Credit Cards Con / by kevin murray

Credit cards can be a real boon for the consumer but it can also be a real bane.  It's definitely a dual-edge sword and should you get on the wrong side, having bad credit will definitely negatively impact your life and livelihood.  That can be most unfortunate, as at age 18, you can qualify to get your own credit card, yet, at that age, you may not have developed the maturity to handle it well.


The first question you might ask is why would any credit card company take a chance on someone so young or on anyone in particular.  The short answer is that they are in business to make money and their top consumers are people that don't have the discipline, or the funds, or the inclination, or the desire, to pay their credit card bills in full.  They want and they encourage this via "come-ons" and higher than necessary credit limits, hoping to tap into that common consumer desire to have it "now". 


While your original intention may have been to use your credit card responsibility, you may be tempted, had an unexpected expense, or just have had too many expenses at once, and have to utilize your credit card more than you originally desired.  Fortunately, as long as you are able to make your minimum payment, your credit card will remain valid, and consumers that are unable to pay in full are the type of customers that credit card companies' desire.  They want you to visualize your credit card statement as something that doesn't need to be paid in full, just something that you need to pay a portion on, and they have no problem with your credit debt continuing to rise as long as you can keep your payments current.  The interest that the credit card issuers charge the consumer in comparison to their internal cost of those monies is such a huge differential that their profit potential is massive and that is where the banks make good and steady money off of your borrowing habits.


With so many people living and struggling paycheck by paycheck it only takes one unexpected event to put you upside down with your debt obligations and once that happens the credit card pyramid begins to break down rather quickly.   In fact, credit cards are really a one-way street.  That is to say, should a credit card company no longer feel that you are a worthy credit risk they can unilaterally reduce your credit limit without notice or even cancel your account and demand payment in full.  Should this happen to you, you have no legal recourse other than to plead your case and hope for some consideration.


Once you get on the wrong side of not paying your credit on time, you will receive an adverse mark on your credit report.  This impact is serious, and it takes seven long years to remove a detrimental record from your report which is a very lengthy period of time.  Although you can legitimately dispute a mark(s) against your credit, it's an uneven fight in which essentially the default is that you are guilty as charge, although it will be investigated. Also, Credit Report companies do allow you to comment on your written credit report that the consumer has disputed the charge.


The bad news for getting on the wrong side of the credit card companies is that everything escalates rather quickly.  For one miss payment, you will probably have to deal with the following:


1.      Late fee

2.      Higher interest rate

3.      Negative report to credit report agencies


However, if you do manage to make good on your late payment in a reasonable period of time, you can probably mitigate or eliminate all of the above.  If you don't, the consequences are severe and your credit score will go down.


The problem with a damaged or poor credit score is it not only affects your ability to get credit cards, it negatively affects your insurance rate, your ability to purchase/finance a car, your cell phone contract, your deposit with utility companies, your interest rate on any and all borrowing, and worst of them all, gainful employment. 


It may sound like a 'catch-22' but those that most need a job in order to pay bills and get back in good credit graces are denied employment because their credit is bad.  Having bad credit will put you on the outside looking in and make your cost of living much more prohibitive than someone else of equal background and skills.