Saturday, November 08, 2008

Fr. Hollywood Recommends...

...the movie Maxed Out, a 2006 documentary that exposes the effects of debt, both personal and national. It is particularly riveting given the recent events regarding the collapse of banks as a result of risky loan practices and sub-prime mortgage lending.

Young people especially need to be taught the danger inherent in getting into credit card debt.

In fact, you can watch this movie online on demand if you have Netflix.

The movie is both enlightening and disturbing. You will see meet some of our old friends in Congress, lobbyists for the banking industry, collection agents and owners of collection agencies, pawn brokers, families and individuals who have been destroyed by debt, as well as the nationally-known talk radio host Dave Ramsey, an advocate of taking personal responsibility, of getting out of debt, and avoiding bankruptcy.

Maxed Out received very high ratings from IMDb, and has been screened nationally by Americans for Fairness in Lending.

While I have to admit, I don't think government regulation is the answer, it is apparent that there are immoral predatory practices going on in which banks engage in policies that obviously sell Americans into a form of indentured servitude. We Americans need to wise up and save instead of going into debt. This will only happen if we start living beneath our means and stop filling our lives with junk that we charge to the credit card.

Please watch this movie, and if you know of any college students, have them watch it as well. The credit trap is not all that different than becoming hooked on crack or meth - with the exception that it is a legal addiction and the dealers and pushers are respected members of society.

This movie is a real eye opener.


Rev. Eric J Brown said...

Credit is like anything else. . . a tool. As such, it maybe be used as a blessing (I consider my student loans, allowing me to go to Seminary in spite of a sinfully cheap Synodical budget as regards Pastoral Education to be a blessing) -- or it can be wicked and shameful vice.

What we have to remember is that the world pretty much always wants us to turn blessings into vice.

Father Hollywood said...

Dear Eric:

There are certainly wise uses of credit (e.g. an affordable mortgage, student loans that can be paid off later after education ensures a decent salary, and a reasonable auto loan that allows one to have reliable transportation - especially where public transportation is not an option).

Credit cards can be very helpful as well - but only when the balance can be paid off in 30 days. Way too often, credit cards are misused - and the fees and usurious rates that can be imposed as a result are beyond belief.

The average family is way over their heads in credit card debt, and millions of people are currently in a kind of wage slavery in which they can only pay minimum payments with no hope of ever being out of debt.

This doesn't bode well for the national economy.

And, of course, there is always someone there to profit from their misery - which is often recognized as misery too late. Isn't it interesting that schools rarely teach children how money, credit, and banking work?

I believe we are looking at some very hard times. Now is the time to do whatever it takes to get out of the credit card debt, and to refinance adjustible rate mortgages into a fixed rate.

Past Elder said...

We'd do well to remember that your bank branch -- the bricks and mortar one or the one you call up -- are retail stores no less than the hardware store.

When you're trying to pay interest on old CDs at higher rates than you can lend on now, and the spread between current lending and savings rates is thin, you've got a big problem, and that means looking to non-interest income to bail you out. And that's without shaky lending practices.

What's non-interest income? Fees, and add-ons like credit life insurance, which being guaranteed issue, is not underwritten so what you pay is scaled to the risk you yourself represent.

It's "would you like popcorn with that" in financial terms. And if you don't sell enough "popcorn", you'll be looking for another job.

You'll see if you haven't already your credit card rate go up not because you actually did get behind, but because it looks like you might. That way, the bank's got more interest from you in case you do, and gets rid of an undesirable account if you refuse the new terms and close the account.

The merchant pays too for letting you use the card -- when I was in retail we used to encourage the lower merchant fee cards over the higher -- then there's what you pay in interest if you don't pay your balance.

Credit is not extra pay.

Past Elder said...

Live like you make 90% of what you make and put the rest away. It'll be easy as hell as soon as you quit believing your last excuse for not doing it.

wmc said...

I am what the banks call a credit card "deadbeat." We pay off the balance every month. The only debt is the mortgage, which is paid down ahead of schedule. Learned that from my Dad.