Friday, April 25, 2008

Spend, Don't Save

So let me see if I have this right--- Interest rates are so low because, even though, as a population, we have always been nagged about not saving enough, we are now not supposed to be saving. The line now is spend, spend, spend. The government wants us to buy. Hence those tax rebate checks. But what can we buy if we can never save? A house? Not anymore. More likely that ballpark G will go to the 2 g’s--gas and groceries.
And if we just keep spending, buying, consuming, stuff that really won’t hold any value, then what will happen if we are suddenly faced with an unexpected life change—it does happen—usually just when you think everything is hunky-dory.
Talk about mixed messages. Cut interest rates so people (oh, and businesses) will borrow and/or spend, not save. Then give the people a tax rebate so they, for some reason, feel flush and go out and spend more. (Reality—that rebate is long gone, baby) Maybe we are now supposed to follow the example of the government and rack up a big deficit.
It seems as if that has already been happening. The Federal Reserve states that revolving credit increased at an annual rate of 6 percent, meaning we have been sliding our credit cards through those MSRs (magnetic stripe readers) quite a lot.
Revolving, or open-ended credit is an agreement by a bank to lend a specific amount to a borrower, and to allow that amount to be borrowed again once it has been repaid.
According to the Federal Reserve Bank of San Francisco, open-end credit is a line of credit that may be used repeatedly up to a certain limit. (Also called a charge account or revolving credit.)

The key words here are “again” and “repeatedly” Think “revolving doors”—the kind that can turn so fast and for so long that you never know what hit you until you're flung out onto the walkway with your head still spinning.

(To ease some of the pain, while there is a time lag from when the Fed cuts rates, it does pay to call your credit card issuer and ask about a reduction in the rate you are charged, particularly if you have been paying on time.
In any case, a straightforward site to read about credit cards in general and how to avoid the quagmire that so often ensues, is )

1 comment:

MB said...

The fact that the banks made it so easy for people to borrow money and overspend is why there are so many foreclosures. Many years ago when I was getting my first mortgage, it was impossible to borrow more than you could afford. Now it seems like they are giving it away, until it's time to repay and reality hits. I know a family who makes enough income to be set for life, yet have gone crazy with credit cards and overborrowing, that they are losing everything. Such a waste!