
Millions of credit-card customers can’t pay their bills - JumpCrisscross
https://www.wsj.com/articles/millions-of-credit-card-customers-cant-pay-their-bills-lenders-are-bracing-for-impact-11587807001
======
bedhead
I drove by Target today and the lot was full. Target doesn't have any kind of
social distancing policy so it was business as usual, no lines or anything.
Literally across the street is my friend's small restored furniture store,
which is closed because it's non-essential. It's a husband-wife who own it,
and even with the loans they just got they told me they've only got another
3-4 weeks until their business will collapse, another 3-4 weeks after that and
their personal finances will be in serious trouble. Sure they'd like to be in
a better financial position in the first place, but that's kinda the life you
choose when you restore furniture as a mom-n-pop I guess. I respect them
either way.

The question many small business owners (and their employees) are now asking
is "Non-essential for who???" Because for millions of people, it's as
essential as it gets.

I started out believing lockdowns were necessary, but I've found myself
drifting towards believing this is all complete madness, that politicians have
failed to draw any distinction between reasonable health precautions in
problem areas and unreasonable blanket policies that impose draconian,
permanently life-altering measures on everyone. Maybe we really need the
scalpel approach rather than the nuclear bomb. And in doing so it's clear that
we're inadvertently creating much longer-lasting problems.

~~~
danaris
The businesses are not what's essential. The _people_ are.

When trying to come up with a policy that will help the most, start from first
principles, like "people are what we care about; businesses and the economy
are there to serve us, not the other way around."

Because...yes, if we don't reopen everything, millions of people are going to
be in serious financial trouble.

But if we _do_ reopen everything, millions of people are going to be in
serious medical trouble.

If we get tens to hundreds of thousands of people dying in the span of a few
weeks, how do you think _that_ will affect the economy? Even leaving aside the
psychological _and human_ toll.

Provide for the _people_. Make sure the truly essential workers (the ones
needed to keep us fed, clothed, healthy, and with the lights on) have what
they need to be safe and healthy themselves, and then _keep_ the rest of us
fed, clothed, and healthy, and keep the lights on, out of the government's
purse.

~~~
downerending
> keep the rest of us fed, clothed, and healthy

The problem is that merely _being_ locked down is quite _unhealthy_ in many
ways. As anecdote, I'm drinking about twice as much, not exercising at all,
canceling dental cleanings, and wouldn't go into a medical setting short of
something obviously life-threatening. (And indeed, many people with stroke
symptoms aren't going to the ER right away, which can easily be life-
changing.)

One essay I just saw made the likely-valid point that the risk here is almost
entirely concentrated in the population that's 60+ (and a few younger people
with unusual medical conditions).

If so, a better plan than shotgunning the entire economy for a year or two may
well be to figure out how to specifically protect those who are vulnerable,
and let things run their course with the rest.

In any case, if something _cannot_ go on, it _will not_. No way we'll be
locked down in a year, no matter what pie-in-the-sky handouts are distributed.

~~~
samsonradu
You're very right, being locked down is unhealthy. But isn't the US in an
'advised' lockdown state only? Why not go out (alone) and exercise?

Currently in Brussels, where things look quite bad statistically speaking.
However, parks are full of people running/exercising/stretching and even
walking just to enjoy the sun.

~~~
caseysoftware
Nationally, yes it's "advised" because the Federal government can't demand it
short of martial law or similar.

That said, most States _have_ required lockdowns or shelter in place.

In the US system of federalism, the state governors+legislators have much more
control over what happens in their state than the President+Congress.

------
biohax2015
I thought it was incredibly callous for CC companies to send me emails saying
“we’re there for you” without any mention of even the tiniest drop in interest
rates, instead mentioning their stupid mobile app or something.

~~~
gav
Exactly. I tried to do some research into the current credit cards rates and
found a spread of numbers but around 20%[1] seems like a reasonable guess. The
current prime rate is 3.25%[2].

I'm not saying that credit card companies should lend at prime, but I feel
that reducing rates for existing balances to 10 or even 15% could make a huge
difference to a lot of people.

American Express sent me an email a month ago talking about it being a
"difficult time" and nothing is more important to them than their customers
"health and safety" but all they can offer is telling me that call volumes are
really high so I should manage my account online. That's not really that
helpful, sorry!

[1] [https://www.thebalance.com/average-credit-card-interest-
rate...](https://www.thebalance.com/average-credit-card-interest-rate-4772408)
[2] [https://moneywise.com/a/what-is-the-prime-
rate](https://moneywise.com/a/what-is-the-prime-rate)

~~~
dehrmann
Unless the government steps up to backstop the risk, there's no reason for
those rates to go down. But the Fed's been doing some pretty interesting
things, so maybe they'll start buying securitized credit card debt.

~~~
dillondoyle
Can card companies raise rates on existing debt? Seems like a spiral where
intervention is the best option? more defaults -> higher rates to offset risk
-> less affordable then more defaults -> repeat

------
MattGaiser
1\. Millions don't pay off their credit cards regularly, so this could be a
headline any month. About half of people are in this boat.

[https://www.cnbc.com/2019/03/19/70-percent-of-people-with-
cr...](https://www.cnbc.com/2019/03/19/70-percent-of-people-with-credit-card-
debt-cant-pay-it-off-this-year.html)

Obviously, it will be more because of COVID, but the details aren't yet
available.

2\. I wish WSJ would just let me pay for the article. I don't read them enough
to get a $20 subscription, but would I pay $2 to read that? yes.

~~~
Damorian
This post baffles me. Your first point accurately describes this article as
misleading/wrong, then in your second point you wish it was easier to pay for
their wrong opinions. If I'm paying for news and opinion pieces, it better be
the highest quality, and I've never been impressed with the organizations that
try to paywall their content, at least not more than other mainstream news
organizations.

~~~
tyre
But the article isn't wrong. The article is talking about minimum monthly
payments, which _isn't_ happening every month.

Paying for the article would allow the GP to read the article and see that

------
wonderwonder
26 million unemployment claims so far and many more to come. Many have not
even been paid yet, for example Florida has only paid ~15% of the filed
claims. People have no money coming in and very few places are hiring. The
government sent 1200 dollar checks to some but not all, many people still have
not gotten those. People who did well the last couple of years and have lost
their jobs now are not eligible.

We are potentially looking at the very real risk of starvation in this country
if this things is stretched out and the federal government continues to limit
its direct aid to citizens. States are looking at the very real risk of
completely running out of funds to pay unemployment and McConnell has
indicated he is fine letting them go bankrupt over it because it weakens the
unions.

Rent and Credit cards are just the beginning, Car payments and mortgages are
next.

We need a very real UBI that goes to everyone regardless of income to get
individuals through this. A UBI also guarantees people have money when this
passes to allow for individuals to go out and pump money into businesses
trying to stand up again.

Its one thing to fret about the US debt, but at the moment we are looking at
the potential for a great depression. When this is all over, mint a few
trillion dollar coins and pay it off. If the dollar drops for a while its not
necessarily a bad thing.

~~~
csomar
> We are potentially looking at the very real risk of starvation in this
> country if this things is stretched out and the federal government continues
> to limit its direct aid to citizens.

Very unlikely for the U.S. Food is very cheap, it just happens that prices in
the U.S. are inflated because of transportation, branding and the millions of
middle men in between. To give you an idea, where I live, 1Kg of pasta costs
$0.4 and grains are mostly imported from the US. Rice costs $0.53 and it is
imported from Asia.

You can survive on Pasta and vegetables for less than $1, and the U.S. is
producing it dirt cheap.

------
Barrin92
the covid-19 situation I think really exposes how mad it is that as a society
it's normal if not encouraged to live on debt or one or two paychecks away
from being broke. Of course, a lot of people don't make enough to even save
much more, but even among more affluent people in particular in the US it
seems common to live a lifestyle that just about only works if you're at 100%
income.

Just for my own peace of mind, I started saving enough to be without work for
a year or so, use a debit card instead of a credit card and rent. Here in
Germany, this is more common than in other places, but still, I wouldn't even
want to live with constant debt on my shoulders.

~~~
jhwang5
You don't realize that this economy - levered to the hilt - NEEDS the consumer
to spend money they don't have to keep it going. If the American consumer
started developing financial discipline starting tomorrow, that's incredibly
bearish for stocks. (Of course, that's probably a good thing for the long run)

~~~
MattGaiser
Except that savings for tomorrow would probably end up in the stock market.
Otherwise inflation kills them.

So I would be interested to know would happen here.

~~~
karatestomp
> Except that savings for tomorrow would probably end up in the stock market.

For far lower returns. With reduced demand, there's not much for that extra
money to do. To the extent investment drives growth it's when it goes into
innovation (R&D) or if businesses have demand but are capital constrained (and
I suspect even that's more like _speeding up_ than _creating_ growth,
exactly—you just get 5% growth now instead of 2.5% over two years, or
whatever). Sure maybe you could spend it on advertising and marketing but all
that can do is get us back to "people spend too much".

~~~
bgorman
How does one draw the line between necessary marketing/sales expenses and
unnecessary ones? Even some of the most "innovative" companies like Apple
spend billions on advertising. I don't have an MBA but it seems pretty much
impossible to sell new products without an advertising budget.

~~~
karatestomp
Right but if the premise is “there will be lots of investment because people
are spending less and saving more” then all that invested money can’t go into
marketing or advertising without getting right back to a low-savings society,
unless that spending is ineffective. So that leaves R&D I guess since there’s
not much else for that extra money to do. Plus lower returns on equities.

------
subhobroto
> They are usually unsecured, which means lenders have little recourse if a
> borrower stops paying

This is misleading.

Yes, unsecured credit cards (there also exists secured credit cards which do
have an attached collateral) do not have a collateral but stating "lenders
have little recourse" is false.

They can collect the debt and make your life a living hell just like the
hospital you went to to address your injured elbow charged you $25k for and
hounds you to this day, garnishing your wages and putting liens on your
property.

> Banks including Citigroup Inc., Discover and Synchrony are shutting down
> credit cards that haven’t been used in a while or lowering spending limits.
> The companies say they were taking these measures before the pandemic as a
> way to lessen risk. But those moves could also leave some borrowers without
> access to credit just when they need it most.

This is more concerning.

Since a certain class of borrowers are being unable to honor their
obligations, other class of borrowers who had opened credit lines, planning
ahead, to tap into exactly during such times will now be left without access
to that what they had planned for in the past.

This now puts a short squeeze on people who could plow through these hard
times and puts them at risk of falling into the class of people who are in
absolute duress.

Does not do good to any one.

I would rather have the lenders continue to keep the accounts for borrowers
with excellent credit history open and unaffacted.

~~~
techsupporter
Credit issuers, particularly unsecured credit card issuers, have been calling
back lines every time there's even a whiff of an economic downturn since time
immemorial. Those who "play the credit card game" have learned, usually
through burned hands, to anticipate this.

There's no such thing as a reliable limit through a big issuer. This is doubly
true if someone has been chasing CLIs through "luv" (getting credit limit
increases by clicking the "request limit increase" button on issuer web sites,
often called the "luv button"). The only reliably stable limits are through
small issuers who have much tighter rules and a much less intricate risk
model.

Also, on this:

> other class of borrowers who had opened credit lines, planning ahead, to tap
> into exactly during such times will now be left without access to that what
> they had planned for in the past.

> This now puts a short squeeze on people who could plow through these hard
> times and puts them at risk

All I can say is absolutely do not rely on credit being there as a backstop.
That's what cash savings are for. Yes, it's easy for me to say "just save six
months of expenses!" and I'm not trying to call you wrong, so much as get a
head start on the next class in the School of Hard Economic Knocks.

The only people who can rely on credit being there are people like that ex-
Amazon engineer whose tweet I've been seeing passed around these past couple
of weeks. He pulled $250k out of a HELOC on some investment property in
Seattle he's been trying to sell, "just to have the cash." He likely already
has so much cash or short-term equivalents to his name, that added $250k is
less out of need and more out of strategy. That class of investor will always
have credit available; most of the rest of us will see it pulled at the worst
possible time.

~~~
subhobroto
The amount of insight and knowledge in your comment is so dense that my single
upvote does not do it justice.

My thoughts:

> Credit issuers, particularly unsecured credit card issuers, have been
> calling back lines every time there's even a whiff of an economic downturn
> since time immemorial

I have an aggregate mid six figure credit line excluding mortgages. Have been
through this and the last two recessions.

Never had a $1 drop in CL: I choose who I build realtionships with very
closely. Infact, I have had CLIs happen during "good times", without me
reaching out . One lender even did a CLI without even notifying me (they
usually email or mail you "good news!") - the only reason I noticed is because
I like to look at my statements manually every billing period.

There is no Bank of America, Citibank or any of that retail nonsense in my
basket of credit mix. Majority of them are in geographically diversified
credit unions

Finance 101.

> absolutely do not rely on credit being there as a backstop. That's what cash
> savings are for

cash is an asset class but it's extremely expensive and a liability for me.

cash causes me headaches. Even with my 3% APY bank accounts (people seem to
believe there are none of them in the US which is untrue!) after effort and
inflation, I barely break even.

I have to track it, protect it try and ensure it does not loose value too
much. I have to visit local branches when I need to take it out or deposit it.

Credit is awesome. In the U.S., it's really cheap and consumer lines of credit
have extremely strong protections.

I purchased a $500 phone from Best Buy because they had a special promotion
that required me to purchase their gift cards. They would not allow me to
purchase gift cards using my premier credit card, so I used cash.

A year later, the phone died. I had 0 recourse.

Had I purchased it with my Amex, all I would have to pay is a $50 processing
fee, if at that. I would, at worst, get refunded by Amex, the fair value of
the phone at that time.

In my few interactions with Amex, I wouldn't be surprised if they just
credited me $500.

~~~
function_seven
> _Even with my 3% APY bank accounts (people seem to believe there are none of
> them in the US which is untrue!)_

I'm one of those people. I have an account that started at 2.2%, and is
currently earning 1.8% or so. I thought that was the best I could do without
locking up my savings in long-term CDs.

Can you share any info on this?

~~~
subhobroto
I can but that exposes me to clear liability that will be hard to argue
against (and I'm easily reachable both by you and your attorney) as I am also
a shareholder at those institutions and hence have a clear selfish motive in
suggesting that you use them even if they later cause you harm.

So I think I have a reasonable suggestion for you: look into credit unions
that are looking to hand out business loans.

In my experience, it's less risky than investing directly into said business
(honestly that's where you make the most money!) and you're backed by the NCUA
upto $250k per account

------
tempsy
The biggest issue is state level bureaucracy related to unemployment.

Part of the stimulus bill increases unemployment benefits by $600/week. For a
lot of lower wage earners this is probably more than they currently make.

If people are having difficulty paying it’s because their unemployment
application is stuck in some office and not being processed fast enough. A
totally preventable crisis.

------
jconley
Just an anecdote here, but my main spending account and auto loan is with a
small local credit union (SFCU). They have been very helpful and proactive in
terms of helping people with reduced cash flow. They are deferring payments on
auto loans, home loans, and removing minimum payments due on credit cards [1].
Of course, interest accrues. They're not trying to go under too. But I did
appreciate the proactiveness. They reached out to members via email and phone
as soon as the shelter in place orders started in our area.

It often pays to do business locally with smaller businesses for situations
just like this. They're a bit more "human".

[1] [https://www.sfcu.org/covid19/](https://www.sfcu.org/covid19/)

------
samsonradu
Can someone summarize the average interest-rates banks charge for credit-card
debt?

I heard some wild numbers a few months ago but they might be outdated.

~~~
nateburke
Double digit percentages. 15-20%. Sometimes more.

Interest charged to people who do not pay down balances is the primary way the
banks behind CCs (not Visa, mc, etc, they just take tiny slices of every
transaction) have a business.

~~~
jb775
It's crazy to see the interest rates we've come to accept as a society
considering that "interest" (otherwise known as "usury") has been considered
illegal in many periods throughout history.

~~~
imtringued
That's a perfectly reasonable interest rate. Imagine you borrow $1000 at an
APR of 15% and for some reason decide to only pay $22 per month. You have 68
months to pay the full amount back until you pay $500 in interest. If you had
decided to pay $100 per month you'd pay $75 in interest in total.

Meanwhile payday lenders will let you borrow $1000 for 3 months. You have to
pay back $500 each month and if you can't pay it off within three months you
will have to pay additional fees. That is basically a 500% APR.

There is no need to hate credit card companies. They are doing a perfectly
fine job. They obviously have higher rates than regular loans simply because
buying something with your credit card doesn't require approval from the
company. When you apply for a regular loan it is often tied to a specific
purchase that can be repossessed or directly increases your income and
therefore ability to repay the loan.

------
rckoepke
[http://archive.is/TJciy](http://archive.is/TJciy)

~~~
ahnick
Getting a cloudflare dns resolution error for some reason.

~~~
techsupporter
Archive.is operators object to Cloudflare not passing eDNS information and so
block resolution through Cloudflare.

------
neonate
[https://archive.md/TJciy](https://archive.md/TJciy)

------
reacharavindh
Paywalled.

Not judging articles behind paywalls, but it would be nice to have an easy
indicator on HN for such articles.

[Paywall] Millions of Credit-Card Customers Can’t Pay Their ...

^ would have been a more useful title.

~~~
lostgame
I completely agree, and can’t understand the downvotes. I’ve felt this way for
years at HN, and a paywalled article is a great way to get me to just hit
‘back’, or open it in Private mode and read it anyway.

If there’s a tag at least I’d know to avoid it to start. As many others have
mentioned, there’s no pay-per single article option, this would obviously be a
very different situation if that was the case.

~~~
dang
It's because because this is an extremely well-worn topic and the comments on
it are always the same.

The answer is: if there's a workaround, it's ok. Users usually post
workarounds in the thread. This is in the FAQ at
[https://news.ycombinator.com/newsfaq.html](https://news.ycombinator.com/newsfaq.html)
and there's more explanation here:
[https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...](https://hn.algolia.com/?dateRange=all&page=0&prefix=false&query=by%3Adang%20paywalls&sort=byDate&type=comment).
Note
[https://news.ycombinator.com/item?id=10178989](https://news.ycombinator.com/item?id=10178989)
from 5 years ago.

Paywalls suck, but HN would suck worse without NYT, WSJ, Economist, etc.,
articles, so workarounds are what we're stuck with until the publication
industry gets its act together the way music eventually did.

~~~
realtalk_sp
Friendly suggestion: paywalled articles should be somehow flagged explicitly
in the title so the community can collectively decide how to treat them and
users can choose not to click into or comment on them. The origin domain isn't
enough information and the current approach is immensely, needlessly
frustrating.

------
talkingtab
This is very simple. If you have tests you can reduce the lockdown. We don't
have tests so we are faced with the choice of personal health vs economic
health.

Why don't we have tests? Other countries have tests.

~~~
LatteLazy
We have tests, but we waste them all on billionaires and senators and
basketball players even though testing them doesn't help them or anyone else
even slightly...

------
3fe9a03ccd14ca5
We really are whistling past the graveyard on our economy. Everyone repeats
“shut it down save lives” but completely ignores the consequences of broad
unemployment. Historically this is the kind of precursor to very violent
political changes, and how a lot of very violent and evil people come to
power.

Just as much as we need to protect lives, we can’t drive desperate people up
against a wall. Everyone in a WFH Silicon Valley bubble should pop their heads
out and over to middle America for awhile to see how bad it’s quickly
becoming.

