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Credit revolving


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Credit cards work on revolving credit. There is a maximum amount agreed that one can loan, but interest rates, always high, can vary and so can the times to repay.

As with all credit (y compris rent/mortgage and other loans) in France, it should never take you over a third of you income, however, it is easy to do with a credit card if the bill is not paid off and left to run up high intest rates and ever increasing repayments on top of the other bills, hence the 'danger'.

I have known a couple of people in France who have got into bad debt with credit cards. They used to be  hard to get hold of. In these times they should also be hard to get hold of.

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Thank you Doudoune, I was just curious as to why this type of credit is such a problem in France, apparently as opposed to credit card debt. Perhaps it is that the latter have much lower limits here than in the YouKay, whereas shop chains issue credit revolving instruments here more freely?
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These cards used to be very easy to get hold of (still are, but less so). Shops such as Castorama, Conforama etc pushed them a their customers with no serious checks such as would have been necessary for a bank loan.

They can be used to buy the shop's products OR to make cash withdrawals, and I suspect that the problem is there.

I have known people in the situation where they have withdrawn cash on one of these cards to pay the repayments on another, and this in spiralling complexity, so each time the credit limit is reached on one card another one is taken.

It is a bit like pyramid selling in reverse.

As idun says there were always  strict controls on credit from reputable sources, but these cards were easy to get by simply declaring false income, as there were few if any controls.

I still have 4 currently unused with the dangerous possibility of borrowing over 15000€.....

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It is very sad, as something seems to have gone wrong with a system which for the most part seemed to work quite well......and should have left people with enough to live on.

Friends tell me that prices have gone up a lot in France over the last couple of years, including one friend who is quite well off. If that is the case, then maybe this is why people who are struggling get into this sort of debt, bad debt.

 

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We took out a credit account with Darty when we bought the last major item as it was easier to pay in three installments and we didn't actually go to buy such an expensive item originally but got seduced by the promo.Anyway all paid off over those months and nothing else bought since BUT every month I receive mail offering me literally several thousand euros of credit either to spend there or on home improvements etc and the same with IKEA as I use my family card most months and they are also offering thousands to spend on my house - all of this goes straight into the bin as soon as it arrives but you can understand and see how people get into spiralling debt when they are bombarded with such temptation.I live by my means, have to these days and actually, when you have saved enough to pay for something you actually appreciate it all the more!

My SIL in the UK has store credit cards by the lorryfull and my sister told me recently how they owe a great deal money on credit purchases because as you can imagine, people receive their bill, pay a small amount off and then go spend even more again thus racking the total up and up! Credit cards in France are hard to obtain unless you have a perfect history and can proove you can pay it monthly as you agree to and as you know here, they don't hang around when debts are not paid or wait to go to tribunal either.

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My understanding of "revolving credit" is that it's a loan without any fixed payments or fixed timescale for repayments.

Eg conventional loan of 4.000 to be paid back over 3 years at fixed rate of 125 a month

Revolving loan of 4.000, spend 4.000 straight away, pay off 500 in 5 months time, and the repaid 500 is available again to be re-borrowed. In other words potentially you never pay it all back because it's too tempting to keep using the never-ending credit.

I may be wrong but I think that's the gist of it, and of course it's dangerous because it's freely available credit once you're signed up.

Lou

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This is the only way I can think of it ... oldie but goodie ....

It is a slow day in the small Minnesota town of Marshall , and streets are deserted. Times are tough, everybody is in debt, and everybody is living on credit.

A rich tourist visiting the area drives through town, stops at the motel, and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs to pick one for the night.

As soon as he walks upstairs, the motel owner grabs the bill and runs next door to pay his debt to the butcher.

The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.

The pig farmer takes the $100 and heads off to pay his bill to his supplier, the Farmer's Co-op.

The guy at the Farmer's Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her "services" on credit.

The hooker rushes to the hotel and pays off her room bill with the hotel owner.

The hotel proprietor then places the $100 back on the counter so the rich traveler will not suspect anything.

At that moment the traveler comes down the stairs, states that the rooms are not satisfactory, picks up the $100 bill and leaves town.

No one produced anything. No one earned anything... However, the whole town is now out of debt and now looks to the future with a lot more optimism.

And that, ladies and gentlemen, is how the government is conducting business today.
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[quote user="Lou"]My understanding of "revolving credit" is that it's a loan without any fixed payments or fixed timescale for repayments.
Eg conventional loan of 4.000 to be paid back over 3 years at fixed rate of 125 a month
Revolving loan of 4.000, spend 4.000 straight away, pay off 500 in 5 months time, and the repaid 500 is available again to be re-borrowed. In other words potentially you never pay it all back because it's too tempting to keep using the never-ending credit.

I may be wrong but I think that's the gist of it, and of course it's dangerous because it's freely available credit once you're signed up.

Lou
[/quote]

I find that quite immoral. I am surprised that after 5 years of an austerity pressy who repeats his mantra on the evils of falling into debt, at an "ad nauseam" frequency of repetition that such a thing should be allowed.

Very strange indeed, I can only assume that it has been overlooked due to the benefits to pressy's friends.

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The format of the loans is indentical to credit card debt, as Anglo-Saxons would understand. Borrow an amount, no fixed term, high interest, very low min repayment amount per month.

There is no such thing as Equifax/Experian in France. There simply is no record of who owes what. When our Dear Leader stepped into the the Elysee, one of the things on the agenda was to impose a central database of all secured and unsecured credit. Quietly dropped by Princess Lagrande.

Without any way to check, people simply lie on their aplication forms. I know people who have as many as 10 loans, repayments amounting to 100% of their salary! And they pay rent, food, ultitities, cars, etc on top.

Credit revolving has been the elephant in the room for many years, and in line with standard French thinking, if you are scared of the answer to a quaetion, don't ask it.

I always chuckle to myself when Brits talk about the amount of household debt in the UK. Well, at least the UK has statistics on these things...........the French don't...............!! No one has a clue!!

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That really is very scary. I have often wondered how some my fellow local inhabitants manage to buy things like a new car whilst building a new house at the same time and also have exotic holidays when others who have two at work can ill afford to feed their families, now I know!
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[quote user="breizh"]

Without any way to check, people simply lie on their aplication forms. I know people who have as many as 10 loans, repayments amounting to 100% of their salary! And they pay rent, food, ultitities, cars, etc on top.

[/quote]

And then when it all gets too much for them they go and declare themselves in surendettement and get the debts written off.

I was shocked to gradually learn over the years that a huge proportion of the people that I know have already done this in the past, the odd thing is when you listen to their sad stories (my heart bleeds for them - not!) they would have you believe that they were victims of capitalism and I really get the impression that they could not see the inevitable coming, something that would be plainly obvious to anyone with even the smallest particle of brain lodged in their skull.

It actually makes me feel more sympathetic for those who run up huge credit card debts in the UK, at least they know what they are doing, some cynically, some through desperation; and at least with a credit card you can buy pretty much anything be it consumerism or food, petrol, pay your mortgage/bills, withdraw cash, pay for breast enlargements for your mistress etc, these guys here are getting into surendettement by buying completely unnecessary tat from the chain stores that push revolving credit, generally the ones that I, being someone that lives on a budget and within my means never feel the need to enter [I]

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[quote user="breizh"]

The format of the loans is indentical to credit card debt, as Anglo-Saxons would understand. Borrow an amount, no fixed term, high interest, very low min repayment amount per month.

There is no such thing as Equifax/Experian in France. There simply is no record of who owes what. When our Dear Leader stepped into the the Elysee, one of the things on the agenda was to impose a central database of all secured and unsecured credit. Quietly dropped by Princess Lagrande.

Without any way to check, people simply lie on their aplication forms. I know people who have as many as 10 loans, repayments amounting to 100% of their salary! And they pay rent, food, ultitities, cars, etc on top.

Credit revolving has been the elephant in the room for many years, and in line with standard French thinking, if you are scared of the answer to a quaetion, don't ask it.

I always chuckle to myself when Brits talk about the amount of household debt in the UK. Well, at least the UK has statistics on these things...........the French don't...............!! No one has a clue!!

[/quote]

That confirms what I was saying above, although I wasn't sure about the lack of a central agency.

I also had the experience of a tenant who lied on his tax return so that he had a high enough income shown on his 'Avis' to get a loan. The result was that the CAF stopped his APL, which of course meant that I had no rent  from him as he knew I couldn't get him out...

The 'Avis' is the nearest thing to a credit check that the stores use..

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I work in the credit field (corporate), and have worked in a number of EU countries. The levels of personal, and corporate insolvencies, are easily the highest in Europe. The legislation is amazingly biased in favor of the debtor. Recovery rates are 24% personal and 48% corporate, in France, versus 73% and 92% in the UK.

I work on a Bad Debt rate of 1.2%, in the UK, and 13% in France. Hence cash in advance, and higher prices, for France, these costs can't be passed onto the corporate customers. It becomes a viscious cycle of lost sales, leading to lost production, leading to insolvency, and lost jobs.

Les Echos was playing the "What if?" game last week regarding the Pressy eclecu. They reckoned that job losses, and insolvencies will skyrocket afterwards, as so many companies have been leant on, not to release bad news for the last few months, but the cork will hit the ceiling over the next few months!

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The law says that people seeking credit are supposed to be offered either credit revolving or traditional HP deals but that the big chains are simpy ignoring this and just offering the former (according to a recent Que Choisir report). The fines for failure, to comply with the law are derisory, so they do as they want. Hang on, isn't Sarko junior married to the daughter of Darty (though the family may have sold out)
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[quote user="breizh"]

I work in the credit field (corporate), and have worked in a number of EU countries. The levels of personal, and corporate insolvencies, are easily the highest in Europe. The legislation is amazingly biased in favor of the debtor. Recovery rates are 24% personal and 48% corporate, in France, versus 73% and 92% in the UK.

I work on a Bad Debt rate of 1.2%, in the UK, and 13% in France. Hence cash in advance, and higher prices, for France, these costs can't be passed onto the corporate customers. It becomes a viscious cycle of lost sales, leading to lost production, leading to insolvency, and lost jobs.

Les Echos was playing the "What if?" game last week regarding the Pressy eclecu. They reckoned that job losses, and insolvencies will skyrocket afterwards, as so many companies have been leant on, not to release bad news for the last few months, but the cork will hit the ceiling over the next few months!

[/quote]

Thankyou for clarifying that. I have understood that this happensfor a long time, but when I have tried to find some information about it, have not succeeded, maybe down to my not being very good at googling and not finding it.

People lie, I wonder how. They always wanted to see pay slips, tax forms and bank statements when we wanted credit and that covered our lives. At what point we could have lied, I have no idea.

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[quote user="breizh"]

I work in the credit field (corporate), and have worked in a number of EU countries. The levels of personal, and corporate insolvencies, are easily the highest in Europe. The legislation is amazingly biased in favor of the debtor. Recovery rates are 24% personal and 48% corporate, in France, versus 73% and 92% in the UK.

I work on a Bad Debt rate of 1.2%, in the UK, and 13% in France. Hence cash in advance, and higher prices, for France, these costs can't be passed onto the corporate customers. It becomes a viscious cycle of lost sales, leading to lost production, leading to insolvency, and lost jobs.

Les Echos was playing the "What if?" game last week regarding the Pressy eclecu. They reckoned that job losses, and insolvencies will skyrocket afterwards, as so many companies have been leant on, not to release bad news for the last few months, but the cork will hit the ceiling over the next few months!

[/quote]

Thankyou for clarifying that. I have understood that this happensfor a long time, but when I have tried to find some information about it, have not succeeded, maybe down to my not being very good at googling and not finding it.

People lie, I wonder how. They always wanted to see pay slips, tax forms and bank statements when we wanted credit and that covered our lives. At what point we could have lied, I have no idea.

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"They always wanted to see pay slips, tax forms and bank statements when we wanted credit"

Me too, for bank loans or reputable firms (if that isn't an oxymoron).

Another feature of these cards was that they were issued by a girl at the customer services desk on production of a minimum of real evidence; a false declaration of revenus or an 'avis' as I mentioned above..

I have one from Castorama with a DOB  which makes me 20 years older than I really am which I can only say is the date she must have guessed from my appearance [:-))]

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About five or six years ago, we applied to Egg France for a card, as they were giving decent things back with purchases. We understood that this was a credit card and said that spending would be paid back when the bill came in. They offered us cards with either 300€ credit or 500€ I cannot remember which. It was nothing and not worth having. Our financial situation was good then, owned our own home, decent salary not really any other debts. Completely honest application too. I tried twice and now I wouldn't touch egg or their related companies with a barge pole.

I heard of people being offered 2000€/3000€/5000€ credit  just like that.

For us it would have been good to pay for, say a holiday via this card and get the % advantages from it and then just pay the bill when it came in. It was all planned. Why we were treat like we were, I have no idea at all. I did not appreciate feeling like we were unworthy, it was not nice at all.

 

And my thoughts on experian etc are not nice. They may help companies, but really, who the hell gives them the right to 'know' every last thing about 'us'. We did not give them any permission at all, ever. I do believe that experian etc should be an opt in scheme rather than big brother, having all one's details just like that. I called them when I first got back to the UK and they said I would have to pay to see what they had on us!!!!!!! They should have had nothing on us, we had not given them permission to have our details. Well that is how I see it, it disgusts me. I'm sure that Eric Blair is laughing in his grave that we have let our lives become thus.

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"I heard of people being offered 2000€/3000€/5000€ credit  just like that."

I was offered an immediate 3500€ on the card I mentioned above...as well as having others at the same sort of levels.

I think there was a 'window' about 5/6 years ago when all this was absurdly easy just before the crash..

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[:-))]But it was before the crash, what would we have been offered after the crash, 10€ credit?

We are a good credit risk, even now, it is a silly company that doesn't give us what we ask for. I do so take against them and like a good efferlump, never forget![Www]

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And yet when you dont want or need to borrow money they are throwing it at you!

In my mind i must have a very low or non existant credit rating, not employed since 1990, unemployed, then self employed/sole director LTD company until 2004, since then dropped off everyones radar completely. 

I have a small rental income that I cant really count on as it has been unreliable in the past, I had an Egg credit card always with zero balance that I used only once every 18 months when they threatened to remove my credit limit, spending a hundred euros or so that month only and then paying it off at the end of the month.

I got a Nationwide credit card when they started charging on the flex account for French purchases, i used it for the 6 month charge free period and no longer.

In my wallet I have available credit of £9000 on the Barclaycard (was Egg), £2500 pounds on the Nationwide card, an overdraft facility of £2500 on the flex account and another £2000 on an HSBC account that I never ever use, they keep renewing these every year and increasing them if ever I borrow the smallest of amounts

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I have one credit card, and one debit card. I almost never use the latter, except occasionally to withdraw cash, and I use the former all the time, but I pay off the full balance every month and have done for as long as I've had one.

Following Chancer's post I just checked, and apparently I have a permanent and unrequested overdraft facility with my bank of around £3K and a further limit of something absurd like £15K on my credit card.

All that said, I have trouble understanding why some (not all, I appreciate that certain circumstances lead to people getting into debt against their better judgment) people feel they HAVE to buy stuff they could do without, and are prepared to get into debt to do it.

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We must be a credit card companies worst customers - only once in the last 20+ years have we failed to pay off the balance at the end of a month (correction, make that 30 years - tempus fugit ! ). 2 x credit cards in uk, but no idea of the credit limit, 1 x debit card in France ( carte Bleu ).

If you haven't got it - don't spend it - simples !
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Please note. The total UK consumer debt figure is calculated on the last working day of the month. If you settle your account in full on, or about, the date it falls due (14th?), then your card amount WILL be included in the UK consumer debt figure. Anyone spot the anomoly?!! At least though an effort is made to quantify. No such effort in France whatsoever. However a personal insolvency rate 5-6 times the UK rate would suggest there is an issue!

For all purchases CC companies deduct 2.25-4.75%, from the seller, of the amount charged to the card. That is where the money is made. Not in acting in a consumer lending capacity.

Anyway that is all bye the bye, it has nothing to do with credit revolving.

I have never been asked for proof of income when having credit revolving pushed at me, thatm was the point, it isn't covered by the same legislation as an unsecured loan.

 

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