It's nice to see somebody going after the credit card companies and their questionable business practices. Some are worse than others but they all need some sort of reforming. They will give a $300 card to anyone with a Social Security number and a pulse. In 2005, the credit card companies lobbied the government to revise the bankruptcy laws to give them a better position financially. They felt like they were getting screwed when people could just walk away from their credit card debt. Isn't that what unsecured credit is? There is a certain amount of risk involved in marketing your cards to a bunch of people who can't afford them anyway. Now they have government backing to support their predatory lending practices. Then there is the high interest rate and exorbitant fees. Let's use the $300 card as an example. Say you go over your credit limit and then pay late. Not only do you owe the minimum $15 payment, you also owe up to $80 in fees. This $95 is almost 33% of your balance. If you continue not paying, you wind up being charged this 33% every month. This amounts to 396% interest the way I figure it.
Another interesting thing about credit cards is the way they affect your credit score. If you have them maxed out but pay on time every month, you look pretty good as long as your credit card balances aren't a large percentage of your income. If you have cards that all have zero balances, it will negatively affect your credit score because of the potential to run them all up at the same time. People who pay off their cards every month don't make the credit card companies any money so the companies will eventually close their accounts. Credit card companies like it when you carry a balance because they are making anywhere from 6 to 21% interest on their investment. It seems backward to reward those with debt and penalize those who pay off their cards every month.
The latest legislation appears to give the consumer a better position to be treated fairly. The credit card companies have had free rein to act like loan sharks with their business practices and it is about time we kick their legs out from under them. I can't believe that some of the companies are receiving federal bailout money while charging the above-mentioned 396%. Of course, this isn't any different than Chrysler receiving bailout money and then closing a U.S. plant and shifting the jobs to Mexico but that's another blog topic.
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Yay, you're back! :)
ReplyDeleteI hate credit cards and credit card companies. Which is why M learned the mantra: "Credit BAD, Debit GOOD" several months ago. Then Mom pointed out that it seemed odd because usually a 'credit' entry is a positive thing and a 'debit' entry is a negative thing. So we inserted the word 'card' and now the mantra is "Credit card BAD, Debit card GOOD".
I think it's ridiculous that they can give someone a credit limit that they aren't qualified for. At one point in the late 90s, while I was working on totally eliminating debt, I had multiple cards that I had paid off, but they were still active; the total amount I could have charged on them was about 45K. An insane amount given my financial situation at the time.
In hindsight, maybe I should have maxed them out and then filed bankruptcy. lol
truth of the matter is, there are probably a lot of people doing just that in this economy. i know that when i lost my job, i thought that i could live on the cards. i did, but then had to file for bankruptcy and now have no cards, no backup. been a couple of years, but still no cards! not that the credit card people have not tried to get me to take on a new card. just today i fended off three unsolicited calls from citibank. since i have no account for them, the only reason they must be calling is to get me to take out a new card. no way. it would be stupid. i have 0 disposable income. so perhaps the credit card bill just passed in congress will help things out. would have been nice if that bill did not also have a totally non-credit card issue in it that is going to allow guns to be carried in national parks!
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