Debt Revolution in Progress

Nearly a quarter of householdsreported paying a charge for a late payment at least one or two times in the past year. And they are not alone—credit card issuers collected more than $16 billion in penalty fees in 2005.

Until 1996, a late payment on a credit card account typically resulted in a fee of $10 to $15, but now such late fees more commonly range from $29 to $39. Of even greater consequence to consumers is the cascade of costs that late payments now trigger: after just one late payment, most major issuers will raise the interest rate on the account to a high “penalty rate” or “default rate” that currently averages over 25 percent.

This higher penalty rate also may be triggered by a cardholder exceeding the credit limit on the account. These late payment penalties—high fees and interest rate hikes—may affect millions of cardholders of all credit risk levels, because grace periods have shrunk, giving customers less turnaround time.

The new, higher default rates may be triggered under the contract without advance notice to the consumer. To create an even greater “sticker shock,” they are applied retroactively to the entire outstanding balance, rather than only to future charges. Another increasingly common, if controversial, practice among card issuers is to extend their right to trigger the penalty rate for reasons unrelated to their own experience with the cardholder on the account.

Known in the industry as “universal default” clauses, these revenue-generating policies amount to levying a fine before there’s an offense. Card issuers now routinely check their cardholders’ credit reports and may raise the interest rate on the card if there has been a change in the consumer’s score, or if there is a late payment reported to a different creditor. Interest rate increases also can be triggered when a cardholder inquires about a car loan or mortgage, gets a new credit card, or bounces a check.

Founders Francis Corbin and Thomas Johnston were aghast to think of having to borrow money to pay interest on money previously borrowed! Sound familiar?

Johnston: “The United States are bankrupt. They are considered such in every part of the world. They borrow money, and promise to pay. They have it not in their power, and they are obliged to ask of the people, whom they owe, to lend them money to pay the very interest.”

Corbin: “The consequences of deranged finances … what confusions, disorders, and even revolutions, have resulted from this cause, in many nations! …

A Very Real Potential of Economic Collapse from Huge Debt

“The debts due by the United States and how much is due to foreign nations! No part of the principal is paid to those nations; nor has even the interest been paid as honorably and punctually as it ought. Nay, we were obliged to borrow money last year to pay the interest. What! borrow money to discharge the interest of what was borrowed, and continually augment the amount of the public debt! Such a plan would destroy the richest country on earth.”

With the state of today’s financial crisis; it’s hard not to see the unseen hand of those who profit from our misfortunes…or are they?

Go to fdrs.org… Free yourself.

Household savings serve two important functions: They help families to weather temporary income losses or unexpected expenses, and they help families plan for the future. Currently over a quarter of
households in the U.S. are asset-poor—lacking the net worth needed to survive for three months at the poverty line.

 This was demonstrated in our survey, where we found that households were more likely to use their savings to deal with unexpected expenses but used credit cards as a secondary source if savings are not available.   Additionally, over half (57 percent) of households who reported using credit cards for basic living expenses had less than $1,000 in non-retirement savings.

 Over the past three decades, America’s savings rate has steadily declined, and recently fell below zero. Individuals who can’t save often are caught in situations where they must use their credit cards in place of funds traditionally set aside for “rainy days.”

 While the federal government currently dedicates $335 billion each year to promote Individual asset-building, these benefits disproportionately help those who already have assets—less than five percent of benefits go to the bottom 60 percent of taxpayers.  We encourage policymakers to increase asset- and savings-building support for working families.

 Households with larger savings were likely to use their savings to pay off their credit card debt—something households with lower savings often could not do.  

Why do some low- and middle-income homeowners continue to carry large credit card balances even after they have used equity in their homes to pay off credit card debt? Was it over-consumption?

 
No.  The reasons were the same ones discussed earlier: bad luck and lack of other traditional safety nets such as savings and unemployment benefits.

Homeowners who use proceeds from a mortgage refinance to pay down credit card debt are more likely than other homeowners to have incurred subsequent credit card debt because of home repairs, car repairs basic living expenses, or a layoff.

 For low- and middle-income homeowners who use credit cards and home equity as their primary safety net, the debt cycle continues.

Regardless of the uncertain benefits in trading home equity for credit card debt, the reality is that using home equity does not in fact decrease credit card debt levels for low- and middle-income households.

20 percent of homeowners who had paid off some credit card debt with a mortgage refinance in the last three years had added $12,000 to their mortgage debt and at the time of our survey still had average credit card debt of over $14,000.

 
As a result, they were carrying 18 percent more debt than homeowners in our survey who had refinanced a mortgage but not paid down credit card debt—even though their incomes were almost identical. Adding to secured debt and incurring more credit card debt is a recipe for financial disaster—and one faced by millions of Americans.  Federal Debt Relief System wants to help you.

Go to FDRS.org now to learn more and find out how you can free yourself from eternal debt slavery!

Federal Debt Relief System saved my life.   When I first looked into them I will admit I was somewhat skeptical.  At the same time I was sinking in debt and really needed to do something and decided to take an open mind and check them out. Then I talked to one of their debt specialist and he put it to me straight-told me what they could do for me and what they couldn’t-the benefits and the pitfalls.  They did work for me and I can only sing praises for such an incredible patriotic organization!  I know my experience with FDRS has been very positive.

 
I always assumed there was some corruption hovering over our government and America’s Banking system. Now I can look on their website, or watch documentaries like “Freedom to Fascism.” It’s very empowering to have the proof in front of you; down to every law, or absence thereof. It’s also motivating to know that Federal Debt Relief System is fighting to remove this corruption. The burden of debt is being removed from people’s lives!