in the position of supporting a government sanction on usury right now, per your wording on marriage. After all, you said allowing gays to be married (here I’m refer to the common use of “married”) equals government sanction of sin. Therefore, it must follow that allowing usurious loans to take place equals government sanction of usury, as well as greed.

    Of course, the whole notion of government sanction of sin is an interesting one. Are you okay with the current situation where you (“through your government”, as you say) are sanctioning the sin of divorce? That sin is far more rampant than homosexual marriage ever will be, I submit. The government sanctions many more sins than that, of course. Are you okay with all of them?

  • DonS

    tODD @ 26:

    To clarify, I didn’t follow the progress of the 2005 bankruptcy legislation that closely, so I am not in a position to opine with authority as to its merits, or precisely how it changed the nature of bankruptcy law. However, my sense is that it really hasn’t changed things all that much for those of modest assets and income. At least anecdotally, there seem to be plenty of folks discharging their debts through Ch. 7 bankruptcy proceedings without all that much difficulty. Yes, I recognize there are many people in over their heads with debt. That seems to be an issue with our entire society, in the public and private sectors. But are usurious interest rates (as yet, undefined) to blame for this? Or is it, rather, the notion that we cannot wait and save for those things we anticipate?

    “Do you think God no longer cares about the oppression of the poor? Even a cursory reading of the New Testament will disabuse you of that notion. So why would God now be okay with what he formerly said was wrong?” — Of course God cares about oppression of the poor. But, my whole point was that those who are indebted are no longer oppressed like they were in O.T. times, when they were imprisoned or enslaved until their debts were paid. Having to live with the consequences of indebtedness isn’t really “oppression”, is it? “Impacted” yes. Oppressed, no. Especially when it is relatively easy to discharge those debts and get a fresh start in bankruptcy.

    To try to re-establish some kind of regulatory scheme to attempt to prevent usury would be an incredible undertaking. First, usury would need to be defined. It would have to be a flexible definition, to account for variable economic conditions. Then, a new federal bureaucracy would need to be established, nationwide to implement the regulations necessary to enforce these laws. All of this would cost billions of dollars the government doesn’t have, and, as usual, result in numerous work-arounds to avoid the regulations. Then, more regulations would be promulgated to attempt to fill the loopholes, etc. I doubt it would work, it would cost a fortune, and it would suppress economic activity and individual liberty, as all government regulation does. And, it would be more than a bit ironic for government to step in to regulate debt, when its own crushing debt and unfunded future liabilities are a far worse long term problem for the poor (as well as the rest of us). The bottom line is that the government is not really very good at regulating the economy. It tends to cause more damage than it resolves, with a good quantity of waste and corruption thrown in, for good measure.

    “Anyhow, you’re in the position of supporting a government sanction on usury right now, per your wording on marriage. After all, you said allowing gays to be married (here I’m refer to the common use of “married”) equals government sanction of sin. Therefore, it must follow that allowing usurious loans to take place equals government sanction of usury, as well as greed.” — No, this is incorrect. I am not suggesting that we pass laws authorizing usury. Only that we don’t need laws prohibiting it. Failing to prohibit something is not tantamount to endorsing or sanctioning that thing. This position is on all fours with my view on gay marriage. I did NOT say that allowing gays to be married equals government sanction of sin. What I said was that if we were forced to implement laws granting to gays the right to marry, with the same benefits and inducements provided to heterosexual marriage, then we would be, in essence, sanctioning and incentivizing a sinful relationship.

    “Of course, the whole notion of government sanction of sin is an interesting one. Are you okay with the current situation where you (“through your government”, as you say) are sanctioning the sin of divorce? That sin is far more rampant than homosexual marriage ever will be, I submit. The government sanctions many more sins than that, of course. Are you okay with all of them?”

    This is an interesting question. Yes, the government does sanction sin. I mentioned in my earlier post state-sponsored lotteries, which I abhor. I’m not sure that the divorce laws fall in this category, as they should probably more accurately be regarded as permitting people to break up, in an orderly way that protects both spouses and particularly children, a marriage which is going to break up regardless. Besides, divorce isn’t always sinful, as there are biblical grounds for divorce. But, the point is not that government doesn’t sanction sin. The point, rather, is that the people should not be forced, by the courts, through their government, to sanction sin. If they vote to do it voluntarily, that is their perogative.

  • DonS

    tODD @ 26:

    To clarify, I didn’t follow the progress of the 2005 bankruptcy legislation that closely, so I am not in a position to opine with authority as to its merits, or precisely how it changed the nature of bankruptcy law. However, my sense is that it really hasn’t changed things all that much for those of modest assets and income. At least anecdotally, there seem to be plenty of folks discharging their debts through Ch. 7 bankruptcy proceedings without all that much difficulty. Yes, I recognize there are many people in over their heads with debt. That seems to be an issue with our entire society, in the public and private sectors. But are usurious interest rates (as yet, undefined) to blame for this? Or is it, rather, the notion that we cannot wait and save for those things we anticipate?

    “Do you think God no longer cares about the oppression of the poor? Even a cursory reading of the New Testament will disabuse you of that notion. So why would God now be okay with what he formerly said was wrong?” — Of course God cares about oppression of the poor. But, my whole point was that those who are indebted are no longer oppressed like they were in O.T. times, when they were imprisoned or enslaved until their debts were paid. Having to live with the consequences of indebtedness isn’t really “oppression”, is it? “Impacted” yes. Oppressed, no. Especially when it is relatively easy to discharge those debts and get a fresh start in bankruptcy.

    To try to re-establish some kind of regulatory scheme to attempt to prevent usury would be an incredible undertaking. First, usury would need to be defined. It would have to be a flexible definition, to account for variable economic conditions. Then, a new federal bureaucracy would need to be established, nationwide to implement the regulations necessary to enforce these laws. All of this would cost billions of dollars the government doesn’t have, and, as usual, result in numerous work-arounds to avoid the regulations. Then, more regulations would be promulgated to attempt to fill the loopholes, etc. I doubt it would work, it would cost a fortune, and it would suppress economic activity and individual liberty, as all government regulation does. And, it would be more than a bit ironic for government to step in to regulate debt, when its own crushing debt and unfunded future liabilities are a far worse long term problem for the poor (as well as the rest of us). The bottom line is that the government is not really very good at regulating the economy. It tends to cause more damage than it resolves, with a good quantity of waste and corruption thrown in, for good measure.

    “Anyhow, you’re in the position of supporting a government sanction on usury right now, per your wording on marriage. After all, you said allowing gays to be married (here I’m refer to the common use of “married”) equals government sanction of sin. Therefore, it must follow that allowing usurious loans to take place equals government sanction of usury, as well as greed.” — No, this is incorrect. I am not suggesting that we pass laws authorizing usury. Only that we don’t need laws prohibiting it. Failing to prohibit something is not tantamount to endorsing or sanctioning that thing. This position is on all fours with my view on gay marriage. I did NOT say that allowing gays to be married equals government sanction of sin. What I said was that if we were forced to implement laws granting to gays the right to marry, with the same benefits and inducements provided to heterosexual marriage, then we would be, in essence, sanctioning and incentivizing a sinful relationship.

    “Of course, the whole notion of government sanction of sin is an interesting one. Are you okay with the current situation where you (“through your government”, as you say) are sanctioning the sin of divorce? That sin is far more rampant than homosexual marriage ever will be, I submit. The government sanctions many more sins than that, of course. Are you okay with all of them?”

    This is an interesting question. Yes, the government does sanction sin. I mentioned in my earlier post state-sponsored lotteries, which I abhor. I’m not sure that the divorce laws fall in this category, as they should probably more accurately be regarded as permitting people to break up, in an orderly way that protects both spouses and particularly children, a marriage which is going to break up regardless. Besides, divorce isn’t always sinful, as there are biblical grounds for divorce. But, the point is not that government doesn’t sanction sin. The point, rather, is that the people should not be forced, by the courts, through their government, to sanction sin. If they vote to do it voluntarily, that is their perogative.

  • cattail

    Credit cards provide protection for the purchaser that debit cards do not. This includes cancellation of fraudulent charges (far easier with credit than with debit cards) and a lot more clout with the merchant when the merchandise ordered is not received or is not as advertised. If you can’t get satisfaction from the merchant, you can dispute the charge with the credit card company and they will go after the merchant. This last is impossible to do with debit cards.

    I have always paid my credit card charges in full each month to avoid interest charges. A few months ago, though, I got my punishment from Bank of America and Citi for doing so in the form of increased interest rates, about 30%. Of course this exorbitant rate provides even more incentive to pay off the charges in full during the grace period, so I don’t know what they accomplished by this! I’m in the process of applying for a credit card from my credit union, which doesn’t go in for such shoddy practices, and will cancel the other two cards when I get the one from the credit union.

    I know a number of others who routinely pay their balances within the grace period and have been hit with the same interest rate increase. They, too, have taken their business to their local credit union!

  • cattail

    Credit cards provide protection for the purchaser that debit cards do not. This includes cancellation of fraudulent charges (far easier with credit than with debit cards) and a lot more clout with the merchant when the merchandise ordered is not received or is not as advertised. If you can’t get satisfaction from the merchant, you can dispute the charge with the credit card company and they will go after the merchant. This last is impossible to do with debit cards.

    I have always paid my credit card charges in full each month to avoid interest charges. A few months ago, though, I got my punishment from Bank of America and Citi for doing so in the form of increased interest rates, about 30%. Of course this exorbitant rate provides even more incentive to pay off the charges in full during the grace period, so I don’t know what they accomplished by this! I’m in the process of applying for a credit card from my credit union, which doesn’t go in for such shoddy practices, and will cancel the other two cards when I get the one from the credit union.

    I know a number of others who routinely pay their balances within the grace period and have been hit with the same interest rate increase. They, too, have taken their business to their local credit union!

  • http://mesamike.org Mike Westfall

    Doesn’t really matter what the interest rate is if you pay off the balance before it applies. I’m sure the banks will now get smart and reinstitute annual card holder fees like they used to have way back when, as well as many new fees such as inactivity fees for those who like to hold onto a card “just in case” but don’t actually use it, or below-the-minimum-balance fees for those who like pay off each month before the interest charge kicks in. And probably other imaginative fees and charges that us normal humans can’t conceive of just yet.

  • http://mesamike.org Mike Westfall

    Doesn’t really matter what the interest rate is if you pay off the balance before it applies. I’m sure the banks will now get smart and reinstitute annual card holder fees like they used to have way back when, as well as many new fees such as inactivity fees for those who like to hold onto a card “just in case” but don’t actually use it, or below-the-minimum-balance fees for those who like pay off each month before the interest charge kicks in. And probably other imaginative fees and charges that us normal humans can’t conceive of just yet.

  • dave

    No thank you on the advice on credit cards. I have two and use them in the specific circumstances where they are more advantageous than a debit card (and/or less risky). I usually don’t have a balance subject to service charge, although on rare occasions I’ll carry over a few hundred dollars that will cost me almost nothing to do.

    Used with restraint and with resources to pay off the balances, credit cards are not a problem.

  • dave

    No thank you on the advice on credit cards. I have two and use them in the specific circumstances where they are more advantageous than a debit card (and/or less risky). I usually don’t have a balance subject to service charge, although on rare occasions I’ll carry over a few hundred dollars that will cost me almost nothing to do.

    Used with restraint and with resources to pay off the balances, credit cards are not a problem.