Credit Cards for No Credit - The American
Horror Story
Credit Cards for No Credit - Beware!
It is the modern American horror story, but one now being seen increasingly throughout the world, it's the use of credit cards for no credit, i.e. if you effectively have no credit but manage to get another credit card to tide you over.
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 you trying to get credit cards for no credit available. This can 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...
The spectre of credit cards for no credit starts to appear. 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.
The apparently easy option of "credit cards for no credit" is now becoming less and less attractive...
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...
"Credit cards for no credit" has now turned into an unstoppable monster careering through your life and sytematically destroying every aspect of your life. 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...credit cards for no credit equals 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.
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 you trying to get credit cards for no credit available. This can 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...
The spectre of credit cards for no credit starts to appear. 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.
The apparently easy option of "credit cards for no credit" is now becoming less and less attractive...
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...
"Credit cards for no credit" has now turned into an unstoppable monster careering through your life and sytematically destroying every aspect of your life. 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...credit cards for no credit equals 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.
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