I found this article interesting. Those of you who insist on using credit cards, may want to reconsider that after you have read this guys story. Especially those of you, who use the arguement that you pay your balance off in full every month. If everyone, that says they paid the bill in full actually did, then the credit cards companies would be bankrupt. However, there is a more pressing reasoning to cut up those credit cards. This time I am not releying on Dave Ramsey to prove my point, instead I am looking to an article in the USA Today (Dec. 15, 2006).
René Rodríguez of Juana Diaz, Puerto Rico, paid late on his August credit card bill for the first time in years. A simple oversight: He misplaced his bill.
But the fees Rodríguez was hit with were hardly simple. First, Citibank charged a $39 late fee. And even though he paid his full balance, the bank dropped his interest-free grace period. Then it began charging interest, compounding daily, at a 24% annual rate. All told, it cost him nearly $100. The policy "is perplexing," Rodríguez says. "It's probably somewhere in the contract, and whether it's fair or not, once the company puts it there, you're stuck."
Remember when most of us paid only an annual fee on credit cards? Today, late fees and over-the-limit fees are replacing that annual fee. Add in a dizzying array of extra charges: for phone payments, "expedited" online payments, credit card use overseas and balance transfers from other cards.
At a time when Americans wield more plastic than ever — 692 million credit cards, with $711 billion of debt — fees and policies have grown so complex that even regulators struggle to grasp them.
That's right folks, miss that payment due date once, and your grace period no longer exists.
Lots of card issuers offer low initial interest rates these days. But once they've pulled you in, they often replace "fixed" rates with floating rates — which can rise — and impose penalty rates of up to 30% even on those with good credit.
"It's like economic Darwinism," says Chi Chi Wu of the National Consumer Law Center, an advocacy group. "The business model has changed from one rate and annual fee to all these different tiers and fees designed to make money."
As I have stated repeatedly, you cannot beat the credit card companies. Eventually, you will miss a payment for some reason, probably by accident and they will sock it to you. It's not a game that I am willing to play. Pay cash for everything, and you will come out ahead of anyone that pays with credit. Ths article is a perfect illustration of that point.
As for those 0% and low intrest credit card offers, the article is clear in repeating what I have said in past posts. Those offers are to lure you in and then they snare you, like a wild animal in a hunters trap. Or, to use John Cummuta's annalogy, like a drug dealer, giving a new adict his first taste of cocaine. Once you have tried the drug, it becomes hard to refuse it. That's why Cummuta refers to credit cards as "Consumer Cocaine."
Just because some people screw up with credit cards doesn't mean everyone does. Some people can beat the credit card companies, but most can't. You can't prescribe advice and say it applies to everyone. Some people are successful playing against the credit cards. Other people are not. Those who are not subsidize those who are, so the credi card companies will never go brankrupt.
ReplyDeleteThere are, and there always will be, enough people who pay late fees, interest fees, etc., to more than make up for those who can beat the system.
You can go on saying "don't use credit cards ever" and that advice may be good for most people... but you have to accept the fact that not everyone falls for credit card companies' tricks. The credit cards are still making their money from the retailers with a percentage of every transaction, so they don't care if there are a small percentage of people who never pay interest fees or late fees. They'd care if everyone was smart, but like any business, they know most of their customers are not smart.
thanks Flexo, if you listen to credit card users, almost everyone of them claims to pay the balance in full every month, as I said if that was so the c c companies would be bankrupt.
ReplyDeleteAlmost every credit card user claims to pay their balance in full, on time? Do you have support for this? I do listen to credit card users, and nowhere near "almost all" claim to pay in full every month. Either you found yourself a bunch of liars, a non-representative sample, or a biased study (you don't reveal your source). Ask any credit card company whether most of their customers pay fees of some sort, and their answer will be "yes."
ReplyDeleteYour issue seems to be whether the people who say they pay in full are telling the truth or not... which is irrelevant.
The only relevant item is what percentage *actually* pay in full, on time, regardless of what they claim to do.
I agree that credit card comapnies are growing more and more predatory in both their offering credit and the various fees assessed. For the few that do pay on time, in full every month, any fees assessed to other people are irrelevant. The fact that most credit card customers have to pay fees and interest allow credit card companies to keep customers who pay in full, on time, every time.
Amen.....credit cards are "the man". It is best to avoid doing business with them.
ReplyDeleteThe 0% interest rates and reward programs are designed to lure you in to their trap.
I am just glad I don't use credit anymore. Whether they are good or bad.
ReplyDeleteKeep up the good work. It is working for you! That's the most important thing.
as a business owner, kevin, i have to learn to resist temptation eventually. i can't go raiding my budget right and left. are you saying nobody should own a business? as a business owner, i am faced with temptations, and i rarely break my budget. i have kept a strict budget for 4 years and having $74,000 in 0% credit invested at 5% is simply not that tempting to me. cuz i know i have to pay every penny back. i've also been offered cocaine and i turned that temptation down, too. my girlfriend needs to establish credit so she can purchase housing after two years of employment. as an immigrant, it is hard for her to establish creditworthyness! you would rather she rents forever! your position is not fiscally... complete. yeah, going into debt sucks. but it can also be a sound decision. you don't like to talk about cases where it's financially sound. you want your readers to think it's always a deal with the devil. it's nice to see a lot more people responding to your one answer.
ReplyDeletecome to think of it, i don't even carry a credit card. i carry a debit card. i manage the credit lines very precisely and continue earning a small income. this is probably the funniest part of this "debate". i know i asked before what you think i should do with this money. well?
Fo course, banks need to make money so they make money on those people who can not pay off their balance. But if you are smart enough you can make a credit card work for your benefit. If it were not possible people wouldn't use credit cards. I agree, it's a game, but in the game there is always a winner. A credit-card owner can win too.
ReplyDelete