Credit Card "Deadbeats" Beware

[GREENBACK]

Why can't you pay the credit card bill when it comes in? You pay your electric bill don't you? You pay the newspaper boy don't you? What's the difference?

As Disney steve stated above, this analogy won't work because these are basically fixed costs. A cc is open ended and so many people have no idea what they spend each month. CC companies know this and count on it. They spend an incredible amount of money looking into the human psyche and most have no idea how much they study this stuff. They know consumers better than we know ourselves from a financial standpoint. They don't want you to have a low consistent limit bill every month like an electric bill. They want you to have an over the top limit that you can't repay and they'll talk you into "affordable" payments just like your other bills. Pretty disgusting huh?

[disneysteve]

they'll talk you into "affordable" payments just like your other bills. Pretty disgusting huh?

Car dealers are notorious for this, too. Have you ever paid attention to the car ads on TV and in the paper? They advertise the monthly payment, not the cost of the car. "Get a brand new Whatchmacallit for only $299/month." Nowhere in the ad does it state the price of the car. How can they advertise a particular monthly payment anyway until a potential buyer has sat down and negotiated the purchase price?

The sad thing is that I've known numerous people over the years who bought a new car and when I asked how much they paid, couldn't tell me. They knew what their payment was but did not know what price they had paid for the car. CC companies and other finance companies prey on these folks.

[swanson719]

Comparing predatory lenders / credit card companies to an obese person and their fork is semantics at it's best. That would be the same as saying it's not the person who murders, but rather the gun, when we all know that's not the case. You put the person in jail, not the gun.

The point is that we have a very real need for personal responsibility in this country. Credit companies prey on peoples hopes and good intentions. Why else do they directly target teens and college students who they know categorically will rack up high fees and overages? Why else do they target people fresh out of bankruptcy? They make money off the average joe who might pay on time like they should, so they market to them as well. But Payday loan companies, tote the note, credit card companies, all of these fall into the same boat. They all prey on people who have low income and a good intention of being able to have a better quality of life.

While it is true that credit card companies and other predatory lenders do nothing illegal, the legality of things and the morality of things aren't always on the same page. It is legal to have a partial birth abortion in some parts of the country. It is illegal to perform the same procedure on a dog. It is legal to have cage fighting, but illegal to have dog fights, even if they don't result in death.

To hide behind the cloak of trying to help these people out, or establish credit, what have you, with a good intention and rewards program so you can market your company and then have absolutely no compassion when someone gets in trouble with the debt from a credit card or other such loan is a paradox in terms. If they really wanted to help people they wouldn't raise they APR to 30% with 3 days notice because you were 5 days late on your car note or last bill.

So yes, credit cards can be a tool to those who can handle them responsibly, but they can also be a weapon to those who cannot. You don't give a 5 year old an assault rifle and send them on their way. Giving a credit card to an 18 year old who has never learned to deal with money or had a finance class in high school is the financial equivalent. We don't teach finance in American high schools on a large scale basic, but that's a class that's needed the most.

[zakity]

We don't teach finance in American high schools on a large scale basic, but that's a class that's needed the most.

Yes, but you also can't expect the school to teach the kids everything. They are and should learn some things at home.

[Inkstain82]

Yes, but you also can't expect the school to teach the kids everything. They are and should learn some things at home.

Sorry, but this is a pretty big thing to just leave in the hands of parents. It's a basic life skill and it's not controversial as far as I know.

[watsoninc]

Check your facts... There is no federal law that protects debit cards from fraudulent activity (though at least one state--MA--has state law mandating it). For everyone else, it is up to the bank to create its own policies, and it's strictly voluntary. Contrast that to credit cards, which have strict federal laws regarding liability with fraud.

Look I know my facts fine. Here is a statement strait from VISA site...

Does my Visa Debit card have security protections?

Yes, when you sign for your purchases, Visa Debit card’s security protections help prevent, detect and resolve fraud in various ways:

* Visa's Zero Liability Policy*, which protects you from unauthorized charges. Any funds taken from your account due to fraudulent use will be returned to you.

Did you get that? When you use the check card as a credit card, you have ZERO LIABILITY. This is the condition that Visa mandates from participating banks...period.

If you want to read more, check it out for yourself
Visa Debit/Check Card - FAQ | Personal | Visa USA

[disneysteve]

Sorry, but this is a pretty big thing to just leave in the hands of parents. It's a basic life skill and it's not controversial as far as I know.

The problem is that most parents don't know enough to teach it to their kids. The parents have the same problems and the kids pick up on mom and dad's habits.

I would like to see finance incorporated into math curricula. It would be a lot more useful to teach kids about banking, investing and credit than to teach them algebra, geometry and trigonometry. When was the last time in real life that you had a need to solve a quadratic equation or calculate the area under a curve? I'm much rather have my daughter learning how to compare different investment options, how to balance a checkbook and how to calculate what she'll need for retirement.

[disneysteve]

* Visa's Zero Liability Policy*, which protects you from unauthorized charges. Any funds taken from your account due to fraudulent use will be returned to you.

This is VERY different than what happens with a credit card. If there is a fraudulent charge on my credit card, I am never out a penny, even for a moment. There is nothing that needs to be returned.

If, however, there is fraudulent activity on a debit card, that money is gone from your account until they investigate and eventually refund it to you. In the meantime, you don't have those funds, which could cause other payments to bounce and result in a slew of late charges and other issues that you need to spend time cleaning up once you get the money back.

[glock35ipsc]

There are many reasons why you need credit...mortgage, small business loan, etc.

I think you missed his point. You don't need credit or an I love debt score for a mortgage, my SIL just proved that fact. She got a 15yr fixed rate on her first home with no credit history whatsoever. Just a trip to the local bank, study the facts of her life, and the loan was approved.

Smart, well run business can be successful without loans. I am lucky to work for a growing company that has never used debt to grow the business, and has been debt free since day one.

It cracks me up the people I know that believe that you MUST have credit in order to survive in this world. That simply is not true. It's a personal choice. If you want to use a CC and pay it off each month, go fer it! I just prefer to pay for it right then and there and not be bothered with the bill later.

[Inkstain82]

I think you missed his point. You don't need credit or an I love debt score for a mortgage, my SIL just proved that fact. She got a 15yr fixed rate on her first home with no credit history whatsoever. Just a trip to the local bank, study the facts of her life, and the loan was approved.

Smart, well run business can be successful without loans. I am lucky to work for a growing company that has never used debt to grow the business, and has been debt free since day one.

It cracks me up the people I know that believe that you MUST have credit in order to survive in this world. That simply is not true. It's a personal choice. If you want to use a CC and pay it off each month, go fer it! I just prefer to pay for it right then and there and not be bothered with the bill later.

A mortgage *is* credit.

[glock35ipsc]

His statement was "There are many reasons why you need credit...mortgage, small business loan, etc.", which I take to mean needing a FICO score or past credit history to get a mortgage or and SBA loan.

Past credit history nor a FICO score was needed for her to obtain a mortgage, as the new mortgage is the only debt she has on record. She pays cash for "things", paid cash for school, paid cash for her pickup, has no credit cards, etc.

[parafly]

The point is that we have a very real need for personal responsibility in this country.

That was exactly my point. I agree that credit cards use predatory practices to maximize profits, but that doesn't make the victims faultless.

[parafly]

His statement was "There are many reasons why you need credit...mortgage, small business loan, etc.", which I take to mean needing a FICO score or past credit history to get a mortgage or and SBA loan.

Past credit history nor a FICO score was needed for her to obtain a mortgage, as the new mortgage is the only debt she has on record. She pays cash for "things", paid cash for school, paid cash for her pickup, has no credit cards, etc.

This may be the case for your sister, but she would be in a very small minority. In order to obtain a mortgage with no credit history, you would most likely need a very substantial down payment and optimal employment history. I am sure that having no credit history limited her loan options and lenders.

What are some of the details of this 15 year mortgage? I highly doubt she received an optimal interest rate, which could make a difference of tens of thousands of dollars over the life of the loan.

A credit history is not "necessary" per se, but it can be a very beneficial tool and save you very significant amounts of money.

[parafly]

Smart, well run business can be successful without loans. I am lucky to work for a growing company that has never used debt to grow the business, and has been debt free since day one.

Very few small businesses can start up without getting a loan. That's just a fact, and pointing out the exception doesn't make it the rule.

Having a good credit history is beneficial in many ways. I'm not really sure how you can argue otherwise.

[Inkstain82]

That was exactly my point. I agree that credit cards use predatory practices to maximize profits, but that doesn't make the victims faultless.

But it's sort of irrelevant to the larger issue.

As a society, we can't force people to be rational. It's simply not human nature.

But we can regulate business practices.