I got a phone call today at home from Chase. I have a Visa card with them. They call every once in a while to see if I want some Life Insurance or whatever else it is that they’re selling these days.

The sales woman began with: “Congratulations. You’ve been selected to receive a Chase Mastercard.”

Before I could respond she said, “…at the very low introductory rate of 0% interest rate.”

It was then that I cut her off and said, “I don’t want another credit card.”

She said, “What? How could you not want free money? Don’t you know what a great deal this is?”

The 0% rate would be a great deal for a customer who carried a balance (at least for the introductory period where they could roll over their other credit card balances into this new card with the lower rate.) But since I carry no balance, the 0% rate was meaningless to me.

The Chase saleswoman couldn’t understand that.

I said again, “I don’t want another credit card!”

But how many others took her up on the deal? Plenty, I’m sure.

Hm…maybe I should have invested in MasterCard stock after all?

And what about the upcoming Visa IPO?

The thing is- Visa and MasterCard just run the transactions. They don’t hold any of the underlying debt itself (like, say, Capital One- which is having to set aside extra reserves to cover their growing defaults.)

Visa and MasterCard are brilliant businesses. Now that the Housing ATM is coming to an end and Americans can no longer borrow off their homes, instead of lowering their standard of living or paying cash, they’ll simply charge even more. And MasterCard and Visa will get richer.

Another case in point: I returned an item to a Tuesday Morning over the weekend. I had paid for it in cash. So as the cashier was doing the transaction for the return on the register, a line formed. As she was paying the cash back to me another customer waiting in line remarked, “she paid cash? Who pays in cash for anything anymore? I charge everything.”

So he does.

The party must continue, housing bust be d*mned. The kids will have their iPhones for Christmas. Plastic will reign supreme.

MasterCard stock here I come.

Did you see the Oprah show this week where the family who lived in California whose take-home income was about $6,000 a month was spending $15,000 a month?

The audience was all agog. Oprah had on Suze Orman to “help” the couple.

But can they really be helped? Here’s their spending habits:

Current mortgage: $1800 (It’s a negative amoritization loan that is about to “correct.” The payments will be $3500.)

Starbucks “runs” every month: $300-$400

Manicures/tanning for the mother: $50 a week

Shopping at the mall: Several hundred a week

Cars: 3 cars (even though the kids are all under age 16.)

Suze Orman calculated that they really have about $135,000 in credit card debt. They can’t afford health insurance for their family and haven’t taken their kids to the dentist in years.

Yet they’re living in an over $600,000 home in Southern California.

The California Dream, baby!

Except, it’s all an illusion.

Suze tried to give them tough love. They’re already 2 weeks behind on the mortgage. She told them to put the house on the market now and move out of California to a “cheaper” state where there is no income tax (such as Washington State.) Suze also told the wife, who is a stay at home mother with 5 or 6 kids, to go to work at Starbucks part-time so she can get their health insurance.

Somehow, watching the wife on the show with her fake tan and hair extensions, I didn’t think she would be able to EVER work at a place like Starbucks. But desperate people sometimes surprise.

The reality is: this family will go into foreclosure on their house. And then they’ll have to declare bankruptcy.

When you look around your neighborhood and wonder “how are all these people affording these cars and houses?” you can bet: they’re not.

The sad thing is, the money is going towards manicures, $900 shoes, $600 a month car payments. Nothing is saved. There is no pride in having investments. They are buying “things.” Things with no value.

Do you wonder why some people never get ahead? Too many “things.” Not enough stocks.

But after hearing about how the one mother was spending $400 a month at Starbucks, I thought, “hm…I should be buying more of that stock.”

For awhile, Americans seemed to be getting ahead of their debt by taking out a HELOC and paying off the credit cards, some of which carry interest rates as high as 26%. It seemed like a smart strategy because HELOCs had interest rates much lower.

Problem is, many Americans went right on spending, running up balances on credit cards once again. Only now, they can no longer borrow off the house to pay it off. Will Americans reduce spending in order to keep their credit card balances down?

Not likely. From the Baltimore Sun:

As growth in home equity balances has fallen almost to zero, credit-card balances have increased at a 17 percent annual rate over the past six months, according to a report by Merrill Lynch economist David Rosenberg. And the trend, he writes, “is clearly accelerating.” A year ago card balances were shrinking.

The data is not encouraging. Americans have kept on spending even as the credit machine for home loans and refinancings has shut down. From Reuters:

Federal Reserve data released on Friday showed U.S. consumer borrowing rising by $12.18 billion in August, more than 20 percent more than economists had forecast.

Most striking was an 8.1 percent increase in borrowing on revolving credit lines, mostly credit cards, to a record $909 billion.

Credit card borrowings rose at the sharpest rate since early 2002.

We’re at records on credit cards now. What is the incentive to stop spending if the banks will keep lending? And so far, they are (on credit cards, that is.) Everyone knows how easy it is to get new credit cards, even for people who have recently declared bankruptcy.

We are a monthly payment nation- addicted to easy credit and thinking only about how much the item will cost us per month. Want the vacation? Charge it and pay it off over the next five years. There is nothing that is denied us anymore. No one says “no.”

We are supposed to be better off than our parents generation. Nearly every American has a television. Most have refrigerators and stoves. Most have phones. This is progress.

So far, Americans seem to be handling the debt load. From Reuters:

Delinquencies are still low, though the most recent data covers only the second quarter. Late payments on bank cards fell in the second quarter to 4.39 percent from 4.41 percent, according to the American Bankers Association.

Eventually, the growing debt load will bite. How did we get in this deep?

I’ve talked about the debt problems before. But now the mainstream press is reporting on it. They’ve moved off the subprime collapse now (even though it’s still going on) and are focusing on the others who are going to lose their home to foreclosures simply because they have an ARM or other type of more “exotic” financing and now can no longer afford the payment.

What really strikes me is the sheer number of people who can no longer afford their home because they have taken out hundreds of thousands of dollars out in a cash out or a heloc and “refinanced.”

Take this couple who found themselves in trouble in Los Angeles. From the LA Times:

An example is the Breidensteins, who bought their house four years ago from Mona’s parents for $270,000, then refinanced twice, each time adding to their loan balance.

The couple, who have two children, used the funds from refinancing to add on to the home, buy out her mother’s interest in the property and pay off a child-support claim from a previous marriage.

The house was appraised at $450,000 in 2005 and this couple “borrowed” 95% of that amount. The home is now appraised at $380,000 and so when they went to refinance out of their ARM - surprise! They no longer have any equity and cannot refinance. What bank wants to give you a new loan for more than what your house is worth?

Instead of this couple being, frankly, well off and having over $100,000 in equity in their home- they are in pretty deep and probably living paycheck to paycheck (the article says they make $80,000 a year.)

But in the era of “free” loans, courtesy of our homes, they were not alone in taking advantage of the ease in credit.

Here is another, similar example- also from California. From the Contra Costa Times:

The Thompsons bought their home, in Fairfield, in 2002 for $271,000 and financed the purchase with a $272,250 loan, county files show. In 2004, they obtained a $54,000 equity line of credit. In July 2005, they obtained two new loans totaling $441,000.

In July 2005, the Thompsons paid $2,200 a month for their mortgage. Last year, the payments jumped to $3,400.

“We were doing well for ourselves,” Thompson said. “It’s very discouraging. Very frustrating.”

The article was all about how even people making $150,000 were having trouble finding loans or getting refinancing. The Thompsons make $141,000 a year but they also have a vacation home in Reno that the article said they rented out. The bank would not refinance their loan.

Where did the $172,000 that they “took” out of the home go? The article doesn’t say.

But like the other couple in Los Angeles, they now no longer have access to the Housing ATM. What will they do now? How will they be able to live within their means?

Many people have been treating the housing money as free money. It’s obviously not. And when the banks are calling up to collect, the homeowners act all surprised as if they’ve been sold a false bill of goods.

The Thompsons said above that they were “doing well for ourselves.” Doing well…by borrowing money?

Americans have been “borrowing” billions off their homes in the past few years. That amount has been slowing as home appreciation has slowed for obvious reasons. What will happen now when that money has to be paid back? For now, home appreciation isn’t going to save these homeowners. They’ll literally have to work the hours in order to pay off the debt.

This will be the larger story of this housing bust. Americans are in deeper debt than ever before. How painful will it be to try and get out?