# Erase credit debt

#### Pengwuino

Gold Member
Wait wait, so you're saying if someone agrees to something that they don't understand and is too complex for them, they're off the hook?

How many people do you honestly think take the time to read the fine print with anything? I know of people who don't even know how many credit cards they have let alone the terms on each.

Maybe I'm just completely irrational and easily taken for a fool, but I don't agree to something when I don't understand what I'm agreeing to.

#### gravenewworld

Because that is all included in the contract you agree to when you get the credit card. If you don't like the terms they offer, don't use their service. For the first, instead of getting a "floating rate" credit card, get one with a fixed rate. For the second, usually if you contact the institution they will set this option upon request. The third bugs me too, I'm pretty sure you'll find it in your credit agreement, which you should have signed. The obvious reason that they do this is that banks are in business to make money, and they make more money off of the higher interest rate balances than the lower interest rate ones.
I wasn't talking about "floating rate" cards, but more of something along the lines of "retroactive interest rate changes" which are changes to interest rates on previous balances for basically little to no reason at all.

http://www.washingtonpost.com/wp-dyn/content/article/2009/03/21/AR2009032101840.html

Banks are in business to make money. If they didn't expect that the person will be able to eventually pay back then credit, they wouldn't have given it. If the customer doesn't pay back the money, the bank eats that loss (either directly, or indirectly through insurance).

Just remember, when you're dealing with a business, their legal responsibility is to maximize profit for the shareholders, not to look out for the customer's best interests. That's your responsibility, not theirs.

And that's one of the reasons why the subprime mortgage crisis happened. Because lenders were not lending responsibly and were not looking out for the consumer.

It isn't true that banks only lend to people if they think they can pay them back. See Ninja loans (part of the subprime crisis):

http://www.washingtonpost.com/wp-dyn/content/article/2008/05/30/AR2008053002554.html
http://www.washingtonpost.com/wp-dyn/content/article/2007/03/13/AR2007031301733_pf.html

What did the banks care if the customers who couldn't afford their mortgages defaulted? The banks could take over through foreclosure and still make a profit since the housing market was supposed to keep going up and up and up. Credit banks believed they could profit whether the borrower could pay it or not. Well guess what? The housing market crashed and the banks were left with worthless foreclosed houses from people they lent to who couldn't afford their mortgages.

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#### gravenewworld

Wait wait, so you're saying if someone agrees to something that they don't understand and is too complex for them, they're off the hook?

How many people do you honestly think take the time to read the fine print with anything? I know of people who don't even know how many credit cards they have let alone the terms on each.

Maybe I'm just completely irrational and easily taken for a fool, but I don't agree to something when I don't understand what I'm agreeing to.
No not at all. What I am saying is

1.) Consumers should live within their means and pay off debt they accumulate as long as they are given full information about their credit.

and

2.) Lenders should lend responsibly and be fully transparent. Disclosure does not equate to transparency.

It shouldn't take a degree in finance to understand the terms and conditions of your credit card. There have been literally dozens of hearings in Congress over the past 10-15 years about consumers not being able to understand credit card agreements.

#### gravenewworld

http://www.consumeraffairs.com/news04/2007/03/senate_credit_cards02.html

Sen. Levin

In preparation for today's hearing, Levin charged the Government Accountability Office to prepare a report on the industry's rates and fees. That report revealed that credit card disclosures are written at a "twenty-seventh-grade level."

"I can only assume that one would need -- after 12 years of grade school and four years of college -- a four-year medical degree, a five-year PhD and a two-year MBA to fully grasp those particular provisions," Coleman said.

See pg 43 from the GAO's report.

http://www.gao.gov/new.items/d06929.pdf

In addition to the average reading level, certain portions of the typical disclosure documents provided by the large issuers required even higher reading levels to be understandable. For example, the information that appeared in cardmember agreements about annual percentage rates, grace periods, balance computation, and payment allocation methods required a minimum of a fifteenth-grade education, which is the equivalent of 3 years of college education. Similarly, text in the documents describing the interest rates applicable to one issuer’s card were written at a twenty-seventh-grade level. However, not all text in the disclosures required such high levels. For example, the consultant found that the information about fees that generally appeared in solicitation letters required only a seventh- and eighth-grade reading level to be understandable. Solicitation letters likely required lower reading levels to be understandable because they generally included more information in a tabular format than cardmember agreements.

It's actually quite laughable considering the fact that most people in the US read at an eighth grade level.

#### Pengwuino

Gold Member
See pg 43 from the GAO's report.
Page 38 of the actual document

#### cristo

Staff Emeritus
Maybe I'm just completely irrational and easily taken for a fool, but I don't agree to something when I don't understand what I'm agreeing to.
Nope, I'd say this was an entirely rational response.

It seems like the major problem is not that the credit card terms and conditions are too complicated (even if they are), but that consumers agree to something that they either don't understand, or don't bother to read, or both.

#### Pengwuino

Gold Member
It's actually quite laughable considering the fact that most people in the US read at an eighth grade level.
Yes the average cardholder being able to read at a junior high level is quite laughable indeed :rofl: . The report summarized:

However, the assessment by our usability consultant found that the disclosures in the customer solicitation materials and cardmember agreements provided by four of the largest credit card issuers were too complicated for many consumers to understand. For example, although about half of adults in the United States read at or below the eighth-grade level, most of the credit card materials were written at a tenth- to twelfth-grade level.
Ok there is something horribly wrong if federal action is needed to help consumers if they can't understand high school-level documents. This certaintly doesn't take away from the fact that if people don't understand a document, they shouldn't sign it.

#### gravenewworld

Yes the average cardholder being able to read at a junior high level is quite laughable indeed :rofl: . The report summarized:

Ok there is something horribly wrong if federal action is needed to help consumers if they can't understand high school-level documents.
This certaintly doesn't take away from the fact that if people don't understand a document, they shouldn't sign it.
Did you go on to read further in the GAO report? Just because people should be able to read at a 12th grade level doesn't change the fact that most people can't. Read further on the sections on Poor organization and Formatting and Excessive Complexity and Volume of Information. Even if you are able to read at a higher level, simply the way in which terms and agreements are laid out and how important information is buried in redundant or useless information can still make it difficult to understand. I especially like the part how one credit card bank buries fees and penalty information along with how they calculate variable rate in case the Wall Street Journal ceases to publish. One of the four major issuers disclosed fees and rates in one document, but then provided how those fees and rates were determined in an entirely separate document. Common sense would tell you to put it in all one thing.

The content of typical credit card disclosure documents generally was overly complex and presented in too much detail, such as by using unfamiliar or complex terms to describe simple concepts. For example, the usability consultant identified one cardmember agreement that used the term “rolling consecutive twelve billing cycle period” instead of saying “over the course of the next 12 billing statements” or “next 12 months”—if that was appropriate. Further, a number of consumers, consumer advocacy groups, and government and private entities that have provided comments to the Federal Reserve agreed that typical credit card disclosures are written in complex language that hinders consumers’ understanding. For example, a consumer wrote that disclosure documents were “loaded with booby traps designed to trip consumers, and written in intentionally impenetrable and confusing language.” One of the consumer advocacy groups stated the disclosures were “full of dense, impenetrable legal jargon that even lawyers and seasoned consumer advocates have difficulty understanding.” In addition, the consultant noted that many of the disclosures, including solicitation letters and cardmember agreements, contained overly long and complex sentences that increase the effort a reader must devote to understanding the text. Figure 14 contains two examples of instances in which the disclosure documents used uncommon words and phrases to express simple concepts.

Should consumers sign agreements that they don't understand? No. But it doesn't change the fact that it happens everyday. Show me 1 or 2 credit cards that don't have terms and agreements with complex jargon and horrible formatting like what was laid out in the GAO report. Pretty much all credit card banks do it and they do it because they know that if they can make it difficult for the consumer to understand they can make a mint off of penalty fees and interest rate hikes. What happened to the good old days (like in the 80s) when a lot cards worked easily and worked pretty much in the same fashion--flat interest rate near 20%, simple terms, and almost little or no fees at all?

#### GeorginaS

I've not heard of credit card debt being erased other than in bankruptcy. Some people I know have negotiated to have interest charges stopped so they could get the principle paid down, but then they forfeited their cards afterward.

Ah, Despite my intentions, due to a miscalculation I ended up over spending by a couple thousand dollars, and I decided that there was no purpose in having a credit card which is just an accident waiting to happen. Now I just use a debit card. It seems to have no disadvantage (except perhaps that I'm not continually "building credit" by using it).
There are loads of advantages to having credit cards in this day in age. Lots of stuff simply can't happen without them, such as renting a car, or making online purchases that you might not otherwise be able to make. They are perfect for emergencies and should be limited to those situations where you need one to make something happen or you're caught off-guard with an expense.

The problem is that most people view credit cards as money they own just waiting to be spent. Then they run into trouble. But they truly are becoming more and more of a necessity in our world.

Homework Helper

#### junglebeast

There are loads of advantages to having credit cards in this day in age. Lots of stuff simply can't happen without them, such as renting a car, or making online purchases that you might not otherwise be able to make. They are perfect for emergencies and should be limited to those situations where you need one to make something happen or you're caught off-guard with an expense.
But I can use my debit card to do all of these things the exact same way. They person doesn't even need to know that it's a debit card if I say "credit."

So far the disadvantages I've heard pointed out are:

1) CC can make additional money through interest. The amount of interest I make in a month would probably not be enough to buy a stick of gum so that's irrelevant to me.

2) CC offers more protection. This is a good point.

3) CC builds credit so credit score is higher if I ever decided I want to take out a loan in the future.

#### Evo

Mentor
I wouldn't use anything except for the non-profit credit counseling agencies that are available for free to the public. You should never have to pay or sign up for anything.

The way this works is that most credit card companies will negotiate to stop interest fees, therefore allowing you to pay off the debt without accruing more debt. That's where people run into problems, they can't afford to pay more than the interest each month. They will also negotiate a timeframe in which to pay off the dept, usually lowering the amount you have to pay each month. The agreement requires you to have your accounts cancelled so you can no longer charge anything, which is smart.

#### NeoDevin

If you really need to sign an agreement that you don't understand, there is always the (expensive) option of hiring a lawyer to read it over for you, and explain the important points.

Staff Emeritus
I doubt it's that expensive, relatively speaking, for someone who is likely to be in serious debt because of credit cards. A lawyer would charge maybe $150 or$200 for this, right? Someone with $10,000 in debt is paying$132 a year (on average) at the ordinary rate, and could pay as much as $320 a year for the default rate. If the lawyer's advice kept the customer in the first category, it pays for itself. #### GeorginaS But I can use my debit card to do all of these things the exact same way. They person doesn't even need to know that it's a debit card if I say "credit." I'm curious to know where you live. To rent a car, they run your credit card through a machine and verify a "hold" on a certain amount of money as against your car rental charges. I don't know any debit card that can do that. When I said they were handy in an emergency, I meant an emergency situation where you don't have enough cash in the bank to cover an unanticipated expense. I don't know how a debit card helps in that situation, either, given that they are direct access to your bank account and subject to the balance you have in it. (Now, granted, my bank account, and hence debit card, has a sizeable overdraft available on it, but it's nowhere near the amount of money I have access to with credit cards.) Lastly, I don't know about you, but when I purchase something online, the software online knows simply by the numbers I've entered into their software whether the numbers belong to a Visa or Mastercard or some other credit card. So how you manage to use your debit card as credit card online is a mystery to me. #### Pythagorean Gold Member I don't know how people end up$10s of thousands in debt on credit cards anyway. How do you not realize you couldn't pay off last month's bills, so maybe you shouldn't be spending on anything but bare essentials this month?
I don't think it's a matter of them not realizing it so much...

Habit is a cool dude to hang out with; he does what he wants. Reason is that annoying, articulate, chatty little twit that always points out when you're wrong and makes a fool of you in public.

They don't fight, because that implies consent, but Habit is always kicking Reason's ***.

#### Pengwuino

Gold Member
I don't know how people end up $10s of thousands in debt on credit cards anyway. How do you not realize you couldn't pay off last month's bills, so maybe you shouldn't be spending on anything but bare essentials this month? I could see someone getting socked with$5000 that they can't pay off right away...maybe the furnace dies the same month the transmission falls out of the car and you don't have the cash to pay that all up front, but then you know you need to cut out all the frivolous extras and perhaps downsizing on the house, taking in roommates to share costs, or watching the food budget more carefully if you can't pay that off in a year's time.
I love seeing talks shows and news reporting segments where they interview of counsel people in tremendous debt. It's seriously as if they have simply checked out like a drug addict. They're confronted with it and they're simply like "Oh well....". Then there's these people that kinda act like kids and think they just need to make the minimum payments and as long as they can, they can spend freely. I wonder if it's them just not understanding basic math. The people with huge debt never seem to be the ones who forget to pay the bills or have an emergency expense they werent prepared for... it's the people who think 'Hey, I have a $20,000 limit, I should buy$20,000 worth of stuff and only be paying a few hundred a month!' as if they think they're getting away with something.