Tag Archives: debt

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Black Friday: Beware of Credit With a Catch

Black Friday is probably going to turn into Bleak Friday for some credit users at Oregon retailers. 

“When it Comes to West Coast Furniture Stores, We Have the Best Prices in Home Furniture,” Mor Furniture says on its website. On Nov. 26, the site is highlighting: “IN-STORE ONLY. No interest with equal monthly payments for 61 months on purchases of $6000 or more made with your Mor Furniture credit card. Equal monthly payments required for 61 months. Learn more.”

If you’re not careful, it could be a costly trap

Let’s say you buy furniture that costs $6,800. The monthly payment due for 61 months, Mor told me, would be $112.00.  BUT, if you still owe any of the $6800 at the end of the 61 months, even $1, Mor Furniture will charge you interest on the full $6800 at a 35.99% rate starting from the purchase date. 

Do the math. The total interest on an amortized $6800 loan paid off in 61 months at an annual interest rate of 35.99% would be approximately $7,422.39, more than the cost of the furniture itself.  In other words, that furniture will cost you $6,800 + $7,422.39, a total of $14,222.

Shop at Key Home Furnishings and you will encounter the same problem if you don’t pay off your entire purchase price in the time required. “No interest will be charged on the promo balance if you pay it off, in full, within the promo period.,” Key says. “If you do not, interest will be charged on the promo balance from the purchase date. The promo balance is equal to the promo purchase amount and any related optional debt cancellation fees. “

Wayfair credit card financing also offers 0% interest options for a set period (e.g., 6, 12, or 24 months) on qualifying purchases, but if you don’t pay the balance in full before the promotional period ends, you will be charged retroactive interest on the entire original purchase amount at a high APR. 

A perceptive consumer observed on Reddit, “One really has to study a business structure. They aren’t furniture dealers first, they are credit companies first, predatory lenders that have attached a tangible item or service to their scheme.”

It’s worth noting that deferred financial schemes are not restricted to furniture stores. Numerous other retailers offer it, too. 

For example, Car Toys, a specialty car audio and mobile electronics retailer, promotes “No interest if paid in full within promotional period” but “Interest will be charged to your account from the purchase date if their purchase balance is not paid in full within the promotional period.”

Window company Renewal by Andersen can trap consumers, too. NO MONEY DOWN, NO MONTHLY PAYMENTS, NO INTEREST FOR 12 MONTHS* its website says. Then it adds, “*Interest is billed during promo period but will be waived if the amount financed is paid in full before promo period expires.’

Anybody can be caught in these credit schemes, but the people most likely to be vulnerable are consumers with lower credit scores who suffer a job loss or medical emergency that makes it hard to pay off the balance, triggering the retroactive interest charge. 

The now beleaguered federal Consumer Finance Protection Bureau cautions all consumers to know the difference between zero interest and deferred interest, because the differences can have big effects on your wallet.

A zero percent interest promotion will not add interest based on the balance of your purchase during the promotional period. If you still have an unpaid balance when the promotional period is over, you will start to pay interest on the remaining balance only from the date the promotional period ends. 

In contrast, some retailers offer financing such as “No interest if paid in full in 12 months.” That’s when you need to be wary because it usually means the promotion is a deferred interest offer. 

Caveat emptor.

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Rep. Suzanne Bonamici: No Friend of Working Families

U.S. Rep. Suzanne Bonamici, D-OR, is thrilled with President Biden’s actions cancelling student loan debt. She shouldn’t be. 

Even though she has a bachelor’s degree and a law degree from the University of Oregon, it’s clear she’s no economist. And even though she’s a member of the House Progressive Caucus and tries to package herself as an advocate for the common man (and woman), her support for student loan forgiveness suggests she’s no friend of working families either.  

That’s because, for one, the billions in student debt aren’t, in fact, being cancelled. The loans will still be paid off. The issue is by whom?

“The idea that the government is footing the bill for this policy is a bit misleading,” the American Institute for Economic Research points out.   “The cost of the program does not fall on the government. It falls on those who miss out on expenditures that would have otherwise occurred, those who pay higher taxes as a result of the program, those who pay higher interest rates or are crowded out due to additional government borrowing, or those who see the purchasing power of their dollars reduced more than usual.”

Even though the Supreme Court ruled that the Biden administration overstepped its authority in 2022 when it announced that it would cancel up to $400 billion in student loans, Biden has since been rolling out a series of debt forgiveness alternatives using a variety of executive actions.

Biden’s ingenuity in coming up with more loan repayment exceptions seems to have no bounds.  

On April 8, 2024, the White House announced an initiative that would:

  • forgive interest balances built up to date for 25 million borrowers, with 23 million likely to have all of their balance growth forgiven.
  • automatically cancel debt for borrowers eligible for loan forgiveness under several loan programs.
  • cancel student debt for borrowers who entered repayment over 20 years ago.
  • cancel student debt for loans associated with institutions or programs that lost their eligibility to participate in the Federal student aid program or were denied recertification because they cheated or took advantage of students.
  • cancel student debt for borrowers experiencing hardship paying back their loans.

While there’s no question student debt has become a burden for many Americans, Biden’s escalating efforts to relieve borrowers of obligations to repay student loans will add to the government’s annual deficits and the national debt. In other words, current student loan holders may escape repayment, but future taxpayers will have to pay the bill since Biden isn’t proposing any new revenue collections to cover the cost.

On April 11, the University of Pennsylvania’s Penn Wharton Budget Model estimated that Biden’s April 8 plans, if they are implemented, will cost the government $84 billion, in addition to the $475 billion that Penn Wharton previously estimated for Biden’s plans.

Rep. Bonamici must not care about that.  

Biden’s student debt forgiveness policies also raise serious questions about fairness. For example, according to Penn Wharton, eliminating student debt for borrowers in repayment for more than 20 years (or for more than 25 years with graduate debt) will provide debt relief for about 750,000 individuals residing in households that, on average, earn $312,977 in annual household income.

There’s also inequity in Biden’s plan to cancel up to $20,000 in interest for borrowers who have accrued or capitalized interest on their loans since entering repayment.  Low and middle-income borrowers enrolled in the SAVE Plan or other income-driven repayment (IDR) plans would be eligible for their entire interest balance since entering repayment to be cancelled if they make:

  • $120,000 or less per year individually or as married filing separately
  • $180,000 or less per year as a head of household, or 
  • $240,000 or less per year as married borrowers who file joint taxes.

Real median personal income in the United States was only $40,480 and the national median household income was just $74,580 in 2022. In other words, many college educated borrowers in Bonamici’s district who are eligible for relief under Biden’s plan are hardly struggling. And despite her assertion that she’s “standing up for working families,” many of her constituents with much lower incomes will end up covering the bills of their better-off neighbors.

Then, of course, a lot of Bonamici’s responsible working family constituents have probably made sacrifices to pay down their student loans, foregoing vacations, nice cars and restaurant meals. They will get no benefits at all from Bonamici’s generosity. 

Tough beans for them, I guess.