Money Crashers » Credit Cards

How Stupid Could Credit Card Companies Be?

Erik Folgate — Tue, 21 Jul 2009 03:35:33 +0000

I don’t know what it is with credit card companies, but they do some awfully dumb things. Credit card issuers have automated the entire process of extending a line of credit. Even with the massive credit crunch this country has experienced, banks are still issuing credit cards to anyone, and when I say anyone, I mean ANYONE.

A Mother was shocked when she experimented with her 6 year old boy applying for a credit card. He filled out the entire application himself and filled out the application truthfully. He filled in $0 for his income, “other” for his residential status rather than owner/renter, and signed his name that looked exactly like a 6 year old’s handwriting. Come to find out a few weeks later, he was issued a $600 credit limit from the Bank of America. How did this happen? This happened, because Bank of America only screens about 3 or 4 out of 10 applications. The ones that aren’t looked at are automatically issued a credit card.

Think you spend a lot of money eating out? Think again. A guy from North Texas received his credit card bill and saw that the balance due was $23,148,855,308,184,500.00. No, I didn’t write that wrong. The credit card charged him 23 quadrillion dollars for his meal at Five Sixty, a fine dining restaurant owned by Wolfgang Puck. Now that’s a programming error. The error was properly corrected, of course. But that bill would ruin anyone’s day!

I am sure I could come up with hundreds of more of these stories, but we all know that credit card companies simply don’t care who they extend credit to. Not only do I think credit cards are dumb financial “tools”, this kind of stuff just makes me laugh at them. The very people that beg and plead to the federal government that they are being hit hard by the economy and they need a bailout, are the same ones that extend credit to kids, dogs, and dead people. It’s crazy. When will these credit card companies start taking their lending practices seriously? Credit cards have become a joke.
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How Stupid Could Credit Card Companies Be? is a post from: Money Crashers

Credit Card Regulations Bill Passed By Congress

Erik Folgate — Wed, 20 May 2009 19:47:09 +0000

The bill to regulate certain credit card policies has now passed through the Congress. Why is Congress regulating credit card companies? Because, they recongize the abusive consumer practices that credit cards perform each and every day, yet we still continue to use them. Here is an excerpt from the article from Fox News:

Meanwhile, the credit card portion is aimed at addressing consumer concerns.

The new restrictions would protect debt-ridden consumers from many of the surprise charges common in the industry, like over-the-limit fees and a charge to pay the bill by phone.

Some of the changes, including a requirement that cardholders receive 45-days’ notice before their rates are raised, are already on track to take effect in July 2010 under new regulations by the Federal Reserve.

But the legislation would put these changes into law and go further in restricting when and how banks charge people and who could get a card.

For example, the bill would require people under 21 to prove first that they can repay the money or that a parent or guardian is willing to pay off their debt if they default.

As banks scramble to make up for the lost revenue, cardholders who pay off their balance in full each month could also see annual fees become the norm and lucrative rewards programs canceled.

On the plus side for consumers, card holders who see their interest rate skyrocket because they have been late on a payment would get a chance at their older, lower rate if they pay their bill on time each month for six months.

Source: Fox News

I am about to sound like a complete pessimist, but that’s because I hate banks. These new regulations sound nice for the consumer, but banks will find a way to replace the revenue they will lose from the reduced interest rates. Going forward, it will be extremely tough to find a credit card without an annual fee and with perks such as reward points and cash back bonsuses. Basically, the government is going to make a bad financial product into a horrible financial product, because now you won’t even be able to get a gift card to chili’s or an extra $100 a year from paying all of your bills a credit card and pay it off immediately.

What are your thoughts on these new regulations? Will it improve credit cards or make them worse?

Your Credit Card Statement Will Look Different Soon

Erik Folgate — Wed, 14 Jan 2009 15:34:41 +0000

Over the past few years with the credit crisis, our government has finally started to realize that credit card companies will do anything and everything to hide their unscrupulous practices, terms, and conditions. As part of a credit card regulation reform, credit card companies will be required to change the look of their credit card statements and terms & conditions.

Here are some things that will change on your statement:

Late payment warning box
Minimum payment warning box.
Separate area detailing changes to your account terms and conditions
Details about transactions, fees, and interest charges will be separated into different boxes so you can clearly understand how much money was charged for fees and interest charges.
A separate area that calculates the monthly interest charge and APR.

You can get more detailed from this article from creditcards.com All credit card issuers will be forced to comply by July 1st, 2009, but many are starting to roll out the new statements now.

This will be a good thing, and hopefully it will wake people up to the fact that credit cards are not a financial tool to help you. They only hurt you in the long run, because over 80% of Americans misuse credit cards. Less than 15% of the population pay off their credit cards every month. These new regulations about credit card statements will help people see how much money they are throwing away on credit card fees and interest rates.

How To Handle A Credit Card Debt in Collections

Erik Folgate — Thu, 30 Oct 2008 17:44:25 +0000

A Money Crasher’s reader recently sent me a message about a credit card balance in collections. I thought that you all would benefit from his/her question and how I answered it.

Question:

I have a credit card debt of a little of 8,000. It went to collection, and I just don’t have the money to pay it off. I thought I would be able to use my student loan to pay it off, but it didn’t come through. Do you think it would be possible for me to set up a payment plan with the collection agency, and if so, how should I go about it? I know that I won’t be able to pay a lot at first because I just don’t have the money while in school, but once I get done (may 09), I’ll be able to pay it off a lot quicker.

My answer:

Thanks for being a reader! I answer questions based on what I would do, so here it goes:

I would not negotiate a payment plan with the credit card company for three reasons. They never stick to their promises, they most likely won’t agree to put a payment plan in writing, and they’ll try to persuade you to give them electronic access to your bank account. NEVER give a credit card company access to your checking account. They will wipe out your account, and then you can’t eat.

Instead, get on a written budget and set up your OWN payment plan. Make sure you have enough money to pay for essentials like food, shelter, utilities, gas, etc. Then, with whatever money you have left over, send that to the credit card company each month until you start making more money to pay it off. The company will deposit every check you send them no matter what the collector tells you.

I hope this helps, take care!