Card Debt

At universities across the country last week, bank representatives pushing credit cards descended upon campuses like confetti at a homecoming football game.They offered T-shirts, baseball caps and water bottles to entice students to sign up for their Visa, MasterCard or American Express cards."Kids are absolutely bombarded," said Carol Jarvis, executive director of the Council on Economic Education in Maryland at Towson University.College students are a lucrative market because they have $19 billion a year to spend and just 60 percent of them have plastic, said Robert B. McKinley, president of CardWeb.

THE credit card, the legal gambling casino and the stock market all have been among the spectacular growth industries of the 1990s.Issuing plastic has been a favorite cash cow of the banking industry since Citicorp bought out the pioneer issuers, Carte Blanche in 1978 and Diner's Club in 1981.The perils of gambling and investing are well known. We were recently reminded of what can happen when the line between the two is blurred: A Georgia day-trader went on a homicidal rampage.Addictive debtThe addictive nature of credit card debt is less well recognized.

IF ONE OF the largest banks in the country has its way, you as a homeowner won't have credit-card balances at high interest rates to worry about in the coming decade.That's because your house will function as your ultimate piece of plastic. In the words of Wells Fargo & Co. Senior Vice President Colin Walsh, "home equity will become the credit card" of the future, thanks to a new wave of high-tech "credit balance transfer" programs heading your way.With virtually no fanfare, Wells Fargo has begun contacting its $14 billion home equity loan customer base and offering homeowners the opportunity to convert electronically all of their outstanding credit-card balances to their equity account -- up to 100 percent of the market value of their homes.

For most students, college is a time to learn. And for some, the subject is debt. Not the debt you study in an economics class but credit card debt. And lots of it.Credit cards are easy to get, easy to use, and -- as many find out the hard way -- easy to abuse."

IN THE FIRST study of its kind, researchers have documented the dimensions of the vast financial shift under way among American consumers to convert their consumer debt -- especially credit card balances -- into home mortgage debt.During the past 24 months alone, according to researchers, 4.2 million American households have converted a stunning $26 billion of credit card debt into home equity mortgage debt.Aggressively pitched on TV by sports celebrities such as Dan Marino and Jim Palmer, and promoted by endless blitzes of direct mail, home equity loans and lines of credit have become the "debt-consolidation" tool of choice for millions of families.

Creditrust Corp.'s earnings skyrocketed to $3 million in the second quarter of this year, seven times the $420,000 the credit card debt collection company posted a year ago.Yesterday's report, for the three months that ended June 30, marked the Baltimore-based company's first since its initial public offering late last month.Creditrust, which collects unpaid principal on delinquent credit PTC card portfolios it buys from banks and finance companies, sold 2.5 million shares at $15.50 a share.

For most students, college is a time to learn. And for some, the subject is debt. Not the debt you study in an economics class but credit card debt. And lots of it.Credit cards are easy to get, easy to use, and -- as many find out the hard way -- easy to abuse."

BILL KEATING has an investment that can't miss.It's tax-free, guaranteed, and returns more than 18 percent annually.It's not a stock or a mutual fund or a bond. It is simply paying off credit card bills and other loans that can drain the life out of a weekly paycheck."It is a phenomenal investment," said Keating, a 57-year-old get-out-of-debt specialist, who holds an MBA from the University of Chicago. "Nowhere can you get an investment that is 18 to 20 percent guaranteed and has no tax consequences.

Bankers like their business dull. And dull is what they're expecting this year.Profits should be plentiful, problem loans few, and if the economy holds up and worrisome bankruptcies and delinquent credit card loans don't grow, 1997 should be another good year to be a banker."

A 33-year-old Howard County businessman is turning the nation's mountain of credit card debt into a personal gold mine.Five years ago, Bernaldo J. Dancel started National Credit Counseling Services (NCCS) on the kitchen table of his Columbia apartment. Today, he makes about $300,000 a year running a $27 million tax-exempt, nonprofit corporation that's about to move into its fifth new and larger office since 1992.County officials tout Dancel's operation as a prime example of economic development -- even as tax experts warn he is pushing the Internal Revenue Service standard of what it means to be a public-service nonprofit corporation.

Despite the weak economy and worker furloughs, a new report gives Maryland a "B" when it comes to the overall financial stability of its residents. The nonprofit Corporation for Enterprise Development, which has been tracking economic data for 30 years, Monday released its Assets & Opportunity Scorecard that grades states every other year on a variety of financial factors. "It's better than a 'C'," says Andrea Levere, the group's president, referring to Maryland's overall grade last time.

Even as a growing number of people can't pay their credit card bills, major banks are jacking up interest rates and clamping down on credit limits. But two new bills in Congress are taking aim at what many consider credit card abuses, and legislators should act quickly to make them law. The House and Senate bills would prohibit banks from raising interest rates on existing balances, something banks and credit card companies have been doing with increasing...

For years, consumers deep in debt turned to counseling agencies to negotiate repayment plans with credit-card issuers. But consumers are now in such dire straits, some can't even afford repayment plans despite concessions from card companies. So the National Foundation for Credit Counseling, a trade group for credit counselors, approached card issuers about making even more concessions for consumers without the resources to repay under a regular plan. The group announced last week that the top 10 card issuers, including Capital One, Bank of America, Chase Card Services, Discover and American Express, signed on. Of course, it is in the interest of credit-card companies to be more lenient, even though they will collect less in fees and interest.

With retirement near, it's no laughing matter that many a baby boomer's 401(k) has turned into a 201(k). The stock market has dropped sharply this year, taking retirement dreams along with it. And because of the credit crisis and Wall Street's dastardly deeds with mortgage-related bonds, some bond funds have failed to provide a safety cushion. www.bankrate.com/brm/calculat ors/retirement/401k_contribution_calculator.asp. Pay down debt: You need more money in savings at retirement if you plan to make payments on a mortgage and haven't paid off your credit card debt.

Have thousands of dollars of credit card debt and little money? The online ads for debt settlement might seem the answer to your troubles. They promise to settle your debt with creditors for 30 cents or 50 cents on the dollar. No damaging bankruptcy. You can be debt-free in one to three years. But there's a lot those ads don't tell you. Debt settlers can charge stiff fees. Creditors could refuse to settle. They might keep hounding you with calls or take you to court. You can get hit by taxes on debt that's forgiven.

There is no leniency. Credit card companies and banks are worried that people are drowning in debt and will fall behind on payments. With home values declining and banks wary of handing out loans, outlets for escaping overwhelming debt are limited. Consumers are finding themselves caught. Card companies are getting tougher, sometimes canceling unused cards or raising rates seemingly for no good reason. And 30 percent of banks said in a recent Federal Reserve survey that they had tightened standards on consumer loans.

With wedding season upon us, a new crop of newlyweds will be trying to figure out how to agree on spending their money smarter. But because opposites can attract in both love and money, that task could derail wedded bliss. Newlyweds, whether young people or those on the second time around, need to find common ground on a number of money issues. But spending might prove particularly challenging. In fact, many longtime married couples struggle to achieve spending harmony, or at least a truce.

There is no leniency. Credit card companies and banks are worried that people are drowning in debt and will fall behind on payments. With home values declining and banks wary of handing out loans, outlets for escaping overwhelming debt are limited. Consumers are finding themselves caught. Card companies are getting tougher, sometimes canceling unused cards or raising rates seemingly for no good reason. And 30 percent of banks said in a recent Federal Reserve survey that they had tightened standards on consumer loans.

GURGAON, India - In a glass tower on the outskirts of Delhi, dozens of young Indians are on the telephone, calling America's out-of-work, forgetful and debt-stricken and asking for cash. "Are you sure that's all you can afford?" one operator in a row of cubicles asks politely. "Well, how do you take care of your everyday expenses?" presses another. Americans are used to receiving calls from India for insurance claims and credit card sales. But debt collection represents a growing business for outsourcing companies, especially as the American economy slows and its consumers struggle to pay for their purchases.

Pop quiz: What's the interest rate on the credit cards you're carrying? How about the default rate? Do you know what constitutes an event of default? What will trigger a penalty fee or surcharge? How much are those fees? If you're like most Americans, you probably cannot answer many or any of these questions. Consider this: It's entirely possible that under a common cardholder agreement provision called a universal cross-default clause, your dispute with the cable company over lousy service constitutes an event of default on your credit card.