Credit Cards Don’t Kill Credit Ratings, People Do

NRO Corner ^ | May 28, 2009 | by Jim Manzi

[Goldsborough]

Some lawyers attempt to safeguard one’s legacy against governmental predation. We aren’t all evil personified.

[CottonBall]

Most people don't have a personal attorney to interpret the gobbledygook for them. They couldn't, by your maxim, sign on for a library card.

I don't think it's too much to think that someone should sign something they don't understand. They don't need a personal attorney. A reasonably intelligent friend or family member could read the contract to them. They're not that hard to comprehend. Like a mortgage contract - they are typically a standard form for each state. Once you've read one and get it, then all you need to read is the parts that have been added or amended.

[CottonBall]

Good post!

I can’t believe that posters here are backing the liberal idea that people aren’t capable of doing basic everyday things without help.

[CottonBall]

You must be from the typo police. Rather than address the issue, you are attacking the typos.

I feel like I’m surrounded by liberals here....

[dfwgator]

I can’t believe that posters here are backing the liberal idea that people aren’t capable of doing basic everyday things without help.

You and me both.

[CSM]

“Constructive self-interest has been replaced with first jealousy, then lust, and now blatant greed.”

Let me be a bit nit-pickey. It isn’t jealousy that is the problem, it is envy. Jealousy is motivating and envy is destructive. If you are jealous of your neighbor’s “stuff” you will me motivated to pull yourself up to his level. If you envy your neighbor’s “stuff” you will advocate the destruction of his stuff to push him down to your level.

[CottonBall]

Detroit has a 25% graduation rate, and what fine graduates those are. Commonly, urban HS have rates around 50%.

That's pathetic. And a HS diploma doesn't mean much these days - just showing up to class will get a kid passed.

[DoughtyOne]

Look, I can cut up my credit card. I have no problem with that. But that is not the answer. And some silly suggestion that I warn my friends and family is so lame, it hardly bares a response. All the credit card companies are charging 28 to 30% interest within a year or two. What good does it do to tell my friends and family?

Then I’m left with a balance I have to pay out thirty years to pay off. When I say that, it’s the proverbial I, since I can afford to pay these accounts down. A lot of people today are under extreme financial pressure. They can’t. And they are trapped in a system where they have to service these accounts and can’t get out from under them.

Your suggestions completely ignore these people.

If they make a payment one day late, it shows up on their credit report. If the credit card company charges 35%, you don’t seem to criticize them for it. Why it’s just “cut up your credit card”.

Not everyone has pristine credit. They need access to credit. Finances are tight and you never know when something will happen and you need to place a repair bill on the card, a medical bill on a card, or some other emergency type bill on a card.

People can’t get new credit, so they try to use the credit they have. When they do, they are charged fees that make it nearly impossible to pay down the principle.

That is wrong.

[Dick Bachert]

TO: XXXX

Subject: Interest rate increase on account number XXXX

To whom it may concern,

We have been XXXX card customers for many, many years. Our records here indicate that we have never missed a payment date. Over the years, we have had several accounts there, several of which we paid off in full. In fact, we recently received a letter from you indicating that two of those inactive, zero balance accounts were unilaterally closed by you. Having heard that closing an inactive account can negatively impact a credit score, we resisted doing so. We shall retain a copy of your closure letter in the event that YOUR closing that account affects our credit status.

However, our primary reason for this letter is to protest your recent notification that our interest rate will increase from the old APR of 8.24% to – for XXXX anyway – a new, improved (and clearly USUROUS) rate of 19.24%. And the “Transaction Fee” thing is a nice touch. You’re not making enough with the new APR? I think we now know where Tony Soprano found employment since his “family” left the airwaves: He’s working there at XXXX!

Then there’s that 25 BILLION in TAXPAYER dough now almost certainly working its tail off for XXXX. We congratulate XXXX XXXXX for dodging most of the sub prime debacle and for wishing to return the 25 B to help Obama fund his utopian welfare state/worker’s paradise. Is that the “Why” of the higher interest rate? To replace the taxpayer dough the other banks may want to keep?

Unlike many of your other “customers,” we have an option not available to them. Despite the current market decline, we have sufficient reserves to PAY OFF this account in full and take our credit business – which this experience will cause us to drastically reduce – elsewhere.

Bottom line here?

We need to get the APR BACK to 8.24% or we send you a check and go away. I think even Tony understands that 8.24% of SOMETHING is more than 100% of NOTHING.

Then there’s some Old Testament Americans seem to have forgotten:

“The rich ruleth over the poor, and the borrower is servant to the lender.” Proverbs 22:7

I believe actions such as yours will trigger a mass exodus away from credit cards back to the pay as you go/cash system prevalent when I was growing up. And that will be a GOOD thing for us all. Most of us have too much totally unnecessary “stuff” anyway.

An editorial comment on the events that brought us all here:

Barney Frank, Chris Dodd and the other Capitol Hill Cretins who pressured FANNY and FREDDY into forcing banks to give home loans to folks with no prospect of making the payments in what can only be considered a stupid vote-buying scheme at best and utter insanity at worst should be drawn and quartered and their heads displayed on pikes on the Mall.

And I have no words to describe the too, too clever idiot “Masters of the Universe” who then bundled this JUNK into so-called Mortgage Backed Securities and “Derivatives” and the complete morons who bought that crap sans any due diligence. The only possible benefit from this – this MESS is that the phrase “The full faith and credit of the United States” is expunged from our language. According to Obama, “We’re out of ‘money’.” He SHOULD have said OUR GREAT- GRANDKIDS are out of ‘money’ and he could have added faith and credit as well.

At your earliest convenience, please consult with Tony when he returns from the Bing and respond via email so we can determine which way we need to go.

Thanks,

[CottonBall]

Whether your complaints about credit card companies are valid or not, the responsibility still lies with the person that holds the card and uses it. Nobody forces them to do so.

And you have a very dim view of people’s intelligence. Contracts are not that difficult to comprehend. Your condescension and elitist attitude bespeaks much.

[EBH]

If you are jealous of your neighbor’s “stuff” you will me motivated to pull yourself up to his level

Yes, you will find a way to pull yourself up be it through a government handout, welfare, or demand a redistribution of the wealth. Others of course will be motivated to put in the hardwork...

Nope, I think jealous is exactly what I meant.

jealous: hostile toward a rival or one believed to enjoy an advantage

envy: painful or resentful awareness of an advantage enjoyed by another joined with a desire to possess the same advantage

[Goldsborough]

I am not surprised that several here are misconstruing the point others have been making about credit card companies.

There is a difference between excusing profligate morons, which no one here is doing, and illustrating that some credit card policies and practices are indeed predatory and in likely need of reform.

I like the notion that a man's handshake is his bond as much as the next conservative. If that were what was occurring here and deadbeats were the only ones burned, you wouldn't hear a peep from me. Of course, a credit card issuer's "handshake" has about 35 asterisks upon it, many of which are "between the lines," such as tardy processing in order to make the consumer "late."

The easy answer is to cancel the card and pay the balance and tell everyone about the schmucks who played games with the credit card agreement. Perhaps next we should just legalize insider trading, not protest Obama's politically targeted abrogation of Chrysler dealer franchises, and ignore guys like Madoff because of caveat emptor?

Even among ardent capitalists there is a role for the government as the arbiter of the legal bounds of the free market. The same impulse that led to the standardization of weights and measures is still at play here when a credit card issuer attempts to bend over even their most scrupulous customers. Sure, even back in the day, people could say, "Don't deal with Sven because his thumb is on the scale" but that is a half measure compared with throwing Sven's ass in jail, or fining him, and outlawing his misconduct as a cautionary tale for Sven's cheating successors.

The credit card issuers have engaged in systemic misconduct. Many instances are nothing more than blatant abuses of contract law for which most people do not have adequate resources with which to redress on their own in any effective way. The issuers now have the sledgehammer of the state's police power coming down on their heads. So much of what is happening to them could have been avoided merely by their acting with the same sense of honor that most of their best customers clearly have had all along.

That you would say that our position is default liberal and paternalistic says more about you than it does about us. One of the few legitimate aims of a government lay in its police powers. In the opinion of many citizens, card issuers have crossed the line of fair conduct in business and are in need of legal correction. That our reasons for concluding so differs markedly from those of liberals, yet makes for a climate of common cause against the problem, is something that escapes your Manichean view of this issue.

[wardaddy]

Credit inquiries will sure kill your credit.

I had 52 in the past 18 months...that hits me from 75 to 125 points depending on who’s talking.

[Niteranger68]

Greed is not good. Greed functions against a persons own best self-interest.

This might come as a shock to you, but I don't think you understand capitalism and self-reliance. Greed is a good thing. Greed is independence. Wealth is created, not distributed.

[Richard Kimball]

Wow. Excellent post. I've been wanting to post the same thoughts, but you did it perfectly.

If I can add a couple of things.

Everyone wants to blame 0bama, but when they overhauled the bankruptcy laws was when the CC companies turned the dogs loose. That was under Bush and the Republicans. CC companies used to try to work with people to get them to pay their debts off, as if the individual declared bankruptcy, they got nothing. Now, they have no fear of jacking up the interest rate and tacking on fees. They want people so far in debt that they'll never pay it off. It's almost like a defined annuity for them.

Also, many of the CC companies sell off the debt, but continue to service the loans. This means they have a vested interest in inducing people to go over line or make late payments. Hence, the sitting on payments, sending out monthly bills late, making payments due on Saturday, Sunday, or a holiday, crediting payments made after noon on the following day, and arbitrarily upping the required payment by fifty dollars one period, hoping your automatic payment will be short.

[Obadiah]

I concur.

[I Drive Too Fast]

If you can, create an online account for your credit cards. That is how I pay mine. The time the transaction is made is the time they have to use. No late fees ever that way.

A few years ago, when I paid by check, my Shell gas card did not post my payment until the day after it was due even though I sent it a week before it was due. I got dinged a little over $4.00 in interest. I didn't get that mad, but I got even. I sent them more than I owed and for the next few months they sent me a statement with a credit balance. In January, they had to cut me a check and mail it to me. I would have kept doing this for years, but I cut up the card earlier and never used it again. I figure I cost them more than the interest they charged me.

[Elle Bee]

they also have a nice self fulfilling business model

for example they open and offer a $10K credit line

You don't use the line or don't carry a balance .. then they reduce the line ... thereby reducing your credit to debt ratio

then use that change in debt ratio (credit score) to raise your rate

It's not pure serendipity

.

[CodeToad]

If a person uses their credit rating by applying for credit, their credit score suffers.

If a person closes a credit account they are not using, their credit score suffers.

If a person doesn’t take out more credit their credit score suffers.

If a person doesn’t close a credit account they are not using, their credit score suffers.

If a person uses the credit they already suffered a hit to their credit rating, their credit score suffers.

Credit is a racket.

[CodeToad]

“The idea the credit card companies have to raise rates from 7% to 30% overnight, just because a person is a day or two late with their payment, is ludicrous.”

They are raising rates on EVERYONE. Our rate just went to 29.99%. We always pay early and keep a low balance. We’re closing the card this week.