Know Your Consumer Rights When it Comes to Credit Cards
Some 3 billion pieces of mail are sent to U.S. consumers each year from credit card companies, according to 2015 statistics highlighted in Business Insider. That’s a lot of marketing to wade through. And, as you know, it’s simply not enough to pay your balance in full and on time. Credit card companies are looking for ways to penalize you for paying your balance off. They can cancel a card if you are not using it, which can hurt your credit score. Did you know they can raise your APR on one card simply because they found out you were late on a payment to another? Did you also know that the fine print on contracts states they can increase your APR at any time they want, for any reason?
Fighting back doesn’t take one borrowed dollar. Here are ten ways to turn the tables on credit card companies.
Understand when and where the credit card debt cycle begins
Credit card companies start recruiting before skepticism or experience develops; college students being a prime target. With education costs and student loans at an all-time high, youth are the perfect profile of a needy, unsuspecting victim. In fact, a large number of college students have reported they didn’t even know the credit being offered to them wasn’t free of charge.
According to a 2016 survey by credit scoring agency Experian on college students and credit found millennials felt “let down” by the preparation they had received so far to manage their credit life responsibly and confidently. Here’s more:
- 40 percent rated their current financial security as poor or fair
- 53 percent feel that being debt-free is an attainable goal in today’s economy
Pay off your credit cards
The best thing you can do for yourself and your debt is to pay it off and never tango with credit card companies again. There is just no substitute or excuse for taking up the financial reins of your own life. This will give you the greatest power, as well as let you help others later who have fallen into the trap.
Send back any credit card offers or additional debt-inducing advertisements
You know all those little ads that are mailed with your bill? Stuff them in your bill’s return envelope to send them back. Let the credit card companies be responsible for their own paper waste and noise. Get calls on the phone from credit card companies? I like to put them on hold and leave them there for an indefinite amount of time.
Destroy all your credit cards — emergencies call for cash, not plastic
Credit cards are not a necessary part of life. Although credit cards — when used wisely — can render a user cash-back and other reward benefits, you don’t need to have a credit card in case of an emergency. You need to have $1,000 cash in a high-interest online savings account like ING Direct that issues debit cards so you can have the money in a snap.
If you choose to keep a credit card, don’t be a debt recidivist
Make it a goal to always keep your credit utilization under 30% — this will help your credit score. Better still for life in general, avoid carrying any credit card debt month-to-month. Unless you are charging more than you can afford or are paying off a big-ticket item, there’s not really a reason to. And if you are using credit to finance larger purchases, be very aware of when any zero percent APR window ends. Even if you only have a small balance left, the fine print allows the credit card companies to charge you interest on the full balance and from the day you made the purchase.
Stop the credit card companies from contacting you
If you go to the National Do-Not-Call Registry, you can register so you won’t get credit card offer calls. To stop your mailbox from being filled up with offers, contact OptOutPrescreen.com.
File a complaint against the credit card companies
Consumer Reports advises consumers to register a complaint with your state attorney general. (Contact information is available at The National Association of Attorneys General.) Also lodge a complaint with the Office of the Comptroller of the Currency, which you can reach by phone at 800-613-6743. If the OCC doesn’t regulate the card issuer, it will help you find the agency that does.
Realize revolving balances support credit card corporations and their causes
From 1990 to 2004, almost $8 million from credit card companies was contributed to both political parties. Aside from achieving personal relief and control over your financial life, another value-based and entirely beneficial reason to pay off your credit cards is to stop giving funding to organizations who will not use your money to lobby for laws on your behalf. In a sense, when you use credit cards, think of yourself as inadvertently giving money to a cause you might (or more likely might not) support.
Remember, penalty and non-penalty fees (late fees, interest rates) have made up a whopping one-third of total revenue for credit card companies.
Support credit card regulations
While there is still no federal law that caps credit card interest rates, the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 helped to tip the balance more in favor of the consumer. Changes include a 45-day notice before changing your interest rate and greater disclosure about how long it will take you to pay off a balance if you only make the minimum payments.
Vote in the next election
I’ll give you the same simple speech my father used to give me when I was younger and disconnected to the process: “Voting is not a choice; it is your civic duty.” If you dislike laws and regulations, get involved in the political process.
Author Katrina Ramser is a freelance writer who contributes to various websites, newspapers and magazines.
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There are 56 comments to "Know Your Consumer Rights When it Comes to Credit Cards".
While I am definitely a fan of being very careful with credit cards and NOT using them until your financial life is in order (if indeed, you are like most of us and have had debt issues that you have worked on in the past or are still working on now), this article was a little extreme in my view; credit cards are not evil- the companies just are out to make as big a buck as they can, and a lot of people are just too lazy to prevent it.
How about a tip that SHOULD have been number one? “Read the fine print. ALL OF IT.”
If you simply take the time to carefully read and UNDERSTAND the fine print and then use the card responsibly, it will help you avoid 99% of the pitfalls that consumers fall into. A credit card is a tool, and a very important one. The fact that the credit card industry is almost completely unregulated means that the rules are not uniform; however they do have to list them somewhere- so READ THE FINE PRINT!. I just switched out one of my credit cards (old one had a fee, and the new one doesn’t), and while the new one (Chase Freedom) has a fantastic reward system, especially since I pay it off every month, the system is also somewhat complex, and in the fine print it makes an EXTREMELY important distinction about how to redeem the rewards. Sneaky? Sure, but very clear since I took the time to read about what I was going to use. Thus, no problem for me.
I agree. We don’t need more ‘regulation’, people just need to read the fine print.
Credit card companies are loaning you money. They set the terms of repayment. If you don’t like those terms, don’t borrow the money.
Pretty simple, really.
Credit card companies aren’t evil.
I had a friend that would take the postage paid envelopes that came in the offers, tape them with clear packing tape to a stack of phone books, and mail them back … just for spite! Those little “reply cards” are weighed before the company can receive their mail and would cost the company dearly. He worked at a large office building and had an almost limitless supply of phone books.
I agree with Paul and Thomas–we don’t need more regulation, and despite a veiled attempt to come across as nonpartisan, this writer’s agenda is obvious.
Where is the personal responsibility? Why do we always look to the government when we get ourselves into a mess, instead of doing the right thing from the start? Hmm…sounds just like the financial bailout situation we’re in right now. My husband and I paid off over $14000 of credit card debt this year, and I never thought that the big, bad credit card companies were to blame. We got ourselves into it, we knew the terms, and it was up to US to get ourselves out and never get in that position again.
My credit card company has waived fees (even when I was the one at fault). Last month my husband’s card was lost and fradulent charges were run on it. If we had been using our debit card, we’d be out $1100. Since it was a credit card, they caught the charges before we even knew the card was gone, froze the account, and called me. I filled out a form and the charges were removed.
Credit card companies are a business and they’re out to make money. Pretty basic, people. Know the terms and be responsible, and they can be very beneficial. If you can’t do that, you have no business owning one.
One additional thing about voting is that you should become an informed voter first. Just blindly casting a vote is not any better than playing a game of pin the tail on the donkey.
I love the idea of mailing phone books back to the CC companies!! That is too funny. Years ago, I started stuffing those offers into the postage paid envelopes, along with whatever paper flotsam that I could conveniently lay my hands on (usually those annoying cards from magazines, or sales circulars from the newspaper)and mailing them back, but I never thought of shipping phone books back to the companies. 🙂
I especially like #10 on this list. I’ve always felt that if you don’t vote, you have no right to gripe about things you don’t like and no right to brag about things you do like. Have got into more than a few spats with friends and acquaintances who’ve said they don’t vote and then want to complain about how things are done. Since 2000, I’m still not convinced that my presidential election vote matters in the slightest, but I vote anyway.
I’m also a little disappointed in the political linking. There are other parties in the US than the Democratic and Republican! The Constitutional, Green, and Libertarian parties all have large followings. And with the Democrats and Republicans actually effecting very similar political and fiscal policies despite all the rigmarole, and votes often described as being for the less detractive of the two major candidates, Americans need to know that they have a choice.
Either give fair linking to all, or link none of them…
Justin–nah, the writer just wants us to look at two links and then pick the candidate “who has an agenda for reform credit cards.”
Never mind those of us who aren’t for big government, or who aren’t Democrat or Republican.
Folks, I’ve removed the paragraph with political linking at the end. I think Katrina’s point is made without it. You all know how to get involved.
Two other points:
1. Yes, reading the fine print is important and should definitely be on the list.
2. I don’t know how I feel about additional regulation. Credit card companies may not be evil, but they do some sneaky stuff sometimes, and their ultimate goal is to get people hooked on credit. Obviously individual responsibility is key…
American credit card debt: $800 billion.
That is larger then the bailout package. American needs a complete culture change to turn away from credit.
Another caution: we pay our CC balance in full and on time every month and never carry a balance. I noticed that they were still charging us interest. I realized that it was because their billing cycle is slightly longer than 30 days, I’m sure on purpose, so they can charge interest for a few days on the balance even if you do pay the entire bill. We started paying twice a month and now never get charged interest.
I personally like using a CC because it’s an easy way to track spending and I’ve actually gotten back cash back and gift card rewards greater than I’ve paid in penalties and interest. You just have to be disciplined about it and actually look at your bill.
@JD
“Their ultimate goal is to get people hooked on credit”
No, their goal is to meet a need of the consumer for credit and charge whatever the market will bare. That is the beauty and evil of capitalism, can’t have one without the other.
Further, that type of rhetoric fosters a victim’s mentality, which does not help anyone. Your website empowers people to change their habits and a victim’s mentality goes against what I think you want to stand for. Like others have said, they are a business and they only exist because there IS consumer demand.
-ThatGuy
#4 — I keep my cash in a money market account. Money market accounts as far as I know can’t have debit cards tied to them, at least mine don’t. Having a credit card gives me instant access to $5000 (my credit limit) in emergency funds while keeping my cash in a higher interest bearing account.
I also enough cash on hand to get past any total emergencies where there’s no electricity or whatever.
#9 — Caveat Emptor and all that, but regulation can also be helpful. Regulations in the meat packing industry made buying meat a safer proposition (http://en.wikipedia.org/wiki/The_Jungle).
With good regulations people would be able to make certain assumptions about their CC agreement.
@ThatGuy
I can see your point, but I disagree regarding motive. Yes, capitalism has its bright spots and it has warts. Yes, credit cards meet a need for many people. Yes, one of the primary aims of GRS is to empower readers. No, I don’t think anyone likes a victim mentality.
However, I continue to believe that credit cards do structure their business in such a way as to “hook” consumers, and to make as much money as possible, often in ways that border on slimy. (Or which are overtly slimy.) See my past post on the secret history of the credit card.
Nearly everyone decries the payday loan industry in the U.S., and for good reason. But what’s the difference between payday lenders and a credit card company? Just a matter of degrees. (To be fair, the difference between a credit card company and a bank is also just a matter of degrees. It’s a sort of continuum.)
Ultimately, however, I think that you and I can both agree that the most important factor is an informed consumer. If we, as credit card users, take the time to read the fine print and to know our rights and to use credit responsibly, then we can hold our own. But oftentimes credit card policies make this difficult.
My favorite example of this is how after I finally obtained a new credit card about eighteen months ago, I read all of the fine print, and did my best to understand it. I even called the credit card company to clarify some points.
I used the card for a month. I paid off my first bill in full. But when I got my second statement, I had a finance charge. I was baffled. I called to ask the reason. (I’ve forgotten what it was now, though. Two-cycle billing? Cash advance?) This was my first introduction to the fact that a consumer could do “all the right things”, and still end up on the short end of the stick.
Look: I’m pretty middle-of-the-road about all this. I recognize that credit card companies are in business to make a profit. I recognize that consumers need to take responsibility for their choices. But I also believe credit card companies do their best to rig things against users, to create traps for the unsuspecting, the ignorant, and the weak.
What’s the solution? I don’t know. Unlike some people, I don’t believe all government regulation is bad. (But I certainly don’t think it’s all good, either.) I guess, as you say, ultimately it all comes down to taking charge of your own life!
Definitely second the calling companies to ask them to dismiss fees–I’m a pay off your balance every month kind of person, but there have been two times in about ten years that I missed my payment by one or two days. Called them up as soon as I realized my error and they removed the late charges, in part because of my good record (?), maybe because I asked nicely. Never hurts to ask. It’s not even the $30-40 dollar fee, which is outrageous, it’s maintaining that good credit record.
I am concerned about point #8. I pay on time and in full every month, so I avoid late fees and interest. But since the credit card company gets a small percentage of every transaction, I am worried that I am
1) Taking money away from local businesses
2) Causing higher prices for myself so that local businesses can recoup that percentage the CC companies get
3) Putting money into the hands of big businesses with their own agendas (as the original poster mentioned)
I used to work for a credit card processor and can say that without a doubt they work hard to make credit cards more attractive. However, as many have pointed out, there is an element of personal responsibility required for their use. If you know “financial crack” is bad for you, don’t try it–you just might get hooked.
Know what’s interesting…if I get near my limit on a card, they raise my available credit. I just didn’t pay attention at first, and next thing you know they’d raised it $2000 without asking me if I wanted it raised. Eeks, I don’t want access to as much credit as they kept giving me. Calling them and telling them to cap your credit limit will stop this process. Remember, even if you aren’t using the credit, it still shows as open to you.
Solid tips, especially #10, the registration deadline is coming up soon so everyone should register to vote!
@JD,
Two-Cycle Billing. For those readers that like tedious examples they can look here http://allfinancialmatters.com/2006/12/12/how-two-cycle-billing-works/.
I heard of this before, but I never looked into it due never being dinged. Seems like it is impossible to NOT pay finance charges with a two billing card.
I will say that I am slowly going insane with the amount of CC offer I get. I average over 5 a WEEK.
Too conservative to use the opt-out website though.
P.S. Was it a discover card? So I know what to avoid in the future.
-ThatGuy
This article is, frankly, idiotic.
No. 1: The writer uses “average” numbers of debt, when the median debt is far lower. Most credit-card users carry no balance. Most that do carry debt have less than $2,000. Only about 1 in 20 credit-card users carries balances of more than $8,000. This is the 20/80 rule in spade here.
No. 2: “The best thing you can do for yourself and your debt is to pay it off and never tango with credit card companies again.” Nooo. Maybe, that’s the best thing *she* can do because she has determined that easy credit is just too tempting. That’s perfectly fine. Knowing one’s weaknesses is the beginning of prudence. But to make such a blanket statement is nonsense.
No. 3: Why should I waste my valuable time sending things back? No one likes junk mail, but the vast majority of people will never waste their time sending it back so why should I bother?
No. 4: I agree that it is best to save cash for emergencies and that credit cards are not “needed,” but it is not always possible to do so. Remember that without credit cards, many people going through a job loss or illness routinely had their possessions repossessed or had to pawn them off. Is that really a superior alternative to carrying a balance for a few months?
Nos. 5 & 6: Agreed.
No. 7: Complain about what? The author presumes most (all?) credit-card users should have something to complain about.
No. 8: This is the “I won’t order from Domino’s because they’re CEO opposes abortion rights” school of consumer decision-making. Hey, if you really can’t sleep at night because Bank of America is using a portion of the money they make off of you to lobby for things you disagree with politically, then I guess this is OK. But the reality is that you as an individual user will have zero impact on their lobbying one way or the other. If you are individually passing up a potentially useful financial tool, who is really bearing the brunt of the costs?
No. 9: Increased regulation will raise interest rates, reduce cash-back programs and weaken access to credit among riskier borrowers. Each of the regulations mentioned will have a predictable consequence for different credit-card users. Capping interest rates will mean less access to credit among risky borrowers — again, is that better than their having to pawn shops and garage sales to smooth income disruptions? Perhaps, but why not let individuals decide? Limiting fees will *not* mean that credit-card companies will just decide to go without the income they’ve lost; they’ll try to recoup it on other ways — probably higher interest rates. This is just a matter of squeezing one end of the balloon.
Requiring a cosigner for applicants without a regular income is a terrible, terrible idea. Cosigning a loan is one of the riskiest things a person can do — and you want to have *more* people acting as cosigners? While lots of parents are implicitly on the hook for their crazy-spending college kids and often come to the rescue (which is what creditors bet on), many choose to let their kids pay for their own mistakes. At least the parents or other cosigners don’t bear the costs of the borrowers’ irresponsibility.
Requiring greater disclosure about the ineffectiveness of making minimum payments doesn’t seem too problematic, though anyone who’s ever looked at their credit-card statement a month after making the minimum payment ought to realize how small a dent they’ve made in the balance. I doubt it would have much effect.
No. 10: Voting is a right, not a duty. Indeed, given how little most voters know about public policy it’s arguable *too* many people vote. Individually, there is little tangible reason to vote as there is little more than an infinitesimal chance that your one vote will actually decide the outcome of any election, with the odds going from “incredibly unlikely” at the local level to “almost impossible” for congressional races to “not possible” in the presidential campaign. As stark as that scenario is, it gets even worse the more people register to vote. The more voters there are, the less impact my individual vote will have.
Perhaps the author should spend less time sending back mailers, talking to telemarketers and voting and more time learning the advantages of leveraging credit to earn cash-back rewards and high interest on cash. I won’t say it’s the “best” thing to do, but it’s one idea.
I just wanted to mention that point number 3 is a bad idea. (In theory it works but in reality not so much)
I used to send back those signup cards in magazines and other free business reply envelopes to make the spammy credit card companies pay for the postage of all their garbage. The problem was that they actually signed me up for some of the magazines without any of my information filled out or my consent. I had to cancel it and explain I never subscribed and that was a pain. Now I still get renewal notices from them.
Basically mailing in an empty form is giving them consent to open a credit card account with your name and address. Sometimes the info is in the bar code from a marketing database too, so you think it is a blank form and it really isn’t.
I’d like to penalize the spammy companies by making them pay too but it just doesn’t work this way.
Actually, number 3 is my favorite. My wife and I started a blog where we send back those envelopes. Sometimes we even put ad-inspired artwork in. The key is to remove the customer locator codes from some of the envelopes and to also NEVER send back any identifying information/forms. We have a lot of fun with it.
The way I see it, I am supporting the economy in these tough times by providing people at the post office and credit card companies with jobs!
On the flip side, we pay off our credit card each month. We only put things on it (our normal monthly budget) because we can get $50 gas cards with our points! That is the main reason for us. Otherwise, it’s just to help us maintain a healthy credit score for when we try to get a mortgage down the road!
http://senderbackers.blogspot.com/
“I recognize that credit card companies are in business to make a profit. I recognize that consumers need to take responsibility for their choices. But I also believe credit card companies do their best to rig things against users, to create traps for the unsuspecting, the ignorant, and the weak.”
Very true. And when you decide to use a credit card, you are choosing to play their game. You can benefit if you are responsible and well-informed (I almost have enough miles for two tickets to Europe), but never think that the credit card company is looking out for your interests. It’s you against them, despite how friendly the rep is on the phone. They might waive a charge, but by no means do I think they are my best friend.
Rather than stepping in to regulate business, I would rather see our government focus on personal finance education in public schools so that we don’t have as many unsuspecting and ignorant citizens. If you tell a high school senior what it means to buy on credit, that senior will be a well-informed college freshman who will be armed against credit card offers that come with a free t-shirt.
@ThatGuy,
That opt-out program really does work. If you’re concerned about using your credit card on a web site, you can also do it by phone (1—888—5OPTOUT).
I did this many years ago & it almost completely stopped the credit card offers (and really cut down on catalogs & other random junk mail too). The only offers I get now are from companies or organizations that I already have some sort of account or membership with, and those are very rare (except for American Airlines frequent flyer program – I haven’t flown in years and I still get a credit card offer from them every couple of months).
I signed up to opt out of pre-approved credit card offers and other junk mail, and now I don’t get ANY mail for 3 or 4 days at a time, it’s really strange. But since I pay all my bills and bank online, and nobody writes letters anymore, that’s what happens.
And I agree with some of the points in this article but as others said, it’s a bit extreme – almost paranoid. Sounds like the author has been burned by credit card companies. I admit I got myself into quite a bit of debt with them in the past but the operative phrase is “I got myself” – not the fault of the CC companies.
This is one time that I think an article on here has been bunk. It came off as very angry and spiteful and really doesn’t seem to address the issue of personal responsibility at all.
Get a grip- Credit Cards are not EVIL-OMG-SATAN. Not knowing how they work and abusing them is. Comes back to personal responsibility- not the man is out to getchya.
April,
I used to think that personal finance education in high schools could be a big part of a real solution. Now I’m not so sure. I went to my little borthers high school graduation. He’s six years younger than me and developmentally disabled so he graduated 8 years after me from a different high school. They have a “scholars” program that about 10% of the kids acheived and this is what it entailed:
3.5 GPA
8 advanced credits (IB or AP)
3 years of a foreign language
1 credit of fine arts
2 co-curriculars (we used to call those extra curriculars)
1 Career Development credit
Career Academy endorsement (these are like majors for high school students)
Meet state endorsements (CIM/CAM)
Complete a senior project
Complete 60 hours of Service learning
Take a full load of classes all four years (how could they not?)
These are among the most over-programmed young people I have ever seen in my life. I would feel overwhelmed completeing half of these requirements. Before I would seriously consider adding more to the what high school seniors are supposed to be taught in schools I would think about these kids and how on earth you would fit more on their plate? Or the kids who don’t complete all of these items but were working really really hard to do so. Also keep in mind that all the units on personal finance in the world will do very little to undo a poor model of personal finance at home.I think many 17 year old kids will hear “remember to be cautious and don’t buy things you can’t afford” and think “well my mom always puts all my school clothes on credit and we’re fine, so what’s wrong with it?”
@PDXGirl–I guess it’s about priorities. Is “career development” more important than learning how to manage your money?
I took every advanced course offered, and I didn’t graduate that long ago, but there were some classes from which I gained nothing. The career development course in my high school was taught by a coach, and we were required to take it to graduate. I got ZILCH out of it. I remember one day he let us make paper airplanes and see whose flew farthest.
It has to start somewhere, and we can’t expect parents who aren’t financially responsible to teach their children. So do we just throw our hands up and say that these kids are unteachable because of bad examples set at home? Of course some will still go on to make bad choices, but at least they’ll have been warned.
Also, I don’t just want them to hear “only buy what you can afford.” A good course would show them how easy it is to rack up debt, how long it takes to pay it off if you only pay minimums, and the true cost of those things they bought on credit. Show them Maxed Out. Make it interesting, but make it very real for them. THAT is what I would have loved to have learned when I was 18.
Following tip #6 should keep you from having to use tip #3, and it is a much more effective and polite way of handling the situation.
I understand that China has had a few little consumer issues lately due to lax or non-existent regulation.
“Read the fine print” is important. It should not excuse dishonest business practices. Anyone who really “reads the fine print” would never have a credit card at all. Are the folks sticking up for credit-card issuers REALLY saying that they’re perfectly fine with a company tripling the interest on a past-due balance for no reason at all?
It seems that the author may have misjudged her audience slightly. I’ve seen similar articles on msn and the like, and for the non-personal-finance-oriented reader who is deep in debt and needs an eye-opener, this might do the trick.
However, for this blog’s readership, the points are sophomoric. I think we all realize that if you can’t manage cash well, then you can’t graduate to managing credit in a disciplined fashion. Colleges don’t admit students without high school degrees or equivalent credentials, but in this situation the credit companies profit off those who have not yet mastered the basics. If there was a system in place where you had to demonstrate a certain level of financial proficiency before obtaining a credit card, it would help the 20% who are drowning. On the other hand, we do have the freedoms accorded us by the Constitution, which leave us responsible for getting ourselves out of any trouble we might land ourselves in. (Except in the case of the bailout, of course.)
Yes, personal responsibility. We all get that. However, there is also social responsibility. Too much consumer debt drives up inflation, which hurts all of us. Prices go up because people are using credit without there being a real dollar behind it. Which is why we have the mortgage mess we have today – home values kept going up and up and up because people were getting more and more credit without a real dollar value to back it up. Maybe we don’t need more regulatory laws, but we do need some sort of oversight. It hurts all of us when ‘make their own rules’ credit markets pushes up inflation to the point where a normal market correction spells disaster for everyone. A couple of people doing this is ‘personally irresponsible’. A large collection of people doing this is ‘socially irresponsible’.
The real bubble is not mortgages, folks. It’s the real value of the dollar since we have so much free flowing credit and no real capital behind it.
I saw that the total national credit card debt was $800 billion, which was close to what is being proposed to bail out failing banks. I said that instead of bailing out greedy banks we could use that money to erase every single American’s credit card debt. This lead to a conversation with some coworkers and the realization that even knowing what people know now (learned it the hard way), the overwhelming majority of people with credit card debt would just go right back into the debt cycle.
This is not an education problem in the slightest. This is a personality and discipline problem.
Credit cards are just as evil (or not) as mortgages. I’ve been pondering on which is causing more havoc with our economy, easy credit with credit cards or easy credit with mortgages…either way banks have been pushing debt onto consumers who have no self control and who need to be more responsible. I thought this article was excellent…probably because this issue has been weighing on my mind.
Somebody earlier in the comments said that if their debit card had been used fraudently like their credit card was, they would have been out over $1000. That is not true. Debit cards by law carry the identical fraud protection that credit cards carry.
I see both sides of this issue. Anything that promotes the “Gosh, I was taken for granted by the big bad institution” is a victim mindset in disguise.
Our culture has lost sight of delayed gratification and personal accountability. We want it now and we don’t care if it costs us a lot more to get it now. And if we get stung in the process, we want someone to bail us out. That is the mindset that credit card companies feed into and reinforce. That is also the mindset that led to the housing bubble and the current financial meltdown.
I wonder if the housing bubble would have happened if people hadn’t gone after quick wealth through housing? Would it have happened if people hadn’t continued to cash in their equity for plasma tv’s? Where does ultimate responsibility lie? With the banks? The regulators? Or with the individual?
Is changing the law or increasing regulation the answer? Possibly, but at what price? Do we as a nation really want the government to protect us from ourselves? Where does that stop? Where is the line? Freedom means having the freedom to fail just as much as having the freedom to succeed. It means having the freedom to live with the yucky consequences when we misuse our freedom. Can we give up the freedom to do one without the other? Do we really want to?
@Liz–From the Federal Reserve site: It’s important to be aware of the potential risk in using an EFT card, which differs from the risk on a credit card.
On lost or stolen credit cards, your loss is limited to $50 per card. On an EFT card, your liability for an unauthorized withdrawal can vary: Your loss is limited to $50 if you notify the financial institution within two business days after learning of loss or theft of your card or code.
But you could lose as much as $500 if you do not tell the card issuer within two business days after learning of loss or theft.
If you do not report an unauthorized transfer that appears on your statement within 60 days after the statement is mailed to you, you risk unlimited loss on transfers made after the 60-day period. That means you could lose all the money in your account plus your maximum overdraft line of credit, if any. (end of Fed excerpt.)
J.D.: agree completely. If regulation weren’t necessary and it was as simple a matter of everyone doing the right thing: then why are Americans in this mess in the first place? I’m not a victim, but a lot of people are. The people who trot out the old “responsibility” hat fail to realize that the bulk of the population aren’t as well educated or “tuned in” as they are. I’ve met plenty of folks who think they grew up “poor” and have a clue as to what those who actually did go through, but their observations are about as close to reality as those that belong to the people running this country.
It’s a nice fantasy that you can get people to be responsible for their own actions, but when they’re incapable of understanding the basics of what they need to be responsible for, they’re not going to do it. My mother-in-law is a social worker and provided me with the ideal example: a young girl of about 25 was living in her trailer with her four kids (different daddies) and current boyfriend. Both were unemployed, they had no electricity or running water…and were considering having a fifth kid because “we just like having babies”. Seriously, do you really foresee that woman reading the fine print on her credit card application, let alone understanding it?
Regulations are the necessary evil we have to live with since we can’t be bothered to invest in our educational system.
Honestly, who gives a crap about credit card companies, or even credit (FICO) score.
From here into the indefinite future, cash talks, everything else walks.
Like a bank is going to turn down a mortgage application on dings for unused credit cards when I show up with 15% DTI and 50% down.
Here’s how to really stick it to the credit card companies: Don’t use credit cards.
I really don’t get the anti-credit-card mentality here. People get burned by debt because they can’t be responsible with credit; those people should ditch their credit cards.
I, however, make significant money off of credit cards, because I put all my purchases on plastic and pay the balance off full each month. That money — which would have been paid in cash immediately — sits in high interest savings for up to 60 extra days (depending on timing). What do I pay for this service? I pay with having to deal with a much more simplified single-bill style monthly budgeting structure. Oh the horror.
JD wrote: “I continue to believe that credit cards do structure their business in such a way as to “hook” consumers”.
Yes they do. And I want ALL companies to do exactly that! Hook me with innovative products! Hook me with lower prices or better service! Hook me with better credit terms, cash back, organization of my spending into categories, integration with Quicken!
That’s the free market in action, and it leads to incredible innovation and value. Too much regulation – or the wrong regulation – strangles innovation and keeps costs higher than they otherwise would be.
There are already laws on the books to regulate business deceptive practices.
People need to take personal responsibility – the lack of which is a primary cause of the current financial crisis and demands for a bailout.
Credit card companies are in business to make money. The problem that gets me is that they like to sneak along some of there tactics. And there is ALOT of small print.
Why can’t they just make the print read this, (we have a right to raise your rates at any time for any reason so if you keep a balance please be aware that we could jack your rates up so much it will make your head swim!)
I would have to say that if my husband and I ran our business (an auto repair shop) that way, we would get put out of business. What makes credit card companies any different? We Americans think it is a necessity to have not just one credit card but several.
We try to be fair and honest with our customers, and require that they are fair and honest back.
I don’t believe that credit cards are all evil and there is a cost for convenience, just be aware of those costs, it is never wise to always carry a balance and pay hundreds of dollars out in interest and fees all for the sake of convenience or financial illiteracy.
http://downwithdebt.today.com/
Isn’t the idea just insidious? Why can’t people step back and look objectively at the big picture?
These companies make exorbitant amounts of money just because other people want stuff they can’t even afford.
What a sick business to be in. Hurting the people that don’t lack the judgment to even know they’ve been hurt.
http://www.goingCarless.com
point 1 should have been: take control of your financial life. it takes two to tango.
i’m offended by the post, because i have a ton of visa stock and everyone needs to use their visa more so i can get rich. which goes to my second point, instead of whining about the credit industry, buy stock in it. just like instead of whining about the oil industry, buy stock in it.
yeah, personal responsibility and social responsibility are one in the same. chicken before the egg scenario. our social contract shouldn’t be save us from ourselves, but that is what is often what we ask elected officials to do: save us from ourselves.
And if the institution is indeed big and bad, why is it a “victim mindset” to point that out? Do you really believe the people who run corporations are exempt from all this “personal responsibility” talk?
This post really doesn’t say anything at all. The entire point it makes is “stop using credit cards!” That’s a perfectly reasonable point, but anyone who reads your site or any similar site has heard it a million times. I know you’re capable of better posts than this.
However, I don’t think individual responsibility is the only key. Ethical business practices are also important.
It’s true that, from a dichotomous consumer-business point-of-view, credit card companies are merely trying to meet consumer demand. However, life is more complicated than that. Credit card companies, in conjunction with the ad industry and all sorts of other businesses, have worked hard to create consumer demand. Even some of the most intelligent people in this society have seen their ability to take responsibility eroded and obfuscated by perpetual and misleading advertising and marketing. A lot of times, the consumer demands that people express would not exist if it weren’t for our culture of aggressive salesmanship. Businesses often prey upon our psychological vulnerabilities in order to sell us crap (or lines of credit to buy crap) that we don’t really need. Other times, the stuff we demand is stuff we more or less need, but we’re convinced to pay more for a brand name. It’s too simple to see the situation as merely between individually responsible consumers and businesses that merely (and benevolently) respond to their needs. A whole culture has developed in which individuals and businesses are meshed together, always creating new “needs” and wants, always developing new “niche” products. It’s hard for individuals to step away from this culture, especially since so many people who are caught up in the culture also happen to work for the businesses that continually create new “needs” and wants.
so if you are confused by it, then don’t sign up for it. This is what gets me the most. We have all the control in the world when it comes to signing for credit.
mythago: no, sometimes bad people do bad things regardless of where they sit. but in terms of arguing the service provider versus the consumer, the consumer has as much control or as little control over the service. Ok, there is an argument that once you make the decision to go into credit, then you are trapped. again, there you have control, too. there are exit signs along the way from change in terms, to increased rates, to increased fees, etc. the fact of the matter is, people simply ignore those and continue to carry debt. it then becomes it is not my fault.
You know, it’s funny how quickly these discussions turn into an issue of personal responsibility and choice. It’s just like the credit card debt post a while back.
When I was in college, I received a check in the mail for several thousand dollars. The letter that came with it went on and on about what I could do with the money, opportunity knocks! It was worded to imply that the money was mine, free and clear. Being a skeptical New Yawker (ain’t nobody gonna give me money for no reason!) I read and reread the letter trying to find the catch. After a half hour, I found, in magnifying glass size font, hidden in a decorative border, the fact that it was a credit card company promotion (from a company I didn’t do business with) and cashing the check was a loan at a head spinning interest rate.
How many people thought that this was a gift from Uncle McDuck? At another time, I was charged interest (at a high rate) and late fees for an error made by a (different) credit card company. Despite a very good payment record and the fact that IT WAS THEIR ERROR, they refused to waive the added costs, until I was in the process of canceling the card.
This is in addition to the stories we hear about credit card and finance companies automatically enrolling people in profitable products like credit insurance, and making it very difficult to cancel it, and various other abuses.
Personal responsibility goes both ways. I am a responsible adult. I pay my bills and try to be fair to all I deal with. I expect my transactions and agreements to be businesslike at worst, friendly at best. I don’t expect the organizations at the other side of the contract to be lobbying congress to get the right to soak me more easily, I don’t expect the rules to change in the middle of the game, and I don’t expect to deal with ‘gottcha’ type payments. I don’t want to have to read everything that comes into my mailbox with a magnifying glass to make sure it’s not some hidden change of agreement stashed somewhere in it.
While it is impossible to regulate abuses away entirely (very smart minds will spend a lot of time trying to get around any regulation that prevents them from getting rich), a more regulated environment is better from the consumer’s point of view than the wild west we have here now. To the people who claim that it will only drive up the interest rates, I ask, what is holding the interest rates and fees down now? As far as I can tell, the only thing that is doing so is what the competitors are doing.
if it seems too good to be true, then it is. what a simple concept. who gives you free money? no one. i doubt it took half an hour to realize, especially with citibank or something plastard on it, that it was a cash advance check or some other thing. if you don’thave an uncle mcduck to begin with, then why would you assume you had one at all then? again, we all know money doesn’t come for free. that’s the first indicator that the bs flag should go up.
“8.6 credit cards the average American has stuffed in her wallet.”
Does anyone know what the “average American” consists of? I find it hard to believe that it is average to have 8.6 credit cards.. I’m always a skeptic of stats, so I’m just curious if anyone knows the details of that survey.
@CoolProducts: Experian did a report in in Feb 14, 2007, and determined from their database US average per person to be 4 credit cards
http://articles.moneycentral.msn.com/Banking/CreditCardSmarts/1In7AmericansCarries10CreditCards.aspx
however, also revealed 1 in 7 americans have more than 10 credit cards. don’t know the deviation of error and not all cards are reported to every credit agency, but that seems to be a pretty good number. Note that is per person.
Average cards per household is around 12 cards.
i would say 6-8 is about right, considering i make a habit of noticing peole’s wallets when they pull them out for purchases at stores (just out of curiosity to see how many cards people have, nothing criminal). people’s wallets are brimming with cards is all i know.
I have vision problems. So I wrote several months in a row on my bill payment & to the companies’ other contact addresses, requesting that any rules & regulations “fine print” be sent to me in LARGE TYPE, as the handicapped protection laws REQUIRE… NOT ONE COMPANY DID SO…
So I cancelled them all, at once.
Their ONE-SIDED adherence to the laws is WHY government regulation needs STRICT & SEVERE enforcement!!
They proved they were out to cheat me.
This could result in a group law sue against Sears and many other company following this policy:
1. I bought a tv, don’t pay for a whole year free interest rate.
2. Company (intentionally?) mistakenly changed my address few months before payment was due.
3. A month after over due, Sears called me that i owed the whole amount incluing interest for the whole year.
4. Company admits the address was not the correct one.
Any comments?
Great article here! At the end of the day what it really comes down to in so many of the cases is the consumer being responsible and accountable. Being responsible means active staying informed and educated with industry policy and standards as they relate to borrowing someone else’s money. Read the fine print! It’s not rocket science, but it does require some time and effort. Thanks. Here is some related info http://gettingcreditcardwithbadcredit.com/