It’s for people without appropriately large emergency funds to live off if they lose their job or otherwise fall into financial distress. I call it the Expensive Loan Option, or ELO. The way it works is that you pay me a fee of $X per year and I guarantee that you will be able to get a loan at any time during that year for $5X at 20% interest. So, for example, if you want to be sure of being able to borrow $10,000 at 20% interest at any time during the next year, just pay me $2000 and you can sleep soundly.
Excited? Well, of course you are. Perhaps you have a nice job and enough liquid assets to pay four months of expenses should something nasty happen. That’s okay, but the Fabulous Suze Orman has told you that you need eight months worth of liquid assets. No problem! Just buy an ELO from me. If it costs you $3500 a month to support that glam lifestyle of yours, then just sign up for a $14,000 ELO for the modest fee of only $2800. I take PayPal.
Congress is about to pass “sweeping credit card legislation.” I don’t think it’s all that sweeping, and although overall I don’t particularly object to it, there are aspects of it that bother me.
Reassuringly for us curmudgeons, the bill is hardly revolutionary, largely a collection of modestly worthwhile reforms and regulations. There are rules about how interest rates can be raised and late fees charged. Most people will not notice any effects, and even those that do will probably forget about it in a year or two.
However, there is one aspect of the would-be law that is significant both in its impact on a small slice of the public and as a sign of the times. The just-passed Senate version of the bill outlaws credit cards issued to those under 21. The House version set the minimum age at 18. That’s a big difference in my book.
Every day it becomes increasingly clear that the Great Recession marks the beginning of a a New World Economic Order. And with the new comes an end of many parts of the old. Some will not be missed. (E.g. no-doc mortgages, investment banks, Circuit City.) Others will be missed by the nostalgically inclined. (Newspapers that actually print on paper, the Big Three Automakers, movie theatres.)
And last week Free Money Finance brought sad news of another part of our culture that is disappearing. Maybe The Latte Factor is Now Less of a Factor? Apparently, caffeine vendors from Starbuck to McDonald’s are now cutting prices, meaning that doing without your morning fix just isn’t the compelling savings it once was.
Not that it was really ever that compelling. Indeed, I am saddened by the news because The Latte Factor® is such an excellent example of symbolic frugality that I will miss it. Realizing that this may be my last chance to take it out for a spin, here goes.
This week’s edition of the Carnival of Personal Finance is up at Wise Bread.
My post on Millionaires as Role Models is there, along with other interesting stuff, including Lies, Dammed Lies, and Personal Finance from The Dough Roller and Why I Increasingly Distrust Financial Reporting from Modern Gal.