My Thoughts on “Maxed Out”

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« I’m Going to Try to Watch “Maxed Out” Today | Main | Thursday’s GIVEAWAY (and Wednesday’s Winners) »

By JLP | June 20, 2007

These are MY THOUGHTS, which might not be your thoughts so keep that in mind when you read my review. I would love to hear your thoughts too.

Okay, I just finished watching “Maxed Out,” the documentary about debt. Here’s my very broad summary:

America is in debt and it’s the Republicans’ Fault!

Seriously. The “documentary” was full of snippets of nasty, mean Republican’s siding with credit card companies and nice, responsible Democrats standing up for Americans. There wasn’t much balance in this “documentary.” They did at least include some commentary from Dave Ramsey, who is a huge proponent of personal responsibility.

I found it both sad and disturbing at the amount of ignorance people have towards credit cards and debt in general. The 57-year old widow who was in the process of losing her house was pitiful. She got into debt easily enough and just kept taking on more and more debt because the loan companies kept giving it to her. In fact she even said something to the effect of, “I thought since they were giving it me, I could afford to pay it back.” I don’t think people realize just what they are getting themselves into when they sign a credit agreement. I really felt sorry for her (I even teared up during her last segment because I felt so bad for her), but the sad fact is that she got herself into her mess because she was playing with fire and didn’t realize it.

Another segment interviewed two moms whose kids got into debt while in college. Both of the kids ended up committing suicide because they found themselves so far in debt. Sadly, neither of the women took any responsibility whatsoever for the situation. Rather, it was all the credit card companies’ faults for issuing their kids credit in the first place. Granted, these kids had NO BUSINESS signing up for a credit card, but they did. Why didn’t these women talk to their kids about credit cards before they went off to college? They said they didn’t think about the fact that their kids could get credit cards while in college.

Folks, credit card companies are in business to make money. That’s it! It’s sad that companies will take advantage of people, but that’s the way it is. It’s up to us to decide how much they are going to make from us.

If I felt that this “documentary” was a little more balanced, I would recommend that it be watched by every high school class in America. It’s not balanced because it leaves personal responsibility out of the equation and is simply another tool to teach us that we are just victims in a massive credit card conspiracy.

Topics: Credit, Credit Cards, Dave Ramsey |

Comments to “My Thoughts on “Maxed Out””

Brad Says:
June 20th, 2007 at 2:36 pm

I don’t like that the credit card companies can put out misleading adds and hide fees and such in a big mess of fine print . . . but they are out to make money like everyone else, and for the most part, they do it fairly.

People get in trouble with credit cards because they spend too much. Period. You can get “cheated” by the CC companies or misled, but when that happens it’s a fee here or a raised rate there . . . not 100k of high interest debt. You did that to yourself.

But hey, everyone loves a villain. It’s nice to know that there’s someone out there who you can blame to take all the heat off of you for your stupid choices.

Chris Says:
June 20th, 2007 at 2:37 pm

Very critical review! Really, I think just about all our problems with the credit card industry would be resolved simply by educating consumers (preferably in high school).

Amber Yount Says:
June 20th, 2007 at 2:55 pm

I still like the movie though, especially because I think it finally pushed my husband to get started on our financial plan…did you see the end credits? They showed extra scenes, and they said they found that woman’s car in the river, where she killed herself. I forgot though to watch the special features…heard there was a bigger dave ramsey scene.

Leslie T Says:
June 20th, 2007 at 2:56 pm

I think you guys are a little too smug. Yes, you are good at understanding financial issues and have figured out that credit card debt is a no-win situation. My mind works that way also, and I’ve done the same. But there are people in this word who were not blessed with minds that work the same way. Does that mean we are “better” than they are, or that we “deserve” our wealth more than they do? Some people just aren’t capable of thinking that way, and they need our help to prevent others from preying on them.

It’s sort of like you have a bunch of bullys beating up people on street corners. You and I are strong and tough and we can defend ourselves so they don’t pick on us. Then some weak little guy comes down the street and they pounce on him and steal his cash, and you feel smug because he deserved it because he wasn’t strong enough to fight back. I’d rather help defend him against the bullys.

Chris Says:
June 20th, 2007 at 3:11 pm

Leslie,

I think it’s incredibly elitist to say that some people can’t grasp the concept of debt. Maybe the mentally impaired, but chances are, they’re not signing up for credit cards. People who have disdain for education absolutely deserve the futures they make for themselves by goofing off during their school years.

Andrew M. Kasper Says:
June 20th, 2007 at 3:23 pm

It’s the CC companies’ faults! It’s the consumers’ faults!

Take a breath, everyone, and prepare for my amazing and unique perspective: the fault falls on both sides.

Credit Card companies knowingly and willfully lend to people who don’t know any better. The language of their contracts is intended to obfuscate and the reality of credit cards; their brochures even glorify the notion. They make no effort to educate their customers on the risks of a credit card. Shame on them.

Meanwhile, consumers are looking for a quick-fix solution. They have money problems so… why not get a credit card? That’ll fix everything! They don’t do the math — they buy clothing for 50% off, not realizing that credit card debt will eventually cost them six times what the article originally cost. People who make the claim that they didn’t know any better are reminiscent of smokers who make the claim that they didn’t know smoking caused lung cancer.

Both sides need to take some responsibility.

Bobby Says:
June 20th, 2007 at 3:27 pm

I have not watched it and don’t have any intention to. I get enough one-sided reporting from regular print and media.

Having said that, I know how difficult disclosure statements can be to understand. I have a better understanding because I worked in Customer Service for a retail credit card for almost 5 years.

There are a few things people need to keep in mind:
1. If you don’t know…ask. Call customer service and have them explain it. If they or a supervisor can’t or won’t I wouldn’t do business with that company.
2. Yes, credit card companies are out to make money. That is what their shareholders expect. (Most companies aren’t evil, just like most doctors aren’t quacks and most lawyers aren’t shysters.) However, they don’t hold a gun to anyone’s head and force them to sign-up.

And as to the mother’s of the kids who committed suicide. Yes it is a tragedy that it happened, but for them to say they didn’t know that credit card companies offer to college students, they had their heads in the sand.

Let the flaming begin.

Adam Says:
June 20th, 2007 at 3:36 pm

Leslie T, it comes down to common sense and personal responsibility. Sure the fine print can be tough to understand for anyone who is not a lawyer, but the fine print doesn’t also force one to swipe their card constantly. You complain about us being smug, yet you talk about these people like their puppy dogs or something that is not intelligent enough to think for themselves. How is that not worse?

Tim Says:
June 20th, 2007 at 3:47 pm

kasper, i don’t know how anyone can determine cc companies knowingly know if someone is going to be irresponsible with credit. that didn’t make sense.

forget everything else, cc do marketing research and that is all that it is…marketing. whether you choose to become absorbed in the marketing is a personal responsibility issue.

even those i despised the 2-cycle billing and other weird things cc companies did, the fact is, you know about them and if you choose to use a cc with these constraints, then you should use them accordingly. it isn’t rocket science. you don’t have to be smart.

problem is, people can’t control their behavior. that is what drives people into debt.

Rob Says:
June 20th, 2007 at 3:57 pm

We live in a society where it has actually become fashionable to portray yourself as a helpless infant. When people become fat it is because the restaurant had the NERVE to actually sell them food. (Imagine going into a restaurant and ordering a Big Mac and having the counterperson tell you “No, you’re too fat. It’s for your own good.”) People kill themselves or others driving drunk and it is the bartender’s fault for selling them drinks. I recently read of a case where parents of a college-age “child” are suing a commuter rail line because the child was playing chicken in his car with an oncoming commuter train at a crossing and lost. Of course it was the RAILROAD’S fault for not creating an impermeable barrier that people could not drive around. I guess the flashing lights, ringing bell, and barrier they did have was not enough to stop someone who was deliberately trying to cross it as some sort of game. It’s the same with credit cards. I think the percentage of people who get credit cards without understanding that they have to PAY THE MONEY BACK is something like .0000001%. This is realyl a case of people who did stupid, reckless things and are now infantilizing themselves to avoid responsibility. Here it is loud and clear for everyone that is too lazy to read the “fine print”:

IF YOU BORROW MONEY ON A CREDIT CARD, THEY EXPECT YOU TO PAY IT BACK! WITH INTEREST!

Andrew M. Kasper Says:
June 20th, 2007 at 4:01 pm

Tim:

A decent point, but consider the very nature of credit cards. They rely on people taking out loans at ridiculous rates. That’s how they stay afloat. It would be ludicrous, I think, to suggest that they weren’t counting on people making bad decisions. They count on the existence of people who don’t know any better. Ergo, use of the phrase “knowingly and willfully.”

Also, you’ll note that I’m playing the game of devil’s advocacy in both directions in my post. I don’t really think CC companies should be shamed for lending money to people; duh, that’s how they make money! Bobby said it best: “Most companies aren’t evil, just like most doctors aren’t quacks and most lawyers aren’t shysters.”

JLP Says:
June 20th, 2007 at 4:08 pm

Lots of great comments!

It wasn’t my intent to be smug. I understand that lots of people don’t understand personal finance. However, who’s to blame for that? To say that people can’t understand interest isn’t a good argument because these same people drive cars and somehow manage to obey all the laws involved with driving (at least MOST of them do).

The fact of the matter is:

1. Personal finance is boring and they don’t want to take the time to learn it or they think they can’t learn it.

2. People want things and credit cards allow them to get those things now. So they do without fully understanding the consequences.

Neither of them are acceptable excuses.

Leslie T Says:
June 20th, 2007 at 4:09 pm

Seems like we’re all saying that there are some people that “get it” when it comes to credit card and debt and there are other people who clearly “don’t get it”. Where we differ is why they don’t get it. Some commenters have said it’s because they’re lazy and greedy and don’t believe in education, and have thus implied that they deserve the trouble they get into. I feel it’s because they have trouble understanding the issues, and I don’t feel that it’s their fault necessarily, and I believe we should help them. If that makes me elitist, so be it. It’s not how I would define elitist.

Colonel Cash Says:
June 20th, 2007 at 4:28 pm

I especially enjoyed comment #10 from Rob. People need to take responsibility for themselves and their own actions.

In my opinion, much of the trouble lies in the lack of financial education. What ever happened to the idea of if you can’t pay cash, you can’t afford it? What ever happened to the notion that one should save up for a purchase instead of paying for it over time? I know that their are some things, like cars and houses, that most people need to rely on credit to purchase, but surely their not purchasing these things on credit cards!

People pay for everything with their credit card. From gas to groceries to utilities. When the bill comes, they pay the minimum payment instead of the entire bill. This gives them the feeling that they have more cash than what they really do. Eventually, this snowball of debt turns into a looming avalanche, with mounting bills crashing down all around the credit card abuser.

I agree that the ‘fault’ is twofold. The consumer who lacks any financial restraint, and the credit card companies who recognize and prey upon these individuals.

ESK Says:
June 20th, 2007 at 4:36 pm

I enjoyed it, it was hilarious to me. Trying to guess what all these people were going to blame their ridiculous decisions on could have been a great drinking game. I think my favorite was the reservist who said “they don’t pay me enough” hey genius, perhaps you should spend less??

Also at fault is the bankruptcy laws, which are “too strict.” Yeah, why shouldn’t you be able to welsh on the debts you have racked up with greater ease?

(25 years old and been out of self-induced credit card debt for about a month? How, busting my ass and making better decisions, like a freaking functioning member of society, and not by bitching when I realized I was paying off some collegiate stupidity).

Slash art, music and/or gym and install personal finance courses in place of em. Teach our kids something useful.

Miguel Says:
June 20th, 2007 at 5:20 pm

I tend to agree with the camp that places blame on both sides. I’ve been in CC trouble in the (distant) past and seen many people abuse CC’s. I was even acquainted with someone who apparently committed suicide over the secret CC debt she had hidden from her family and husband (though I certainly think her issues went much deeper than that).

After my first serious run-in with CC problems, I learned my lesson and have been a straight arrow with debt ever since. I was young and naive and focused only on consumption, not saving. Fortunately, this happened early enough in my life, and fortunately, I did not get in so deep that it would have long-term implications.

And here is where I fault the CC companies. They often don’t shut off the tap even after it becomes obvious the person cannot handle the debt. I think it is not only reckless on the cardholder’s part, but also reckless on the industry’s part to essentially feed addicts at their most vulnerable stage. Often, by the time the problem comes to a head, the person is in so deep, there is barely any way out, accept for bankruptcy, and even that has been neutered courtesy of guess who.

Ultimately, I do believe in individual responsibility. Spending is like most compulsive vices (gambling, boozing, etc.). There are industries that are designed to feed the impulse. Ultimately, it’s up to the individual to resist or at least understand the risks. Society cannot bear 100% of the responsibility of protecting us from ourselves.

GeekMan Says:
June 20th, 2007 at 5:31 pm

I have trouble believing that anyone above the age of ten (and not mentally handicapped) would have trouble understanding the basic tenets that credit card companies do business by. If you ask someone if you can borrow money from them, promising to pay them back at a later date, they will expect to be paid back. That’s it. Can you honestly believe someone wouldn’t understand that?

Saying that fees and charges are unfair doesn’t really enter into the arrangement unless you wind up borrowing more than you can afford to repay in the time alloted, which is not the fault or responsibility of the lender. Blaming the CC companies for the bad financial housekeeping of those who borrow too much is similar to blaming the manufacturers of luxury items because their stuff is more expensive than generic items.

Ultimately, if you can’t afford it, don’t buy it.

Independent George Says:
June 20th, 2007 at 7:43 pm

If I understand correctly, their evil, master plan goes something like this:

1. Lend money to consumers.
2. Collect 10 cents on the dollar after the debts go into collection.
3. ???
4. Profit!

Just think about how much money they’re making off all those people not paying their bills!

John G. Says:
June 20th, 2007 at 7:56 pm

Independent George- I guess you read Slashdot?

Customers Revenge Says:
June 20th, 2007 at 8:29 pm

CCs definitely, knowingly, willingly, etc want everyone to pay 19% interest by going into debt to buy meals, video games, movies, and everything else. I guarantee they have genius mathematicians working for them who try to find exactly how much they can offer to folks so they can max out but still pay their interest payments. They obviously don’t want anyone to commit suicide before paying, they just want them to pay forever.

If anyone thinks that the average person can out-think hundreds of mathematicians and marketers then they should think again. It is not a fair playing field, and most people are not 1) smart, or 2) capable of self-control.

thomas Says:
June 20th, 2007 at 9:37 pm

last time I checked, the CCC’s don’t force you to use their service. Everywhere I go still takes cash. It all boils down to the basic principle of not spending more than you can afford. That kind of math is learned in grade school and is not a hard concept to grasp.

Yes, CCC’s engage in sly tactics (oh, we are increasing your int rate b/c you were late on another or we pulled your credit and it has worsened since you signed up even though you’ve never paid late), but nobody forces you to live beyond your means. Nobody forces you to overuse and keep using your CC.

I’m totally shocked (eyes rolling) that thid “democramentary” had a leftist view point.

Independent George Says:
June 20th, 2007 at 11:48 pm

If anyone thinks that the average person can out-think hundreds of mathematicians and marketers then they should think again

Very well: I accept your challenge.

My monthly income is X dollars.

I spend Y dollars in a month.

I have Z dollars in the bank.

If X > Y, then Z will increase at the end of the month.

If X

Independent George Says:
June 20th, 2007 at 11:49 pm

Oh, damnation, I forgot about the html tags. Shoot, you get the idea.

Matt Says:
June 21st, 2007 at 12:19 am

The core of the issue comes down to not being satisfied with what you have, which the CCC have learned to exploit. The US’s #1 export is craving for the things we don’t need and unfortunately many people have been trained to equate happiness with materialism.

However, a big caveat is that many people just don’t have enough earning power, since wages have been relatively stagnant for the last couple of decades and have not kept pace with inflation. So many people live paycheck to paycheck and when it comes down to it, if a child has to get medical treatment and the cash isn’t available, a line of credit is usually about the only alternative.

We’re also very good at justifying things to ourselves, like that we’ll be able to pay back some expense that is really beyond our means. Couple this with the fact that financial literacy in the US is really low and it’s a recipe for some serious financial problems. Check out these statistics I sited on my blog:

1. One out of three Americans could not answer this question correctly: Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow: more than $102, exactly $102, less than $102?
2. One out of two could not answer this question correctly (and it’s true or false!): “Buying a single company stock usually provides a safer return than a stock mutual fund.”

* Annamaria Lusardi and Olivia S. Mitchell. Financial Literacy and Planning: Implications for Retirement Wellbeing. University of Michigan Retirement Research Center, 2005.

Michael Says:
June 21st, 2007 at 2:19 am

Well, neat. Maxed Out just showed up in my mailbox yesterday, courtesy of Netflix.

If this movie is really as “leftist” as I’ve read that it is (thanks JLP et. al.), then my wife may have to physically restrain me.

Otherwise, heavy household objects may be flying toward the TV.

Foobarista Says:
June 21st, 2007 at 3:17 am

All “folks” need to do is not to play. And plenty of folks do exactly that and do just fine. The problem is if you buy into the “I deserve it” mentality, or into a victim mentality, the world will chew you up and spit you out.

This has always been the case. Today, it’s CC companies and payday loan outfits. In the old days, it was loan sharks.

Jenn @ Frugal Upstate Says:
June 21st, 2007 at 5:43 am

Well, lots of interesting comments.

Let me preface this with saying that I totally agree that personal responsibility is the key here-people need to be responsible for their actions. That seems to be missing in many facets of society today.

Also, anything billing itself as a “documentary” really should try to be as fair and balanced as possible.

That out of the way I will say this-my 11 years as an Army officer has taught me this-there are a lot of people in the world who are a lot dumber than you think. I don’t mean that to be derogotory (sp?) they are trying as hard as they can, they are just truly not as smart as some other people.

THis may sound obvious, but until I graduated from college and entered the Army as an officer I had been in a rather self selected population of people who were as smart as I was-in highschool I was in classes with the other folks who were in the college track classes, then in college I was with other folks who were at least smart enough to make it in there. I assumed everyone was at least that smart.

They are not. There are people out there who truly have trouble grasping things like compound interest. It may sound flip, but these are the folks you can see on “peoples court” and “Judge Judy” and laugh at because of the dumb things they do or say. . . they really are out there.

They still have responsibility. they still should realize that they have to pay back money they borrow (they may not realize how much MORE money that will be than what they started out borrowing. . . ) This is where something like a class that started pounding this stuff into their head in highschool might be helpful-as would credit cards being required to cut a person off after they had defaulted to a certain point.

To me that would be sort of a middle ground-adding in some education, and then putting in a bit of a safegaurd by cutting off the neverending flow of credit once someone has shown they can’t pay.

Customers Revenge Says:
June 21st, 2007 at 7:37 am

From Independent George: Very well: I accept your challenge: .. My monthly income is X dollars .. I spend Y dollars in a month .. etc

That’s exactly the calculation people use! Eg:

* My bank balance is $1000 and my monthly income is $500.
* I can’t afford to go on a nice $2000 vacation with all my friends because it’s more than $500.
- except -
* If I put it on my credit card then it’s only $100 per month, which is less than my monthly income. Now I’ll be able to go with my friends, who are probably doing the same thing so it must be ok. And the credit card company sent me a nice brochure and plays constant TV ads that tell me I work too hard and should enjoy myself for once, and the president tells me I should fight terror by spending money.

WHAM!

Independent George Says:
June 21st, 2007 at 8:22 am

#28 (Customer’s revenge) - Does it really take a mathematical genius to realize a $2,000 vacation costs $2,000? Or that if I borrow $1500 to cover the difference, I’m going to have to pay more than $1500? Because that’s all it really comes down to.

By the time I graduated college, I was no stranger to debt & credit problems. I spent more than I could afford, missed payments, and even defaulted on a few cards. I survived. I learned. I grew. It was my own damned fault, not Citibank’s.

Independent George Says:
June 21st, 2007 at 8:28 am

#27 (Jenn) - Also, anything billing itself as a “documentary” really should try to be as fair and balanced as possible.

I actually disagree with this - I think documentaries should have a viewpoint. This particular viewpoint just happens to be anathema to me, and am expressing my own views in response.

Rob Says:
June 21st, 2007 at 10:19 am

Actually the traditional idea of a documentary is to provide a factual report. It is supposed to be objectively “documenting” a state of affairs (like, for example, a National Geographic documentary on mountain gorillas). IT is not supposed to provide one side or twist facts to advocate a viewpoint. Unfortunately people like Michael Moore and Al Gore have totally changed the idea of what we think of as a documentary. Just because something is unscripted doesn’t make it a documentary. What Michael Moore and others like this Maxed Out are doing are at best advocacy pieces or at worst propaganda. Which is fine, but they should be labeled as such and not misleadingly labeled documentaries.

JLP Says:
June 21st, 2007 at 10:24 am

Rob’s right. People associate documentaries with facts rather than fiction. I’m not even advocating right-leaning documentaries. What I want are BALANCED documentaries.

Independent George Says:
June 21st, 2007 at 10:49 am

Except this isn’t fiction. It’s expressing a viewpoint. I don’t think there’s any obligation for balance unless you’re making an explicit claim of neutrality - and I don’t think it applies in this particular case. The filmmaker had a distinct viewpoint, and made no efforts to conceal it.

I’ll take explicit agitprop over concealed bias any day of the week.

Kristen Says:
June 21st, 2007 at 10:59 am

Most of the comenters here (including you, JLP) seem to have an unjustifiably limited idea of what a documentary can be. A documentary can be a type of news journalism, striving for objectivity. Or it can be a type of OpEd piece, expressing an opinion or policy perspective. Or it can be a feature-style profile, which incorporates elements of each. It doesn’t have to be NOVA to be a documentary. A documentary is simply a nonfiction film, and nonfiction can encompass an opinion or point of view. Sheesh. And people say there is no merit in studying literature.

I saw Maxed Out when it was out at festivals over a year ago, so my memory is a little rusty, but I don’t remember it downplaying personal responsibility at all. I don’t remember anyone ever saying, “Well gosh, I know I spent that money but I shouldn’t have to pay it back because I am a rugged individualist and am therefore too good for such things.” No, people got into bad situations because they made bad choices, which most of them admitted. Why did they make bad chocies? Because they didn’t know any better. Why did they not know any better? I agree with Leslie, #13: because they didn’t see what was going on. They hadn’t had a sound financial education–most people haven’t, unless they were self-educated on the topic. The terms of credit cards are difficult to understand for a layperson, because they’re written in standard contract legalese to favor the drafting party. Advertisements and other representations contain misleading statements designed to downplay or contradict the terms of the contract. The people who got into credit card debt in that movie did it in part because of their own wilfull blindness, but in part because the credit card companies and collection agencies preyed upon (and encouraged!) their wilfull blindness in a craven and unethical ways. There’s enough blame for everyone at this party.

The argument that credit card companies are in business to make money is awfully shortsighted. Pursuit of money is not some talismanic incantation that excuses all bad behavior. Credit card companies need stronger regulations, something in the vein of the FDA-required nutrition information on packaged foods. Consumers need better financial education. Only then does it make sense to say that bad decisions are solely the fault of the consumer.

I thought the most telling scenes in the movie were with the debt collectors when they talked about their (abusive) techniques for collecting on debt, even debts that were legally not collectible. It was disgusting.

yabadaba Says:
June 21st, 2007 at 12:20 pm

Wow. These comments makes it look like that we live in a socialist country or at least a significant number of people want it to become that way.

Credit cards are all about personal choice and responsibility. The companies offer a product and have rates associated with them. If you dont like their terms and conditions, go elsewhere.

With this John Edwards rhetoric of two Americas I think a lot of people find it fashionable to blame all their poor decisions on “Corporate America.” When is it ever your fault? It is time for people to grow up and take responsibility.

Customers Revenge Says:
June 21st, 2007 at 2:50 pm

It’s that credit card companies specifically play to weaknesses. They are like drug dealers to some people who can’t think or have no self control. I’m 100% for people to have personal responsibility, and I 100% think people who flush their futures down the toilet with debt are idiots.

But c’mon . . . credit card companies exist to exploit exactly these idiots. So what now? Credit card companies could be decent and provide reasonable services at reasonable rates and in reasonable volumes, but they don’t. And most of the time it isn’t like the average person goes looking for bankruptcy, it is these companies who spam mailboxes with endless offers, or phone calls, or catch me at the airport and in malls to hard sell me cards.

Anyway, I agree with responsibility but I will not agree that credit card companies, for the most part, are anything better than opportunists preying on the weak minded and weak willed. Of course there are good cards because there is a market of smarter people. But where they can, they jack you apparently until you commit suicide.

Independent George Says:
June 21st, 2007 at 4:04 pm

#36 - I think you’re conflating cause and effect.

Credit card companies do offer good rates and incentives - to people with good credit. That makes perfect sense - the less likely you are to default, the less they need to charge you for your loans. Having completed the whole FICO circuit from a 750 to 450 to 750 again, I know this world very well.

People with poor FICO scores - due to lower incomes or poor payment histories - represent higher risks of default. In order to run at a profit, lenders charge higher rates to make up for lost revenues from the defaults.

Think about what happens when you force better terms on loans to people with poorer credit. Because the default rate is higher, they lenders lose money if they are forced to offer loans to a ‘500′ borrower under ‘600′ terms. So, they cut off loans to anyone who scores at 600 or less.

Excellent, you say? No more predatory lending to the poor? Well, not quite.

If you are a subprime borrower who needed cash you didn’t have to, say, repair your taxi cab, or fix the heater in your apartment, credit cards are no longer an option. True, you no longer have to look forward to paying 23% APY on your principal, but you still need to fix your cab, or repair your heater. So what are your options?

Well, you could try a credit union… but if you already had that option, you wouldn’t need have needed the credit card in the first place.

Payday loans? I’m assuming that in this hypothetical world, they’re regulated even more tightly than the banks.

Pawn shop? That assumes you have enough property valuable enough to put in hock - and even if you did, you’re not getting value for it, and you’re paying even higher interest rates than the credit card companies.

Loan shark? Ever watched the Sopranos? Not pretty.

The end result is, you’re screwed even worse than before you were ‘protected’.

Rob Says:
June 21st, 2007 at 5:55 pm

Not to belabor the point but Kristen - you have it wrong. A documentary is NOT any nonfiction film. In fact I just picked up my dictionary and saw that it is defined there as “providing a factual record or report”. Merriam Webster online says “broadly : FACTUAL, OBJECTIVE .” I’m fine with people making any kind of nonfiction film they want (as long as if they represent it as nonfiction there shouldn’t be anything staged or edited out of context), but they shouldn’t call it a documentary. If they do, it really is just a transparent attempt to conceal bias or misrepresent what the film is. They should just call it an editorial or simply a “nonfiction film”.

Dr. Housing Bubble Says:
June 21st, 2007 at 7:02 pm

Blame is a two way street. However, when you have Wall Street championing extremely easy credit, a government running us into record deficits, and credit card companies literally giving money to anyone with a pulse, we do have too much money floating around. The recent legislation now makes it harder to file for bankruptcy. Do you think this was in the public’s best interest? Personal responsibility? Of course. But you wouldn’t put a child in a room full of drugs and candy and blame them for taking the drugs would you? Why? Because they are kids and don’t know any better. Not everyone is Suze Orman and capable of understanding compound interest or mortgage backed securities. If anything, this is the reason we are in for a big mess with the housing market.

Not everyone in the public is up on finance like many here. Their punishment? Losing everything. And you are right about one thing, credit card companies are in to make money. And looking at their quarterly earnings they seem to be doing extremely well. Do they care about social responsibility? I’m not sure. If anything, our government is setup to provide some sort of oversight but none of this is occurring. If anything, we are living in a plutocracy with a tinge corporatism.

Do you think someone getting a loan for $700,000 on a $20,000 income is right? It is absurd. But it is happening. Or what about a grad student buying 2 houses and going $600,000 in debt with a $15,000 income. At a minimum, there needs to be standards. Both Republicans and Democrats are in bed with corporate backers. Number one contributor to Republicans? National Association of Realtors. These political action committees carry clout. And don’t even get us started on inflation. The BLS is a ridiculous measure and so skewed, you might as well ask OJ Simpson if he is innocent.

lorax Says:
June 21st, 2007 at 9:52 pm

> incredibly elitist to say that some people can’t grasp the
> concept of debt

You know no one like this? I find that incredible. If there weren’t any of these folks around Dave Ramsey would be out of a job.

Sorry libertarians, as much as I’m for personal freedoms, *I* can’t follow those obtuse credit card agreements printed in microscopic font. There ARE some things that need to be regulated, at least to some degree. (I blame both dems and repubs for this, but at least the dems are willing to throw the consumers a bone in the form of better disclosures.)

J.D. @ Get Rich Slowly Says:
June 22nd, 2007 at 9:13 am

JLP, I reviewed this film back in March. I had some of the same complaints you did: it’s overly politicized and doesn’t address personal responsibility. I felt it would have been more powerful if it had. One reader was actually able to ask the producer questions, but felt he was evasive. Lame.

The truth is that there are two sides to the credit problem in the United States. This film only presents one. (And make no doubt, people: the credit industry is predatory and does whatever it can to prey on the weak and uneducated.) It does not present the other.

Archetypical Says:
June 22nd, 2007 at 10:03 am

So many comments about the need for more regulation and more education… what ever happened to personal responsibility?

Simply put, using a credit card = spending someone else’s money with a promise to pay it back PLUS interest. I’m pretty sure the majority of cardholders understand that much.

While I understand that some people may not be mathematically inclined, there is no mystery or magic to understanding that your debt will continue to grow if you do not pay back what you owe plus the interest you have accrued.

Ideally, you would not accrue interest because you would pay back your balance in full each month. The only exceptions are those in a state of emergency (unplanned medical costs, unemployment, transportation failure, etc.) and those living beyond their means (spending tomorrow’s money today). Even those in an emergency could have curbed the impact by living below their means and building an emergency fund.

The problem we have is that people are failing to own up to their choices. You have a choice whether to read the fine print. You have a choice whether to sign a CC application. You have a choice whether to spend money you don’t have on something you can’t afford. Just because people make poor choices doesn’t mean someone else is to blame. If people choose to impale themselves on spoons it would not mean spoons are bad, that spoons should be regulated, or that spoon manufacturers should be held accountable for what people choose to do with their wares.

As far as the film is concerned I doubt it will change my feelings in any way.

Kristen Says:
June 22nd, 2007 at 11:06 am

Rob: your definition seems to be for the word “documentary” as used as an adjective, as in “documentary evidence”. It is not a definition of the noun “documentary,” particularly as applied to television or film. The noun “documentary” means “on or re-creating an actual event, era, life story, etc., that purports to be factually accurate and contains no fictional elements.” In other words, nonfiction.

It is helpful here to know the difference between basic parts of speech, e.g., the difference between adjectives and nouns. You appear to have confused them.

Me Myself And I Says:
June 22nd, 2007 at 12:14 pm

Several folks mentioned that kids should learn this basic mathematics in high school.

Well, why not start younger than that. We (my wife and i) teach our children every chance that we get about money. Most times when we make a purchase on our credit card (which is for only as much as we have budgeted, including groceries, gas, etc.), we explain to our children who are 7 years and younger, that the bill will be paid in full when the statement is received. Meanwhile, we’ll also get rewards of 1% on everything (except 3% on gas purchases), with no annual fee.
Next year when the oldest 2 are 8, I’m going to teach them how someone can possibly use a credit card to make money, if used wisely.

Me Myself And I Says:
June 22nd, 2007 at 12:23 pm

Oh and FWIW, both my wife’s and my credit scores are in the 800’s. And her’s is actually higher than mine, although she has no income (she stays at home with our 4 kids).
This is after going through bankruptcy some 16 years ago (on about $14,000 of debt) because I wasn’t formally educated about credit, and didn’t take the time out to teach myself, and I was an alcoholic and an idiot.
I should note that I was in fact formally educated about credit, by virtue of the math courses that I was taught. However, I didn’t see a connection between the math I had learned in my earlier years and proper use of credit.

Alex Says:
June 22nd, 2007 at 2:16 pm

One of the interesting points that came up during the bankruptcy bill debate was that the stigma of bankruptcy had gone away and that people were know using bankruptcy not as a fail safe, but as a financial tool. That bankruptcy bill, at least the main parts, had passed numerous times without objections only to be held up due to an abortion issue (please don’t start talking about abortion).

I think personal responsibility is key, but I do have to take to task the CC companies. They extend credit to people who do not merit it and then when they don’t get paid they want to change the law. Well in my mind responsibility works both ways. When you make terrible business decisions there are consequences, or should be. Lobbying to make the bankruptcy and credit laws tougher may make sense, but it should not absolve the industry from its bad decisions. Credit card companies assume risk for unsecured debt and profit in the form of higher interest rates for accepting higher risk. Unsecured debt is exactly what it sounds like. Don’t want the risk, don’t issue the credit.

Jane Says:
June 22nd, 2007 at 2:51 pm

When I’m being a realist I realize that people really ARE taken advantage of by CCCs. They DO NOT think of it as borrowing someone else’s money and promising to pay it back later. They think of it as being their own money. So as a realist I understand that there is a problem and that there needs to be more balance in the system. CCCs are absolutely w/out a doubt predatory.

Now let the tightwad in me speak. I think people are so hard on those in CC debt because of the sacrifices we make every day. I really, really want new things. I watch people around me getting new things. I resent the hell out of the fact that they get them and I don’t. My answer to that is to respond in anger and self-righteousness about personal responsibility: Who are they to whine!? They took money that they didn’t have and bought things they couldn’t afford. They agreed to the terms when they spent the money the CCC generously gave them. They have no right to complain about it being unfair!! What’s unfair is that they spent money they didn’t have!!

Bottom line is that other’s choices really have nothing to do with me. It’s just really easy to take my anger at the sacrifices I have to make to live debt-free and turn that on others to justify my jealousy over what they have and I don’t.

Rob Says:
June 22nd, 2007 at 4:16 pm

Kristen - it is helpful to know basic parts of speech, as well as vocabulary. The part of my post that got cut off (because of some formatting or computer stuff I don’t understand), is this:

“FACTUAL, OBJECTIVE [a documentary film of the war]“.

Merriam-Webster. Hard to argue with that. Factual AND objective. And “documentary” the noun is simply “a documentary presentation (as a film or novel)”. A factual and objective presentation such as a film or novel. Helpful to know.

Rob Says:
June 22nd, 2007 at 4:24 pm

Jane - Others’ choices have a lot to do with you. A portion of the cost to the credit card companies from people who don’t pay back their debts and go bankrupt is passed on to all of us.

The credit card industry is highly competitive and there is no real evidence that the hundreds of banks and financial institutions that offer them have conspired to take advantage of people and charge them higher than market rates. There is no one to blame here but the consumers who lack self control. DHP gave the perfect example of the infantilism I was talking about when he said “But you wouldn’t put a child in a room full of drugs and candy and blame them for taking the drugs would you? Why? Because they are kids and don’t know any better.” But we are not dealing with kids here. These are adults who do, or should, know better.

Archetypical Says:
June 22nd, 2007 at 5:05 pm

Jane — I don’t see how a person could rationalize a credit card as free money CC companies give away instead of knowing they have to pay it back (with interest). I don’t know anyone who would enter into a legal agreement without reading the terms first — and if they would they would have to be held responsible for doing so unless you could prove illegal coercion and/or misrepresentation.

CCC’s don’t generously give people money to spend and then hold them accountable for their mistakes — they open lines of credit with agreed repayment terms that people choose to spend.

I also don’t think that people who take personal responsibility for their actions and recommend it as a course of action to others do it out of anger, jealousy, or self-righteousness. A person is either responsible for their actions or they are not.

M. J. Wise Says:
June 22nd, 2007 at 11:47 pm

Wow. I skipped through most of this movie, and I have to say I was disappointed. It’s incredibly one-sided. Credit card companies are just presented as some sort of monolith. There is minimal appreciation of personal responsibility, and there are minimal attempts to do any sort of real education. It would have been well-served by stripping out the extraneous political content though and replacing it with the basic facts of how interest and credit works, which surprisingly is almost totally absent here that I could tell. George W. Bush didn’t put you in debt and Sheila Jackson-Lee is not going to get you out of it.

Having watched this, it’s amazing how ignorant people can be. The mathematics of credit really aren’t THAT complicated and it’s a testament to how some people are either sleeping through junior high or high school or being grossly misserved by them. However, that being said, I actually work in a safety consulting business by profession and it’s amazing how many people ignore things like safety warnings on products where it can be their life at stake, so it’s not surprising people basically embrace a sort of ignorance about their financial condition as well.

Interest is incredibly powerful, as is credit. They are not to be wielded lightly and take responsibility and restraint and can serve you well if respected and used judiciously.

Person I felt most bad for: The woman with the mentally retarded son. I don’t quite understand how he could sign anything legally and have it be binding.

Person I felt least bad for: The widower who just kept taking on debt because they would give it to her and, gee, they must know best. I’m surprised she made it to age 53 acting with such ill-advised trust of total strangers.

I-Gor Says:
June 25th, 2007 at 8:31 am

The fact is that we live in a world where most people graduate college heavily in debt. They have student loans, they have credit card debt, and they don’t necessarily have the skills or experience to pay it all back. Once a student is “comfortable” with $65k of student loan debt, then what’s a couple thousand more in credit card debt.

Many people make the sma claculation that Customers Revenge described: “How much will it cost me per month to have everything I want?”

Sadly, the answer is always “way more than you can handle.”

We place great emphasis on teaching high school and college students calculus, algebra and history. We should probably teach them about personal financial managment. In today’s day and age it’s a far more useful skill than, say, home ec (but, come to think of it, it could be taught as part of a home ec course).

Kristen Says:
June 25th, 2007 at 10:19 am

Rob, your new and improved definition is still of an adjective, not a noun. This stuff informs usage. Where a word can be defined braodly as an adjective, or specifically as a noun (as in the definition I provided that pertains specifically to a film or television documentary, to mean nonfiction) the conventions of usage tell us that we should use the most specific term. If you persist in bending the English language to suit your personal purposes, that’s your busines, but it does not reflect the rules of grammar or the conventions of usage.

CreditHater Says:
June 27th, 2007 at 5:08 am

I totally agree with Customers Revenge. Credit card companies will never do anything without sekf profit. Otherwise we wouldn’t have such a great credit card industry today. They have their revenues to make a living and flourish.

Brian Says:
June 27th, 2007 at 4:03 pm

As that song goes…”There ain’t no good guy…There ain’t no bad guy.” Credit card companies want to make money by any means necessary (who doesn’t?). Very good people go into serious debt for very valid reasons. The best way people can stave off bad credit situation is understanding how credit works. This information can be obtained from various sources. The best way to deal with a substantial amount of debt is combine it and reduce the debt amount. For more information, go to http://www.creditsolutions.com.

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