Retail Credit Card – When Credit Bites Back

You might think a retail credit card would be harmless. And you may be right. But my good friend told me a story about his wife that left me speechless. (Well, not really, because here I am now writing about it.)

In this particular case, the retail credit card actually got his wife fired from her job. Here’s the scoop:

My friend’s wife (we’ll call her Liz) has been working at Lane Bryant for a couple years now. She’s had glowing reviews. The customers love her. But there’s one little problem.

Liz does not like to push the Lane Bryant retail credit card as hard as the company would like. Sure, she asks each customer if they would like to open an account. Most either already have an account… or decline because they don’t want a retail credit card.

No matter how the customer responds, Liz never gets pushy and usually accepts the customer’s response at face value. Under normal circumstances, Liz’s behavior would be perfectly acceptable. Except there’s a little detail called a quota

Minimum Number of New Retail Credit Accounts

Apparently, when you work at Lane Bryant, you’re actually not in the business of selling clothes. You’re in the business of getting people to open Lane Bryant retail credit cards… and then getting them to buy clothes. Kinda.

Because you don’t actually want customers to buy clothes with cash or anything other than a Lane Bryant credit card.

This is why each employee is required to open 6 new retail credit card accounts every 2 weeks. That’s 3 new accounts per week.

If any employee fails to hit this quota, they can be let go immediately. Fired. On the spot.

Unfortunately, this is what happened to Liz. Not even her glowing reviews or positive customer feedback could make up for her unwillingness to shove credit cards down the throats of Lane Bryant customers.

Lesson: If you don’t feed the beast, the beast will devour you instead.

Mixed-Up Priorities

During the last few years, strange things have happened to the business landscape.

Cash is no longer good enough. Credit is king because stores can make so much more through exorbitant interest, late fees, and fees assessed when you try to pay your bill by phone or the Internet.

Let’s be honest. These are no longer retail stores. They’re credit card companies disguised as retail stores.

This can’t be good. It’s not good in the short term, and it’s definitely not good in the long term.

One retail credit card I recently canceled charged $10 to make a payment over the Internet.

Worse, they put the fee on my NEXT statement in the hopes I’d forget about it. That way they could charge me a late fee on top of a fee that shouldn’t even have been assessed in the first place!

But, hey, this is American business. Anything to keep the shareholders happy, right?

American Credit Card Debt – Symptom of a Debt-Based Currency

American credit card debt ballooned rapidly in the 90s and early to mid-2000s leaving many families with total combined balances in excess of $10,000. Some used the easy credit irresponsibly, racking up $50,000+ in consumer debt (not even counting car debts).

Then, in the fall of 2007, signs of weakness in the housing market — and the economy in general — began to appear. By the fall of 2008, the entire economy seemed to be falling apart.

All of a sudden, Americans were struggling to repay their credit card debt. They were even struggling to pay their mortgages.

One commenter on Digg suggested that credit card debt wasn’t the problem, but rather that irresponsible Americans were the problem.

Yes, I laughed. On the surface, it’s easy to agree with. Irresponsible people get what they deserve, right?

But the issue is actually much more complicated because the dollar is a debt-based currency. It is not real money. Every dollar in circulation is actually owed to the Federal Reserve — with interest!

In other words, our entire economy is based on debt.

Credit Card Debt Is Inevitable

The way the American economic system works, credit card debt — and, indeed, all forms of debt — is inevitable. Because the only way the economy stays healthy is if the money supply is expanding.

And the ONLY way new money is created is through debt.

This may be hard to believe. And since I don’t have space in this article to explain how this works, I will simply point you to G. Edward Griffin’s masterpiece, The Creature from Jekyll Island.

In America, every dollar magically turns into 10 dollars, maybe more, all through the dubious practice of fractional banking.

American Blindness

Most Americans don’t really understand how our money system works. They are blind. As a result, they hack at the branches instead of striking the root.

The branches are things like credit cards, irresponsible behavior, etc. These are not the real issue. The root is our debt-based money system. This is what is hurting us.

Right now, Americans are paying off debt faster than they ever have before. They’re tightening their belts, cutting back, using extra money to reduce debts. They are borrowing less.

This is all good. All things being equal, having no debt is better than being in debt. So I commend any person or family that is fighting the good fight (so to speak).

But until our money system gets a complete overhaul (including real money), then Americans will continue to bear the burden of oppressive credit card debt.

Credit Card Law – What the New Rules Mean

In May of 2009, Congress passed a new credit card law called the “Credit Card Accountability Responsibility and Disclosure Act of 2009.”

It is called the “Credit CARD Act” for short. (Politicians just love acronyms, don’t they?)

While some of the provisions of the law went into affect last summer, most of them go into effect February 22, 2010.

If you want to learn about the new credit card law in some detail, you can read this write-up by the FDIC.

But I found the infographic below to be much more fun and enlightening. It is the most beautifully executed explanation of the Credit CARD Act I’ve seen. It shows:

  • The severity of the credit card and debt problem in America.
  • A few of the good things the new credit card law does.
  • Plus, the sneaky practices the new law does NOT prohibit. (The credit card companies can still get away with a few shenanigans.)

I encourage you to click the infographic below. This will take you to the original blog post where you will want to click the same infographic and scroll through it. Takes about 2 minutes.

Credit Card Law - Debt Is Crushing Americans

Not what you’re looking for? Search Google:

Credit Card Debt Reduction – Seven Methods Revealed

Getting a credit card debt reduction is not always easy, but it can be done. Naturally, some methods are less stressful than others. Let’s look at the easy options first.

Ask for an interest rate reduction first.

One of the first things you should do is call up each of your credit card companies to ask them to reduce your interest rate. Ask them if they have any better rates available and, “Is this the best you can do?”

By getting your interest rate lowered, you will automatically pay off more debt every time you make a payment. Less will go to interest and more will go toward paying down your principal.

Consolidate balances onto low-interest cards.

Although it’s not always possible, you might consider consolidating two or more balances onto a low-interest credit card. While you may pay a balance transfer fee, this could be off-set by the lower interest rate.

The end result is you get a lower interest rate, which makes it easier to pay off your debt faster.

Pay off high-interest balances first.

In many cases, it makes the most sense to pay off your highest-interest cards first. Take whatever extra cash you can afford and use it to pay down your highest-interest balance.

Once you pay off this balance, you will have even more to pay down your next highest-interest balance. And so forth.

Use lump sum payments like tax refunds to pay down principal.

Many families will get at least one lump sum of money each year, usually in the form of a tax refund, sometimes in the form of an inheritance or performance bonus.

Rather than using that money to buy a new doodad or gadget or toy, use that money to pay down the principal of one or more credit cards.

By using your windfall in a wise and responsible way, you will quickly see a significant credit card debt reduction. You may even pay off one of your cards entirely and get to enjoy more cash flow every month!

Put your credit cards in a Ziploc bag of water… and freeze them!

One of the big reasons so many good people struggle to get out of debt is because every time they make some progress, they put more debt on their credit cards.

The temptation to use credit cards is just too easy. And you’ll never make long-term progress if you keep using your credit cards while you try to pay them off.

One technique is to simply remove your cards from your wallet or purse and place them in a file at home. But if the temptation to use them is still too strong, you can put them in a Ziploc bag full of water… and freeze them!

By doing this, you will not be able to use your credit cards whenever you feel the compulsion to buy something. You will actually have to pull the Ziploc bag out of the freezer and let it thaw.

Of course, this may take a few hours. And by then, you may have cooled down yourself — and no longer feel the need to buy whatever it was you wanted.

All of these methods are relatively painless. Anybody with enough self-control and self-discipline can do them. But if you’re really in a pinch… and you’ve got to get a credit card debt reduction fast… then there are a couple of more painful methods.

Hire a debt reduction and consolidation service.

There are many debt reduction and consolidation services that will create a debt repayment plan for you and deal with the credit card companies on your behalf.

This is the route my brother and his wife chose to go. They hired a company that figured out how much they could afford to pay against their debt each month. They then used this figure to create a debt repayment plan.

During this time, my brother and his wife stopped making payments to the credit card companies. They began to get calls from collection agents. But they expected this.

Fortunately, the company they hired has been able to bear the brunt of the calls and negotiate debt reduction deals with the credit card companies.

Thankfully, my brother and his wife are making good progress now. And even though they are still in debt, they finally see the light at the end of the tunnel. They have hope.

Try to get a credit card debt reduction yourself.

Although it’s usually not advisable to do this, you can try to negotiate a credit card debt reduction yourself.

Unfortunately, most credit card companies are very experienced. They’ve heard all the sob stories. And they won’t be very willing to forgive any of your debts.

Which means you will have to stop making payments if you want to have any kind of leverage in the negotiation. This is the same process you would go through if you were working with a debt consolidation company… but this time you’d be handling all the phone calls and negotiation yourself.

It’s not necessarily the way I would do it; but I have heard of some brave individuals trying to go it alone.

No matter whether you hire a company or not, it’s fairly common for people to get credit card debt reductions of anywhere from 40% to 60%.

So if you had a balance of $10,000 on one card, you might see it reduced to as low as $4,000 and maybe as high as $6,000. In the end, you have to decide:

Is all the stress worth it? Is it worth it to wreck your credit score to reduce your debt? And could you possibly accomplish the same thing by choosing some of the easier, less stressful methods first?

Wrapping It All Up

If you’ve still got a source of income, and you can discipline yourself, then definitely choose some of the less stressful methods first. Try to get your interest rates reduced. Consolidate balances onto a low-interest card. And so on.

If, on the other hand, it is literally impossible for you to make all your minimum monthly payments, then you will probably be forced into choosing the more stressful method of hiring a debt consolidation company — or trying to negotiate with the credit card companies yourself.

Choose wisely. And I wish you all the best as you seek to get a credit card debt reduction.