Killer Credit: Attack of the $915 billion consumer debt monster

[marmar]

from In These Times:



Features > January 28, 2008
Killer Credit
Attack of the $915 billion consumer debt monster
By Adam Doster


Candace Angus is not one to break the rules. When she served on the Chicago police force for 25 years, it was her duty to maintain order. And as a longtime credit card user, she was never late on a payment and never in debt. So when she found interest on her Capital One balance considerably higher than she anticipated, she was irked.

A customer service representative explained that the charge was “residual interest” from two months prior that had not yet been applied. Although she didn’t grasp the concept fully, Angus swallowed the news and paid her next bill in full. Thirty days later, residual interest was still on the statement, and higher than the month before. “ caught me entirely by surprise,” she says. “I’d never heard of that practice before.”

What was this mysterious charge? Essentially, the payoff balance was obsolete by the time it reached Angus’ mailbox because interest continued to build as her bill slid its way through the mail system. If her check took a week to reach the processing center, seven days worth of interest was eventually tacked on. And this caveat was hidden in the contract’s fine print.

“It should be clear to the consumer that interest is being held up for a few months,” Angus fumes. “Is it to the benefit of the consumer or is it to the benefit of the credit card company?” While she acknowledges that others have it worse than her—because her problem didn’t lead to default or loads of debt—Angus’ experience typifies those of many. “All the cards don’t use that practice,” she says, “but they all catch you somehow.”

In the last quarter century, an unstable financial relationship was forged between Americans—grasping for an increasingly elusive middle-class lifestyle—and credit card companies that offer strapped consumers a lifeboat. But without adequate regulation, the industry has used deceptive techniques to hoodwink consumers and accumulate more than $30 billion in profits per year. Now, if legislators at the national level don’t step in, some analysts fear American’s affection for credit may widen the existing credit crisis. ......(more)

The complete piece is at: http://www.inthesetimes.com/article/3496/killer_credit/

[mike_c]

1. OMFG-- this is just so typical of life in America....

We are resources to be harvested. Have dreams? Got misery and need relief? EVERYTHING that drives humans to strive is grist for the profit mill in America. If people are in need, or suffering, you can make a buck!

[Captain Angry]

2. SO many people still think that they are the customer.

When somebody watches a television show, most likely, they think that they are the customer.

If people realized that they were the product being sold to the advertiser, I think TV watching habits would change dramatically.

That credit card company gets interest, as well as fees, as well as the transaction charge. It makes you wonder how the major credit card companies aren't the biggest companies on earth. And then you realize that they've got nothing on the oil companies.

[marmar]

5. So sad but true.....

n/t

[BB1]

7. U R in da Matrix...

[dysfunctional press]

3. that's one of the reason i make the payments online...

and i generally try to do so within a few days of using the card to make the purchase.

[SoCalDem]

4. Which begs the question...

Why not just use the debit card at the store and eliminate the whole credit card thing completely?

[tsuki]

6. That's what I do. It sure cut down on impulsive purchases. nt

[ima_sinnic]

8. the only way to GET credit is to USE credit--so if you need, say, a mortgage

you must have a record of credit use.
I'm midway through a 2-yr project of improving my credit enough to get a mortgage with good terms (esp. since it appears "subprime" mortgages are a thing of the past--even if one wanted to pay the exorbitant interest on one) and have been doing a lot of research on this. Best is to have different types of credit and always to be using only a small fraction of the credit you have available. If you rarely or never use a credit card, your credit score will be lower and you won't get as good a mortgage deal. This sucks for people who have adhered to the old-fashioned principle of being thrifty and never getting into debt. That has gone the way of the horse and buggy. If you've always paid in cash (or, equivalently, with a debit card), you'll be a "special case" with little or no credit record who will require "manual underwriting"--and I'm not sure of such a person's fate in the mortgage market. Would probably have to have a large down payment, at the very least (but a thrifty person who avoided debt might have some savings).

Once I make my goal of getting a mortgage and buying a house, I'm going to melt my credit cards.

[flashl]

10. Some insurance companies rates are linked to an individual's credit score.

So, if you are not using credit, your insurance rates will be higher.

[ima_sinnic]

11. yes, and the greed-head reason for that is people w/higher credit scores

are supposed to be less likely to file a claim--not that they're less likely to be in an accident, but that they wouldn't file a claim on it if they were. I once screamed over the phone to a CSR from Progressive when I found out my rate had taken my credit score into account--even though the rate was still quite low and reasonable--but she insisted that there was a "correlation" between claims and credit score--though at that time I hadn't discovered this true reason and thought they were saying people with low scores were poorer drivers. They won't admit their true reason--that people with good credit would rather not have their insurance rates go up and can afford to fix the damage without reporting it. As with health insurance, you pay for something but then are penalized if you use it.

Supposedly Geico uses credit scores also, but I switched to Geico after I got p-o'd at Progressive for using my credit score and never saw an inquiry on my credit report from Geico, plus there was no notice buried in the tiny "terms" text about it--and their rates were better than Progressive's.

Unfortunately, I believe it is also becoming more common for employers to check the credit scores of potential employees. This probably makes sense for jobs involving handling of cash, but I don't see the sense of it otherwise.

We are truly becoming ruled by number-crunching vampires.

on edit: the true injustice of it is that we have to PAY to find out those scores that are determining our own fates.

[dysfunctional press]

12. credit score and airline miles.

mostly.

[KatyMan]

9. What if they gave a loan

and nobody paid?