You get stacks of them in your mailbox every week. Those credit card offers promising 0% interest on balance transfers and even new purchases until some date far out in the future (usually six months to a year). You wonder if this might be a way to not only pare down some of the interest you may be paying on your other cards, but to start getting out of debt altogether; maybe. There are many things to consider and most of them revolve around you.
What happens very often in the real world when consumers take some credit card company up on these kind of offers is that they do indeed manage to realize an interest savings at first, but when push comes to shove and they’ve got more month at the end of the money again. It’s very tempting to just go and charge up the old credit line once again, and before you know it, they’re back in the same situation again.
‘Well’, you say, ‘why didn’t they just cut up or close those old accounts when they took out the new credit line?’ Well, that may have worked for their spending, but it would have also given their credit score a ding, as seasoned accounts count for more than new ones.
This puts the ball back in the consumer’s court: will they be responsible enough to go the route of keeping credit lines alive while reducing their interest, or is the temptation too great? This is a decision each has to make for themselves.
Many students are faced with the opportunity to acquire credit cards that are hawked to them on campus, and sometime this can cause major financial problems for not only the student borrower, but perhaps their parents as well.
Typically credit card companies will push their cards on students who already have limited means with which to pay debts. Before the student knows it, they have charged up a boatload of non-deductible debt that may be in addition to any school loans they are carrying, and can pose quite a burden. Not only that, but sometimes parents have to come to the rescue, usually when the situation is already spiraled out of control, and put out even more money for the child’s "education" than they had envisioned!
Some colleges and universities are trying to take measures to limit the student exposure to this kind of predatory practice, such as by limiting access for credit card companies, instituting waiting periods, like the University of California does, so that a student can’t sign up on the spot, and by offering money management classes to their students.
Some think that college would be a good place to learn how to handle credit wisely. I’m not sure I agree with that, as the typical student has plenty to be concerned with. To see how universities in the state of Texas are dealing with this problem look at this article by Holly Hacker in the Dallas Morning News.
[widget:ad_unit-1221255277]If things have come to the point where you need to start doing something, hopefully before you start to receive threatening calls from the credit card companies or when you just see a crisis looming on the horizon, you may want to get a plan for negotiating a plan with your creditors. You may only need to lower your rates to get a handle on things, and the good news is that that is very possible.
Roughly twenty percent of credit card borrowers have negotiated at least some terms with their credit card issuers, usually the interest rates and annual fees. These are the ones you may be able to get something done on. Don’t expect too much mercy on late fees and raising your credit limits if you’re already having a problem. Annual fees are probably the easiest to get rid of, as there are many issuers that don’t charge them at all anyway. The customer service representative you talk to on the phone may have some latitude to help you with rates, but then again you may have to work your way up the ladder. Each company’s credit criteria is a little different, and there are usually no rules set in stone; each case is handled individually.
While most issuers don’t want to talk about debt negotiation, they’d really rather do some of that than have you default on the debt, which is why many now have hardship programs in place, which reduce interest and payments for a few months while you get caught up on your bills. You don’t hear much about these programs, but with a little perseverance you can ferret them out. They’ll also appreciate the fact that you came to them first, if in fact that’s what’s happening here. The collection process is costly to them, whether it be simply having to have someone call or actually engaging a collections agency down the line, so they want to avoid this at all costs.
When you call your lenders be sure and explain your situation clearly; how this came to be, how long you anticipate this problem will last, what if any financial promise you see in the near future. In other words try and paint a clear picture before you ask for what you want. When you do ask, explain what you can afford to do at this time, and ask how they can help you.
Be sure and document all your conversations with any of your lenders, as this will be helpful should anything go legal on you.
If you can’t get the lenders to agree to a reduced payment, a change in terms or anything other concession, then it may be wise to consult a credit counselor. Don’t threaten this or give them any reason to do anything adverse to your credit rating. Be polite, but firm in your desire to work this out for all concerned and you’ll eventually come out the other side!
I came across an article from CBS News called “Time To Abolish Debt Slavery”
In the old days, banks lent money to people they were confident would pay them back. No more. These days, banks search for people who cannot pay them back and lend them money anyhow.
These unsecured loans come in the form of credit cards. And the banks cannot find enough young people, students, sick people and old people on small fixed incomes to give credit cards to.
Read the rest of the article here
So is this a matter of evil credit card companies taking advantage of unsuspecting people or are the “victims” to blame for not reading the fine print? If you read through the comments on that article, you’ll see both sides of the coin.
Personally, I don’t think “stupidity laws” are necessarily the answer. That is, laws enacted to protect people who do stupid things (motorcycle helmet laws are a good example).
I think people need to be sure to read all the fine print and make sure they know what they’re getting into before signing on the dotted line.
On the other hand, the credit card companies should be held accountable for anything that isn’t fully disclosed to people when they sign up. There should be laws requiring those disclosures to be made clearly, not hidden in 10 pages of 8 point legal fineprint.
If nothing else, the story is a good example of why you need to be sure you read all the terms before signing up for a credit card.
