When business slows, so does spending
Visa credit card in wallet
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Scott Jagow: Now, we continue our occasional series about how people are being affected by the credit crunch. Maybe you've noticed credit card rates have gone up and credit terms are getting tougher. I'm sure you've noticed if you use a credit card for business expenses and have to wait for reimbursement. Kate Archer Kent of Red River Radio tells us one story from Texas.
Kate Archer Kent: The first thing to know about Phyllis Allen: She's a shoe-aholic. At last count, she owned 150 pairs.
Phyllis Allen: Oh! These were the last shoes I bought and they are so gorgeous.
Phyllis finances her passion for footwear by selling ads in the AT&T Yellow Pages. She's paid a base rate of about $66 a day. The rest is all commission. And recently, that commission has dwindled.
When she landed her first outside sales gig in the mid-1990s, it included $96,000 in ad renewals. She says today's sales packages are about half that size.
Allen: It doesn't matter whether you're bringing back 10 percent or 100 percent. If you're getting a percentage of $96,000 versus $45,000, that's a big difference!
The Yellow Pages were already threatened by the Internet. The credit crunch made things worse. Many small businesses simply can't afford to place ads anymore or they let their contracts lapse.
At first, Phyllis let some customers write postdated checks. But when they failed to make good on their payments, she would have to return her commission. And that was the lion's share of her paycheck.
Allen: Depending on if it was a really good sale, a chargeback can be something that takes up to half of your pay.
She used her credit card to make ends meet during months when her commission fell flat. But then the card company started to raise its rates. And now Phyllis is really starting to feel the pinch.
Allen: I mean, you can go out and be as crazy as you want to, and American Express will say, oh yeah, fine. But at the end of the month, American Express wants their money.
Credit card companies don't look as though they'll be lowering their rates any time soon. And Phyllis' business isn't likely to pick up before she retires in 10 months. So she's reined in her spending and she's learned the difference between needs and wants.
Allen: Actually, my needs are real simple. And I figure that they'll ratchet down even more when I retire.
She's committed to buying only basic necessities. And maybe the occasional pair of pumps.
Allen: And so these are shoes that I like: big heels.
I'm Kate Archer Kent for Marketplace.