December 31,2008
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Bring Your Credit Umbrella in Case of Layoff, Pt.1 –
– Red sky in the morning...These are truly unusual times and call for unusual measures. With an incredibly high one third of our nation's consumers concerned about losing their jobs, a wake-up call demands some introspect. There is a significant "what-if" looming over our heads that is only being addressed after the "Oh, no!" replaces it. That concerns credit cards. Credit cards will be the only liquidity (means of buying things) for many of the thousands who will experience this "Oh, no!" every single month for a while to come. Since few have ever faced such conditions in the past and many will face these extremes every day now, it's wise to shore up realistic expectations concerning our credit card liquidity now.
Better scenario (based on real experience): You are laid off for a month, but then return to work at former pay (very lucky). However, living slightly beyond your means (as many do) this one month hit causes you to fall behind a little in resources to cover the expenses. So you seek a little relief by calling your credit card company and explaining the circumstance and request that they lower your interest rate a little so you can catch up. You have been very active with your only credit card but have also been responsible with it by never missing a payment and even paying over the minimum amount. The ‘help you out', however, is not quite what you expected. To your chagrin, the bank helps you out by canceling your account, leaving you responsible to pay off the existing debt with the interest rate unchanged. Note, this is not an offer nor suggestion. It is an action in which, you have no say in the matter.
Sound extreme? Well, it isn't any more. The credit card lenders are way over-extended now and must find every way they can to reduce risk exposure. Their future is bleak, like yours. They're looking at unprecedented ‘charge-off' (uncollectible debt) levels for perhaps the next year. Now, you're without any back-up plan in case you're laid off again for an extended period (as most will be). Your liquidity is gone and you can't buy anymore once your savings runs out (if you even have a savings). The following article will give some helpful advice.