David Rodeback's Blog

Wednesday, November 23, 2005

Look Out for This Grinch

Some folks in our credit-driven culture are in for a little post-Christmas surprise, and it's not a happy one.

It's news to no one that you can get in some trouble with your credit card during the Christmas season. Some folks run up a debt every year, and pay for Christmas for the next several months. I'm not sure why they do it year after year.

But this year, it will be quite a bit worse for some people, and they won't realize it until January or February. Federal law allows banks and other credit card providers to require twice as a high a minimum payment as they have in the past. For some people who make purchase decisions based on monthly payments, this could be a real hardship. Suddenly that big television you thought you were getting for $59 per month could be twice as expensive. Swen Swenson sent me a link to a good article about all this, "Your credit card payment just doubled."

Sometimes the monthly payment is dangled as a hook to get the buyer to buy more than he needs or can afford. After all, $24 per month (for 24 or 36 or 60 months) sounds a lot cheaper than a several hundred dollars up front, so the prospective buyer is less likely to feel inhibited.

This happens on the car lot, too. Last time I shopped for a car, all the salespeople wanted to talk about was the monthly payment, and how much better a vehicle I could get for just a slight increase in monthly payment. Never mind that it would be five years instead of three, or whatever. The monthly was only slightly higher. I told them I could do the math myself, thank you, and I wanted to talk about the sale price instead, and when that was settled I'd worry about the financing. They were not very comfortable with that.

In any case, this Christmas season the monthly payment hook is barbed more nastily than usual. Exercise caution. Utah already has far more than its share of consumer debt-driven bankrupcies.

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Copyright 2005 by David Rodeback.
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