(Revised 2/1/08)
Stopping Revolving Credit and its abuse by credit card companies is an important issue to me and many other hard working American citizens.
The United States is in a national revolving credit crisis's. Working Americans continually pay monthly minimums into their credit cards, but then they need to use the small amount of available revolving credit during the month. The rich investment bankers are simply making huge profits off each payment while only returning a small portion to the worker, thus the term revolving credit.
This revolving credit industry is like a tumor in the American economy and is bleeding the life's blood out of the working person. This tumor needs to be surgically removed from the economy.
I want to recommend that revolving credit simply be eliminated for Americans who choose this plan. Yes, if you owe VISA, MasterCard, American Express, or Discover, your debt is simply wiped clean.
The only stipulation for the person who chooses this plan is that they will never be eligible for revolving credit again and they will be limited to conventional bank loans and debit cards.
By eliminating revolving credit, you will have more money so you can make your house payment and make more purchases from retail stores, thus stimulating growth in both the housing market and consumer goods.
Since this original debt was never intended to be repaid, just profited off of, it will not be missed. What will be missed by the rich investment bankers are the huge profits made off your interest that they roll back into the credit industry to give you more credit so they can get more interest from you.
The Basic Problem
Revolving credit card companies start by offering 0% interest and then increase the rate to about 6% after six months to 2 years. Sometimes if you have not paid off your purchase, they will add in all your accumulated interest at some unreasonable rate like 20+%.
After a few months, your credit card is maxed out, so they give you more credit plus you start getting a lot of pre-approved credit card applications in the mail. You get a couple more cards "for emergencies."
At some point you're maxed out on your original card, plus the emergency cards, you are living paycheck to paycheck and they have you to far in debt to pay the cards off immediately.
Surprisingly, more pre-approved credit card applications start coming in the mail, so you take out another one or two to get you though these hard times.
When these get maxed out, you are beyond your ability to make payments. You can no longer get cash advances to make your payments on your other cards and your application on the most recent "pre-approved" cards are being denied.
You get behind in your payments and the interest rates start going up to over 30%. At 30% you would be paying back your loan in less then four years, but instead all that interest money just goes to profits for the credit card company.
The credit industry charges you these stiff penalties to encourage you the be responsible and make your payments on time. They believe that taking money from you will increase your ability to pay.
What you get are over the limit fees, late fees, and the "Hey loser, how about a payment?" phone calls.
They've got you and there is no way out, other then bankruptcy.
My Recommended Solution
Rewrite the Chapter 7, Bankruptcy law to allow Americans to eliminate the amount owed on revolving credit debt without it effecting their credit or credit score. This would be for revolving credit card debt only. It would not include auto, boat, vacation, etc, bank loans, retail store charge cards charging less then 2% over prime, home loans, medical bills, etc.
The Winners
The struggling American worker, the economy, the struggling housing industry, and retail stores. The American worker will be able to make their house payments or purchase newer homes, thereby helping bail out the house market. They will also have more money for retail purchases. People in the retail business will have more money to buy homes, thereby simulating the housing market even more. These people will have more money to buy consumer goods, simulating retail sales and the economy. Cash money is now being used by working Americans to buy goods from each other.
The Losers
The people that have been making the, "Hey loser, how about a payment?" calls to you. They will be out of a job, but wait, with the simulation in the housing industry and retail sales they will be able to get jobs in those markets. We'll move these people to the winner category.
The rich investment bankers. If they've been pulling huge profits out of the credit industry in salaries or dividends, they've probably already gotten their original investment back. If they've been rolling that money back into the credit industry to inflate the economy and make more revolving credit available, they are the problem and will justifiably be penalized.
Yes, I do realize that some of these people may run the risk of losing their secondary island home or mountain retreat, but if they invest wisely in the housing or consumer goods markets, they will be back living large in no time.