How the banks are killing America

In the mail comes a nice letter from the credit card company, we are jacking up your rates to 30% no reason, really, we are doing this so we can provide our customers wit ha better credit experience, or some wording of that nature.

I always paid on time, it is set to autopay, i pay more then the minimum too.

I am a "credit risk"

why am i a credit risk?

well i have a high balance on my card(s)

ok do i pay more then the minimum every month?

yes

do i miss payments?

no

have i defaulted on any loan i may have?

no

have i mentioned i am employed full time?

yes

you are a risk, but you can "opt-out"

opting out means closing the account and paying it off at the current rate, for me that is 8.24% right now, i do admit to carring a high balance on the card but i barely used it after having to borrow the money, the irony was, that, since it wa the lowest interest card i had, i was going to pay it off over the following 4 months or so and use it more frequently to help bolster my ailing credit score.

why is my credit score ailing if i make payments on time all the time?

well since this "financial crisis" which was when the banks were foolish and incompetant with their money and invested in bad and stale investments and lost alot of money, then subsequently were given almost unlimited amounts of money via the government thanks to the taxpayer... yes, me the taxpayer, with my full time job, bailing out the financial insitutions so, they would NOT have to go into bankruptsy, like so many "normal" people and buisneses do these days. ALL the bailed out banks, and then some, have decided to raise their rates to borrowers, if they would give them credit at all, it does not matter that the prime rate is in the region of 0.5% and if you have lots of money in savings ( i.e. YOU loan the bank YOUR money so they can use it) you are lucky to see a 3 or 4% return In addition to NEW government legislation limiting what a credit card company can do i.e. not raise the interest rates on existing purchases only NEW purchases, also limiting how and why and how much the rates can go into effect (all starting in the new year)

So as a result if you do not want to pay 30% on ALL your unsecured credit cards, you get to "opt-out" i.e. close the account, which is fine, however, when you close an account it affects your credit rating, sometimes quite drastically, thus lowering your credit score, making you seem less attractive to a bank, they then see you as a risk and may lower your available credit too, this ALSO affects your credit score as a higher percentage of your debt to credit ratio is instantly eaten up through no fault of your own, so these two factors can take a mid to high 700 score or even an 800 score and drop it to mid 600's... and all you had to do was nothing.
So as your score drops you get hit with higher rates, or get the option to close, as you close your score drops, now your score drops FAST, faster then a lead balloon in many cases but it takes months or years to rebuild.
so as you slowly close more cards, some of them could be long established ( another factor affecting score) the lower your credit rating drops and more you have to work to get it back up.
The answer maybe not to have credit cards.... unfortunatly you need a revolving line of credit to establish credit ( and they thought quantum physics was weird) so you need a card, the other answer is not to rack up so much debt i.e. do not spend what you cannot afford, have savings etc, ok, lets look at that last one, savings, the average rent for an apartment ( 3 bedroom ) in chicago NOT including utilities is around $1100 - 1500 a month, why 3 bedroom? well a partner and 2 kids, a fairly normal family so already thats say 750 a paycheck in rent alone ( a mortgage would be around $2000 a month) lets add utilities, electrics $100 probably closer to $150 Gas around $150 too, so thats at least 1150 in basic accomodation.

food, a family of four can survive, on just about 100 - 120 a week in food, thats cutting it a little thin so thats another 440 a month $1590

this is not including any additional insurances you may have on a property or anything else, so a minimum you need at least $1600 a month TAKE HOME to support your family

1600 a month is about 19,200 a year AFTER TAX and benfits which is why the federal poverty level for a family of four is 22,050

now a $10 an hour job for a normal working week just so happens to pay exactly ( before deductions) exactly 1600 a month, and, the minimum wage in chicago is $8 an hour.

so lets say you have 2 people in a $10 an hour job, you make 3200 a month between you 38400 a year before deductions, take out tax ss medicare you are down another 20 or so percent so thats about 30k take home.

so lets take out the 19200 that leaves 11520 to pay for everything else about 960 a month

so lets take 960 a month and look at what else we can do ( i did not include PRIVATE insurance in the wage calculation BTW)

a car.. lets say, you were lucky and have a normal secondhand car.. at gas prices right now we have about 2.70 a gallon in and around chicago, lets say 1 person takesthe bus to work the other works in the burbs and drives say 20 miles each way, the car ( it is older) gets about 20 mpg, the tank hold 15 gallons so each tank gets you about 300 miles so at 40 miles per day you do about 200 miles a week so you need to fill your car up twice a month ( not doing ANY other driving and not including any traffic issues along the way) so it costs you about $80 a month to fill the car up with gas to get to and from work, the CTA charges about $2 a ride with a transfer, so thats $4 a day $20 a week about $80 a month so for travel alone it costs $160 a month.

960 - 160 = 800 left... oh insurance... you cannot drive without insurance...

for a typical married couple you can probably pick up basic insurance for about 2-300 every 6 months ( bare basics) lets call it 250 so thats about 42 a month or 500 a year

so with basic insurance for 1 car

800-42 = 758

this sounds like a plan we can save $700 a month.

I will at this point estimate some insurance information both adults get insurance through their work they pay about $70 a month out of pocket so we will take out the 140 from the 758 as it was not there to begin with this is assuming an HMO.

758-140 - 618

in illinois we have all kids they base your rates on your gross family income. in this case 3200 a month this puts you in premium level 1

the cost per month for this is only $25 for the 2 kids and the co-pays are small.

618-25 = 593 a month left over

these are typical outgoings per month.
so all in all yes 2 people working full time could save 593 a month.

oh wait 2 full time workers? what about the kids? you cannot expect the kids to be home alone? that would be illegal.

Day care costs for children under two typically come in at about 200 a week

oh dear thats 800 a month lets hope the kids are not in day care

lets choose a baby sitter instead. that should be between 8 and 12 an hour but lets say you worked something out with someone and you only pay $4 an hour and we need say 3 hours a night sitting for the kids * between 3 pm when they get out ( though many schools round here get out at 2pm and 6pm when one of you makes it home)

3hours time 5 days is 15 hours a week 15 hours times $4 an hour is 60 a week

about 240 a month IF you can get it at $4 an hour

at 8 an hour ( illinois minimum wage) it is 480 a month

lets plug those numbers into the money-o-matic

593-240 = 353 left over

or

593-480 = 113 left over


in chicago you pay a one time a year city sticker that costs $120

your plates need renewing at $75

this does not include incidentals no clothes were included ( lets hope you are a member of a nudist camp)

i also low balled many aspects groceries go up considerably with kids in diapers...

anyway back on track some people NEED credit cards to absorb some cost of living be it an unexpected care repair or a doctors visit... if you are a home owner i hope your house stays together with prayer as there is no money to do anything, oh wait you cannot even afford a house on what you earn, so thats ok.

so the banks drop your score and raise your rates...

you cannot get other credit as your score is too low..

now this is the best part...

you are paying off the cards slowly but surely, as part of your budget then they rack up your rate... suddenly a $30 payment a month rockets to 60 or 80 or more depending on what you had to use the credit for ( lets say a 2000 head gasket replace on the car)

so they think that by racking up the rate, they are going to get more money? from where?

you will default, and not pay or worse file bankruptsy, when it gets to a certain point, you do not care and simply will not pay.

the banks are the ones doing this, by raising what they consider a "risk" to the point to where they cannot pay the debt they had undertaken, up until that point however the bank WAS getting repaid what was owed. Through their own greed, or lack of financial planning they have ruined a families credit score, and lessened the chances of them getting money from the debtee by making it impossible to pay.

the debtee meanwhile has absolutely NO safety net to cover an unexpected issue

and this is with responsible people...

and the banks still cry out for more TAXPAYER money.

where is the bailout for the regular working couple? after all when they undertook the debt, they could and were paying it off, they were NOT a risk until the banks decided to lower credit lines and raise interest rates as a result of lower scores.

this is not typical of my situation except the part of the credit card companies jacking up my rate for no reason, but it did get me thinking as to how we would survive as a minimum wage family.