The Real Reason for the Credit Crunch…

OK – so this may or may not be factual… but it is sadly (funnily) 🙂 all too believable – right?

In January 2000, a man received a bill for his, as yet unused credit card, stating that he owed $0.00. He ignored it and threw it away. In February, he received another and threw that one away, too. The following month the credit card company sent him a very nasty note stating that they were going to cancel his card if he didn’t send them $0.00.

He called them and was told that it was a computer error, and that they would take care of it.

The following month he decided that it was about time that he tried out the troublesome credit card, figuring that if there were purchases on his account it would put an end to his ridiculous predicament. However, in the first store when he produced his credit card in payment for his purchases, he found that his card had been cancelled.

He called the credit card company who apologized for the computer error once again, and was told that they would take care of it. The next day he got a bill for $0.00 stating that payment was now overdue. Assuming that having spoken to the credit card company only the previous day, the latest bill was yet another mistake he ignored it, trusting that the company would be as good as their word and sort the problem out.

The next month he got a bill for $0.00 stating that he had 10 days to pay his account or the company would have to take steps to recover the debt! (could be interesting seeing how they’d go about that, huh!?)

Finally giving in, he thought he would beat the company at their own game by mailing them a check for $0.00. The computer duly processed his account and returned a statement to the effect that he now owed the credit card company nothing at all.

A week later, the man’s bank called him asking him what he was doing writing a check for $0.00. After a lengthy explanation, the bank replied that the $0.00 check had caused their check processing software to fail. The bank could not now process ANY checks from ANY of their customers that day because the check for $0.00 was causing the computer to crash.

The following month the man received a letter from the credit card company claiming that his check had bounced and that he now owed them $0.00, and unless he sent a check they would be taking steps to recover the debt…. 😯

The man, who had been considering buying his wife a computer for her birthday, bought her a typewriter instead.

Anyone have their own story of  banking troubles??

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11 thoughts on “The Real Reason for the Credit Crunch…

  1. I was a auditor at a bank for 30 years. I have seen all the horror stores.

    My bank gave a guy around $400,000 so he could build his dream house, made out of concrete. He couldn’t make his mortgage payments and we got stuck with a half finished concrete house.

    Another time a builder was putting up a apartment building. He had already borrowed money from three other banks to get it finish. We gave him a around $200,000 more and he still couldn’t finish it. That meant we were 4th in line to get any money. We never got a dime back.

    The golden rule in lending money is to look at the ability of the borrow to pay off the loan, not the value of the collateral, which can drop in value. During good times, when everybody has money, no one pays any attention to that rule. Then the economy goes into a down cycle. People can’t pay their mortgage. The value of the property drops and it’s bankruptcy for everyone.

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  2. Ed – none of us can predict with 100% accuracy what is going to happen even tomorrow let alone for the life of a mortgage and banks ensure that they win more often than they lose and almost never make an annual loss – unlike any other business.

    Times like the 1920’s and the recent financial collapse will catch them out once in a while but the banks are primarily the ones responsible for this crash which started with the sub-prime lending mortgage crash in 2007.

    The suffering this causes still seems to be spread more to everyone else more than the banks themselves.

    I wonder how long (or even if at all) the lesson being remembered at the moment of why it is not a good idea to forget the ‘Golde Rule’ of Banking will last??

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  3. i laughed all the way through that, love! hysterical! and so typical…whether it happened or not…but wouldnt be surprised if it has…

    credit scares me. we dont touch it anymore.

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  4. Tam – 🙂 it gave me a good giggle too, along with a slight ‘pang’ that our modern technologic de-humanising world seems sometimes to completely lack the human ability to overcome mechanical stupidity. Mostly with the catch-cry excuse – “it’s a computer error”. No – it’s a human error and humans, not computers or programmers should FIX it.

    As for being scared of credit – i would hope that you never be scared of a ‘simple’ tool. It is not a gun we need be scared of, not a bullet, but the fool who uses them illegally or without the correct understanding of it’s use (like a six year old who takes step-dads gun to school and kills a classmate).

    Similarly, Credit is a tool that has it’s value and uses when it is known how to use it ‘safely’. If we use things without being aware of all the possible risks and taking apporpriate precautions we can get hurt.

    I DO understand your and B’s situation and know it was more a matter of misplaced trust and perhaps a slightly misunderstood situation that lead to your ‘fear’.

    If we can learn to use credit so that it benefits us in a safe fashion ( as Papa seems to do?) there is little, if anything to fear from it… as you well know, however, Credit CAN be a very dangerous thing if we do not fully understand it and treat it too lightly and trustingly.

    Just because something is ‘legal’ and is advertised/pushed at us does not mean it is ‘safe’ and will not bite us if we don’t look very carefully at what it does and what we do with it.

    Of course the banks and finance industries will do nothing anywhere near as much to make sure you are fully informed of the risks as they will to make you want the Credit in the first place – People seem to forget this and think if they are not made aware of the risks that those risks must be very small compared to their ‘need’ for a product.

    This applies to far more than credit alone. Advertising has a LOT to be held answerable for.

    Their answer is ‘Let the Buyer Beware’, but if 99% of the information ‘pushed at us is to display a benefit and 1% to mention any ‘problem’ how is the buyer to get a ‘fair’ idea of what to expect?

    When companies legal teams work hard to find what can be said to us without them being sued while we have to work hard just to pay bills and have little free time to fully investigate the pitfalls the same companies know all to well but never tell us about how fair is such a system?

    More people need to be more aware of this than currently are so that they can be better protected and have less reason to end up getting scared.

    <B

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  5. i agree with a million percent!

    the borrowers definitely need to be more careful of what theyre getting into. and all the loopholes and tricks are in the fine print. hard to see. but theyre there. so look for them, but know youre rights too. if there are any 😉

    but living on a cash only system has been so freeing for us!

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  6. Tam – i REALLY love it when we can find agreement 🙂

    And there is far less chance of getting into financial trouble if you can live on a cash-based only system than any ‘financially leveraged’ (Credit) based one 😉

    That is something my parents lived by and i almost managed to learn well 🙂

    Many today are finding it can be only too easy to over-extend yourself, or more recently find that your circumstances to have the ability repay change while the amount you owe does not. 😯

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  7. too funny….reason why I no longer use credit is stuff like this…

    the only story I have is once I was traveling in Chicago and using my debit card paid for my hotel.
    Instead of the hotel charging me the $500 for the nights I was in Chitown, the dinged my checking account for $5,000 due to a mis-key.
    It through my account into wicked overdraft and bounced all of my auto bills that had just gone through. On top of that , I was billed $3850 by the bank due to the 110 instances of overdrafting at $35 each. Ironically enough, it was so many instances because every time they tried to bill me the $35, it overdrafted again and generated another $35 charge.
    Well, the end of the story is that I got all of my cash back after about 30 days. I ended up having to bring my attorney into the matter because the bank did not want to refund the fees which in the long run ended up coming back as well. The Hotel which I stayed not only refunded all of my room, but gave me several nights as well.
    Needless to say, there is one bank out there I will never do business with again…won’t give the name but will just say they are a “Regional” bank with a lot of “Green”. anyone in or around the south will know of who I am speaking 🙂

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