I happened to catch the Frontline documentary Secret History of the Credit Card last night via the Web. It scared me. It made me want to become a credit card deadbeat -- someone who pays off his whole balance each month, denying credit card companies fees and charges -- as soon as possible.
Among other things, the documentary reminded me why credit card companies are effectively legal loan sharks in this day and age:
Frankly, it all seems to border on the amoral. Is the credit card industry to become another example of the antagonistic relationship between upper level management who set the fees and the customers who ultimately pay their salaries?
- A credit card company can raise your interest rates whenever they want with only 15 days notice.
- There is no legal limit on the amount of interest a credit card company can charge -- the industry-wide maximum today is around 30%.
- There is no legal limit on the overlimit and late fees that a credit card company can charge on a monthly basis -- some lenders are charging nearly $50 a month for each fee.
- The minimum payment presented on each monthly bill is about 2% of monthly balance, meaning that paying a balance off using the minimum payment could take decades.
- Finally, the U.S. Treasury Department seems loathe to curb lender abuses (through the Office of the Comptroller of Currency) and is discouraging state and local authorities from pursuing legal action against credit card companies for comsumer complaints.
Mrs. Geek and I are currently carrying rather large balances on two cards. One card represents the cost of our honeymoon in July. The other represents some consolidated debts incurred by Mrs. Geek during grad school -- she used credit cards to make ends meet in the rather expensive metropolitan area where we live. We're taking aggressive steps to reduce those balances (they'll hopefully both be paid by this time next year.)
Still, I can easily see how it could all go so VERY wrong. If either Mrs. Geek or I got sick or lost our job, we might miss a payment or two, our currently very reasonable interest rates would go up, making our payments bigger, possibly forcing late or overlimit fees... and you get the idea. Things could easily spiral out of control.
Fortunately, neither Mrs. Geek or myself use credit cards as "free money". We both have debit cards -- the same as a check without the fuss. We don't reach for credit cards unless we don't have cash on hand to pay, or we're getting something that we don't want the other person to know we got... at least right away.
I hate owing anyone large sums of money. I think a lot of people used to feel that way, but don't anymore. When did that change, I wonder? I don't know.
on 2005-01-07 at 1:46 p.m.
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