Tuesday, August 5

What is going on in the world?!

Try not to be startled, folks, but I think the apocalypse may be at hand.


Because a credit card company gave non-payers a better rate to help them pay off their balance.

Begin at the beginning

Okay, let me backtrack a little: I have this friend, let's call him... John (because I'm unimaginative). He and his wife had to live apart for part of this past year, when he got a job in another state. She stayed behind to finish schooling.

Now, John comes from a well-off family and so his financial priorities have always been slightly off from mine. And there's no law against that (yet), so hey live and let live. But, once he met his now-wife, their combined sense of financial appropriateness really got skewed:

-- They decided that, since their honeymoon was going to be one of the last big hurrahs before repayment of student loans and credit card debt set in, they would really do it up. So they spent $8,000 on a two-week trip to one of those all-inclusive resorts in the Bahamas.

-- About a year later, the wife visited John and, while he was at work, won a Nintendo Wii off eBay. When he expressed concern about the purchase -- given that they were still paying off the honeymoon -- she told him that he should relax. "It was only $300," she said. Plus, she'd sign for her promissory note next week -- and any leftover funds from her student loan could pay off her recent purchase.

-- Recently, John became aware that there were some very angry creditors calling. His wife had been in charge of making payments on the credit cards and, in the stress of graduation, she apparently just decided not to pay. And while looking for work, she continued that trend.

Getting back to zero

When the creditors began calling, John figured out something was wrong. He mentioned to wifey dearest that Bank of America had called, threatening to send them to collections.

The wife thought they should let it happen, then make a deal with collections to get it off their credit report. She was shocked when John told her that, even if you pay a collections company, your credit is still affected.

How do these people not get picked off by natural selection?

So, John decided perhaps he should take control of their finances. (Maybe he'd read a personal finance article by Liz Pulliam Weston; maybe he just was too scared not to take the helm.) After all, aside from the collections threats, they had late fee pains: Their 6 cards were all getting late charges. At $39.99 a pop, that's $240 a month.

Back to my beginning

So this brings us full circle back to the beginning of my post, dear readers.

When John called good ole' B of A, the operator asked him why, exactly things had gotten to this point. John explained: He and his wife had lived apart, she was still a student so barely making money, and he had been out of work twice in the last 12 months.

The operator said he understood. He said the company would let them set up a $150-a-month, 6 month payment system, and then -- and this is the part where you hear the hoofbeats of the 4 horsemen -- said the company would lower the card's rate to 7%.

John was so surprised, he actually asked if he had said 17%. Nope, said the operator, the company would like to have its money, and so it was in everyone's best interest if B of A gave a lower rate.

Why I'm pleased -- and mad

Okay, here's the thing: I'm torn.

On the one hand, I'm happy that at least one credit card company has gotten a clue. The thing that is so insidious about credit card debt is that those high rates of interest make it hard to see any real progress. If you're paying off debt, a good chunk of any payments made goes straight to interest.

Of course, this is how the companies make money, which is how they can afford to operate. So it's something of a necessary evil. But to keep punishing people with high rates when they're trying to do the right thing... It's always struck me as vaguely counterintuitive.

And perhaps it's a sign of the economy. People are starting to pinch pennies. Lots of people are in way over their heads. So maybe, just maybe, the credit card companies realize that their best chance to get their money is to give folks some leeway. It will certainly create customer loyalty, if I had to guess.


It's really annoying to watch all these other folks get breaks. Maybe I'm just over-inundated with the potential housing bailout (and I'm definitely sick of hearing about private companies getting federal help).

It just feels like people who do the right thing are punished for it. People who don't walk away from their houses are still struggling. Granted, people who do walk away have that major credit blemish, but they can plead victimhood and have probably already rationalized the whole thing to themselves.

Tim and I pay our cards -- in fact, we try to pay every week, just so that the money doesn't get frittered away on other things while waiting for the due date. We intend to pay every last cent we owe. And yet we're not getting any breaks from our credit cards -- other than more credit card offers of introductory rates.

I am just getting tired of people who take shortcuts getting rewarded. The rest of us are running a marathon. We're sweaty and tired and have quite a few more miles ahead of us. But it seems like the ones getting the Gatorade are the same ones who cheat and take the bus to the finish line.

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Blogger Tricia said...

Credit card companies will often lower your rate if you call and ask them- anybodys rate.

August 6, 2008 at 11:32 AM


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