Denver Direct: Credit Cards Akimbo

Friday, June 19, 2009

Credit Cards Akimbo

The entire credit card “industry” is one giant scam. Remember when our mailboxes were being flooded with entreaties to sign up for another “introductory zero interest rate” scam? Remember when people proudly showed you that they had 20 credit cards, and they actually carried them all in their wallets? It seemed a mark of wealth but was really an indication of extreme stupidity. You might have had a total of $100,000 “available” in your credit limits. Wow, you were “rich”.

But how could you not see that paying $18 a month on a debt of $3000 would have you paying interest for the next ten years? And if you added a few purchases from month to month you might have been able to see that you would never pay off your actual debt and that with rates as high as 29%, you might be paying forever. You probably could not even remember what you bought with your card, and yet here you were now paying it off – forever!

And then it seemed prudent to refinance your house to pay off your credit cards. Now you were turning your credit card debt into a mortgage. Now you could take 30 years to pay off that $10,000 debt, with the result that you would pay back $30,000 for that $10,000 worth of stuff you couldn’t even identify. Not smart!

Now with some kind of “reform” coming down the pike, these companies are scurrying to fleece you in new, creative ways. As usual, I’ll take an example from my own experience to elucidate.

I keep two cards, one for business expenses and one for personal expenses. In May, I, along with millions of others, received a notice from Chase that my limit was being lowered from $9800 to $3000 (merely a business decision they said) and the interest rate was being increased to 29%. I really didn’t care that much since I always pay the entire balance off each month. But then I encountered the recent inflation of dental costs.

One of my next to front teeth broke off at the gum line. I was flabbergasted to discover that the cost of fixing it was going to be $2200, but you can’t go around with a gaping hole in your smile, so I put it on my personal credit card. I knew I might be close to my new limit, but I didn’t actually check on it since I had just paid off the previous months balance.

When the credit card bill arrived, I carefully scanned the charges (something you MUST now do every month). Apparently, for one day, my balance had exceeded the new $3000 limit. And there it was, a $39 charge for exceeding this new lower limit. Mind you, this was not for not paying, just for exceeding the new lower limit they had set.

You may have also discovered that if you protest these charges, the credit card company may back down and remove them. I called to protest, and they agreed to remove the charge BEFORE I EVEN ASKED!

My point? Scan every month’s bill and protest every charge. Better, yet, keep your card for emergencies and pay in cash.