Credit Card Abuse - The American Horror Story!
It is the modern American horror story, but one now being seen
increasingly throughout the world...
A successful middle class consumer, with a good income and excellent
credit history, enters middle age knowing that it is time to start
saving for retirement. Then something unexpected happens. It may be
good news, such as the birth of a new baby, or it may be bad - an
illness, a family emergency, a divorce...
None of these events by themselves, are usually enough to destroy
anyone's financial future. But, they can trigger credit card abuse and
eventually lead to significant financial hardship. What may have been a
problem for only a few people who couldn't "handle" credit in the past
has become an increasing problem for many people.
It has become quite common for the middle-aged, middle class consumer
to have many bank and store charge cards at any given time. And most,
if not all, are carrying large balances. In 2005, the average consumer
had nearly $10,000 in credit card debt, or even double or triple that
if loans for cars and other large expense items are included. Worse
still, in 2005, the credit "rules" were changed...
First, many credit companies have now doubled the minimum monthly
payment to four percent. In itself, this is not a real problem for most
consumers. Most cardholders probably pay this anyway.
Second, with no usury laws to stop them - and despite inflation rates
from 1-to-3 percent - credit companies have pushed interest rates for
"problem" cardholders to 30 percent or more.
Third, if there is a problem with any creditor, such as a late payment,
other creditors have the option to cut their card's credit limit (often
to the current balance), double or triple the interest rate and cancel
any "special offers".
The "Six months no interest" or "Zero interest on all balance transfers
for one year" are attractive offers. But the slightest infraction
involving even one creditor and the next bill may include full interest
charges - from the start of the offer.
It only takes one creditor to turn someone with a decade of good credit
into a "problem" customer. A bill one day past due may cause an account
to go up in interest, down in limit or both. And this can spur other
credit card companies to follow suit meaning that in a short time all
your credit cards could be charging a high rate of interest, over-limit
fees and even late charges when your bank account is hit by the high
rate of interest.
Now a double minimum payment becomes a serious problem, as that
original $10,000 total debt begins growing by $250 a month in interest,
plus up to $500 in accumulated over limit fees and another $500 in
possible late fees!! You can begin to see the problem...
And what about bankruptcy to solve the problem? Not any more. As of 15
October 2005, it became virtually impossible for an American consumer
to declare personal bankruptcy. At least, not without a lot more cost,
a lot more time - and the certainty of losing everything, including
home and car.
The moral of this story is this. Take another look at those colorful
bits of plastic in your wallet, the ones offering those great promises
of "easy payments" and a better lifestyle. See them now for what they
really are...Viral monsters, ready, willing and able to destroy the
cardholder's life in the blink of an eye.
Next time, think about handing the sales clerk some colorful cash
instead.