How should the average middle class person deal with the financial crisis and credit crunch

[january43]

On one hand, we are encouraged to trust the bank and to believe that the system will be fixed..and yes, it was a run on WaMu that caused it to have to be bought up..fear from the customers who were worried about their deposits put the bank in a situation it couldn't deal with...even though the deposits are insured.
OTOH I have read that credit cards may not be honored as time passes and that people who expect that they have $4000 available on their credit card might be turned down if they try to use it.
I'm taking a trip in 6 weeks to have much needed dental work done...in Costa Rica.  I have paid my credit card way down so I could pay for the work by Visa.  If I had just made minimum payments, I could have banked the big payments and saved the money, paid in cash.  But the thought of traveling with a lot of cash makes me nervous.
I will be so very bummed if I get down there and discover I have a lower line of credit.
What are your fears-how do you plan to work with this credit crunch?
january43

[LateAugust]

Your concern is wll founded.    I was and am a WAMU customer, for banking only, I dumped my stock almost a year ago.  If you watched their stock for the past 9 months, the FDIC seizure should not have been a surprise, it went down month after month after month.  They overspent for years buying other banks to become the largest bank in the nation.  Additionally they got a little silly with the mortgage fiasco that has plauged other firms.  The classic was when they  brought in the new CEO on 9/8/08, gave him a 7.5 million $ signing bonus, and a clause that when he left  an additional 6.5M.   The man made a million dollars a day,  and the shareholders didn't know they would be taken over soon, and made this contract on the 8th of this month???  I find that incredulous and indicitive of the greed on WallStreet.

I live in an area where the economy is still pretty strong, probably one of the most stable in the nation.  Our housing has declined maybe 2% at it's worst.  Unemployment is one of the lowest.   Yet we are hit by this problem.  For a prime example of borrowing funds, my husband owns a franchise and has 7 stores.   Our business is down in all locations, but making payroll and a profit, but much less than other years.   He recently tore down one of the stores (we own the land) and was going thru all the permits to begin building. Well,  altho a fairly large some of monies was set away to pay for this  you are taking about a great expenditure, and the business in not bringing in any revenue, so he needed to borrow aprox 150K.   Our credit is impecible, we have colateral up the ying yang.  But his persoanl business banker called to let him know they are suspending most small business loans,  and it is very possible he will not get the loan unless he acts on it immediately.   He is strongly considering not to rebuild.  This will put 50+ of our employees out of work (we currently have them in the other stores on a temp basis) plus the architect and contractors doing the construction.     And this is not WaMu    we have accounts in various banks.   He is more fortunate than most,  but it is not uncommon for small business owners to borrow payroll as their revenues ebb and flow.  Thank God we don't have to do that, but I can guarantee you many do.

I would strongly encourage you to get the monies now,  put it in money orders, or have the money wired to the location you are having the surgery so its all paid up front.  I personally would not wait or think I will be able to borrow any money in the very near future.    

I am afraid of what is happening with the economy.  I am afraid of loosing everything I and he have worked for all of our lives.   This is a very serious situation,  and a major problem with huge and far reaching implications for all Americans.

[bubbles1096]

It will be very hard for small businesses to get the necessary loans to make thier payroll everyweek, many times small businesses will secure lines of credit with thier financial institutions if they have a large amoutn of money tied up in something else or if their turnover is slow. It happens more than you think. Small businesses are the heart of America and the economy.

It will be hard for middle class people to secure lines of credit for vehicles; the crunch has alreaady started where I live anyway, even people with near perfect credit will have a hard time either getting approved or have to pay a higher interest rate than last year or the last 5 years. Normal interest rates for used vehicles is 4-8% it will possibly go up to 10-12%. Interest rates for unsecured lines of credit will go up too.

The housing market here in Michigan stinks to begin with, record time foreclosure rates, if you are looking to purchase a home, you can get A LOT of house for your buck, but most people are feeling the crunch too, so the market will continue to get flooded with unwanted homes and forclosed homes while the demand for rental property and apartments will sky rocket because people's homes are foreclosed, they cant' get into another mortage, rent, the demand for rent goes up, therefore the landlords bump up the rates. In the last 4 months alone, I've seen 2 huge apartment complexes raise thier rent by $200 a month & there's a waiting list.

People wont' be able to get the mortgage insurance either,for the last 10 years, the feds have been very negligent on watching the rates and allowing peopel to buy too much house for thier budget. they should've stopped that 5 years ago, it looked good on paper but down the road we're in trouble and we have reached the end of the road right now.  It will be very interesting to see what happens in the next 2 years. It will get worse before it gets better.

[allaboutmary]

I hope all goes well for you.  I think it's sad that Americans have to go out of the country for affordable health care.

[flmagi]

Your fears of the lowering of your credit line are well founded. Be sure to check that credit line before you board that plane. If you still have the credit line, don't be surprised if the interest rate goes way up as soon as you start chargeing on it.
For me, right now, I'm just worried about hanging on to my house and feeding myself and the dogs.
Good luck and God bless us all.