credit score 800
My husband likes to tell me about his college days, in the early 90s, before I knew him. One of his favorite memories is about his first experience with credit cards. He remembers being a college freshman, new to northern Michigan, stepping onto the campus for the first time. Expecting to be greeted by helpful upperclassmen and faculty who were there to escort him into the beginning of the rest of his life, he had a rude awakening - he was greeted by ‘the credit card guy’.
Still a fairly new marketing tactic at that time, campus recruiting by credit card companies was not looked down upon as the sleazy and unscrupulous predatory practice that it is. Older brothers, sisters, and cousins did not yet know to warn their younger relatives about ‘the credit card guy’ that would find them in the student center. The idea that you could get a free long distance calling card, T-shirt, or pizza just for filling out a short application was too good to pass up. Credit card companies know that starting college is an exhilarating experience; you feel empowered to make adult decisions, typically for the first time in your life. So, ‘the credit card guy’ makes sue that the very first ‘adult’ decision you make is to get a credit card you know nothing about because you want free pizza. Although the credit card companies claim that they are providing a valuable service to studnets, U.S. News and World Report agrees that this practice is questionable at best:
Just like many other unsuspecting freshmen, this campus recruiter convinced my husband that he needed a credit card, so he applied and was easily approved. Happy about his newfound freedom and means, he told his older brother about his credit card, expecting a good pat on the back. Instead, his brother was outraged. He had a steady job and living arrangements, paid his utilities on time, and was basically doing everything he could do to be financially responsible, but he couldn’t get a credit card to save his life. He was repeatedly denied because he didn’t have enough assets or income, according to the credit card companies. His little brother didn’t even have a job, and he just waltzed onto a college campus and got a card with a $500 limit? How unfair! Living on his own, he really needed credit to take care of business, yet his little brother, with absolutely no way to repay his debts, was able to get what he had been working hard for by simply checking “yes” in the box marked, “Are you a student?”
Needless to say, my husband was shocked and confused.
Now, in hindsight, he can see why his older brother was so angry. While his brother had intended to be responsible with credit he could not attain, my husband was absolutely irresponsible with credit that he did not have to work for at all. It helped to warp his idea of the purpose and proper use of credit, which took years to undo. However, because it caused him to plummet into debt so quickly, he can see why he and other college studnets were targeted. Low income plus easy credit equals a lifelong customer for credit card companies. With mass marketing of financial products to and predatory lending becoming a part of mainstream American culture over the past 20 years, young people and people with low incomes can almost expect to be able to get something for nothing. That’s why the mortgage industry crisis has crippled our economy. Sub-prime mortgage lending was ‘the credit card guy’ of the housing market.
Except no one got a free pizza.
Most of us know that paying interest on credit card debt is one of the best ways to throw away money, no doubt. With regard to contemporary credit cards offered by reputable American banks, money-savvy consumers:
- surf 0% credit card offers
- are never late with payments
- make every effort to keep their credit score high so that they can qualify for the best -- best as in most consumer-friendly -- credit card offers available in the market
- if they aren't surfing 0% offers, pay their balances in full each month to avoid interest charges
- take full advantage of their credit cards' rewards programs.
- use credit cards to pay for all types of goods and services, so as to take advantage of the excellent consumer protections that most credit cards provide like zero fraud liability and purchase protection.
Bottom line: if you are a solvent and responsible consumer, credit cards work for you, and not the other way around.
Sometimes, I encounter a friend of family member who is paying interest on credit card debt, but who also has a relatively robust savings account. I explain how this doesn't make sense, because if you are paying e.g. 12% interest on your debt, and making 3% in your savings account, you are losing money -- and plenty of it -- each and every month. I often hear the excuse, "but I like to have a rainy-day fund." Yup, establishing and maintaining a rainy-day fund is an excellent idea, but it's important to find the right balance. I agree with the advice in today's YouTube.com clip: the only situation where it's reasonable to pay interest on credit card debt is if you have a good reason for stashing away a lot of cash, like if you believe that you're about to get laid of from your job. Here's the clip:
Should illegal aliens be allowed to get a credit card from one of America's biggest and most reputable banks? Today's YouTube.com clip is a clip from a CNN news story. Your comments are welcome.
The global credit crunch that began last year and has caused misery in financial markets around the world is not over. In fact, many economists believe that we haven't even reached the beginning of the end. That spells trouble for many consumers and business owners looking for credit these days -- and possibly for the rest of 2008.
Banks are cutting back, even on accounts held by their most credit worthy customers. Credit lines are being reduced, and interest rates are being raised, even for certain borrowers who've never been late with a payment. The excuses the banks are