A few well respected economic experts say there is a bright light on the recession horizon...an increase in credit card use.
Mistakenly they think this means Mr. Average Guy is feeling better about things and is out there shopping again.
No. Mr. Average Guy is feeling much worse about a lot of things...the job market, food prices, gas prices, rent, mortgages, foreclosures...and more payments than he can make.
For those who have sufficient money (and there will always be those who have plenty of money) and who tend to look upon those who don't as being foolish, bad managers, lazy and stupid, the truth is the average person is none of those things.
Before last year's mortgage meltdown, America was going strong and there was no reason for someone (or a couple) with good jobs to worry about being able to pay bills, buy food, or just plain live. Most of us had a slew of credit cards eagerly distributed among us by banks that said we had earned the credit, deserved it and could afford to live large.
Then storm clouds began to roll in and now we're in the midst (whether Washington wants to admit it or not) of a recession, tettering on the brink of something worse.
Even if you have a good job, it may not be enough. Things can happen. You can get sick and not have enough insurance to pay the bill, or maybe no insurance. Your kid gets hit in the mouth in a ball game and loses several teeth, maybe a parent needs some urgent financial aid, maybe someone in the family lands in the hospital for major surgery. Just having a baby can cost a small fortune.
Your cars are always a money worry. Even new cars can develop major problems not covered by warranties. I took an old vehicle in for brake repairs and was stunned to get a bill for $900. A transmission can be as expensive as an operation. Straight faced, mechanics, doctors, druggists, electricians, plumbers, schools and tax offices can give you monumental bills and expect payment right now.
For all those emergencies in the past, you turned to credit cards. Filling up the family SUV just to get to work can cost $160 or so. If you drive a diesel, fill up is much worse. Suppose two of you are driving to work each day, you have a kid in college who always seems to be broke, you have a high schooler wanting to keep up with the latest fads, sports and outings, you have little ones that want everything from I-pods to movie tickets. You want to continue to give everyone as much as possible but what about when the mortgage goes up and you can't make the payment or the hot water heater dies.
If you can't get a loan elsewhere, you may turn to your credit cards. You have some credit left there.
When people are in trouble-any kind of trouble-they go into survivor mode...meaning you will do whatever you have to do to get by, if that means borrowing more money you don't know how you'll repay. Maybe after a while, after enough suffering, buffeting, maybe a job loss, a death in the family, a major car wreck and injury, you stop caring anymore how you repay it. You get it if you can; you use it.
Too many Americans are rapidly reaching that point. There are reports of desperately depressed and angry home owners losing their most valuable possession deliberately trashing the property before it's taken away. If they can't enjoy it, they don't want anyone else to either and you know what they think of the bankers and realtors who assured them this was the right thing to do. The old con line “Trust me” comes to mind.
“You don't need to read this-it's just a standard contract....sign here...initial here...and here...and here.” Unless you take along your own lawyer to decipher the double talk, chances are you never knew what was in that contract you signed...not really.
Where do people go after they lose their home? Move in with relatives, camp out in their car? Did you ever try to rent an apartment when you've lost your credit? Apartment managers require credit checks, first and last month's payments in advance, a security deposit, a damage deposit, and seizing on an opportunity to milk the dying cow, apartment managers are raising prices.
When things begin to go sour, problems in anyone's life tend to compound.
It's useless to say you shouldn't have bought that house, got those credit cards, bought those new cars. Someone very glib and oozing confidence talked you into it. Now the problem is how to get out of it.
