financialcounselor

A Shiny Plastic World

In Uncategorized on December 19, 2012 at 8:23 pm

It’s boring, but reading credit card agreements is imperative

We all know that the world of retail transactions has gone plastic. The percentage of purchases involving a debit or credit card increases yearly. Think of the recent American Express ad campaign with shots of cashiers mechanically swiping cards while a line of consumers snakes its way through the retail assembly line. Then one consumer pays with cash and the entire operation comes to violent halt, the music stops, and everybody stares down the guy with the cash that disrupted their shopping bliss.
With so many different credit cards so readily available, you can’t assume every card will carry normal terms. There can be lots of clauses and conditions in those long, dense credit card contracts. For example, some cards will charge you a fee if you don’t use the card a set number of times during a particular time period. Most card agreements contain terms that if violated trigger a jump in the interest rate.
Take it from me, if you’re getting a new credit card, read the entire agreentment, especially if you intend to carry a balance on the thing.
This is going to be an extreme example, but there was one caller I spoke to, Cheryl from Colorado who didn’t know that she was required to pay back the money she had borrowed by using her credit cards. This woman was under the impression that she did not have to pay back the balances on her credit cards in full.
“I thought the reason for the minimum payments is so your credit score doesn’t go down,” she said. “And the more you pay, the higher your credit score goes.”
“That’s not how it works,” I said. “They expect you to pay them all that money. I’ll explain it to you.”
“Oh,” she said, the sound of disappointed realization in her voice. “What about all the finance charges? I didn’t spend that money.”
“I’m afraid they want that money too,” I said.
It’s a shiny plastic world indeed.

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  1. And then there are the dangers of NO credit. We live in a very gray world. Most people only think in terms of black and white, not unlike their credit agreements. Kind of ironic.

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