Opting Out
No one likes credit card companies. They charge excessive fees and interest and it feels like they are always out to take your money, but did you know credit card companies are reaching an all time low?
The sleazy tricks of these creditors has reached a new level of shamelessness. Tricks like having an incorrect PO Box number on the mail-in portion of customer statements and still charging late fees when the mail is returned and the most nefarious move yet is the ability to “opt out” of new programs.
Credit card companies are choosing to recoup deficits by raising interest rates across the board. How can they change your interest rate if you don’t go past due? Easy! They send you an insert with your statement stating that your interest rate is now 30%, but if you choose to “opt out” of the program you can choose to cancel your card instead. They also may be choosing to charge you daily instead of monthly on your interest.
Well this is reasonable you think. I just opt out and get rid of the card. Think though, what would you do if you had just put a large purchase on the card that you cannot pay today? What if you paid for a downpayment on a large item or maybe for your child’s wedding? You cannot cancel a card with a balance and that $10,000 wedding is now charging you $3,000 a year and applying $8.20 a day to your card. That would be bad enough, but you need to remember compound interest. Even if you get your interest applied monthly still that is $250 the first month in interest alone if you cannot or choose not to pay the entire 10,000 in one lump shot. What if you chose to let it ride an extra month because you could not make a large payment? That means $256 the next month. How many of you can pay $500 a month to attack that balance? I can’t. However, if you don’t, you cannot “opt out.” If you can, do you really want to make a payment that only half helps you and pays the other half directly to a credit company? If you made a $500 a month payment on that $10,000 balance it would take more than two years to pay off that balance if you never used that card again.
That is pretty disturbing, but have you thought about adding fees to the mix? If you miss a payment the average charge is $35 and the average over limit fee is $50. Lets say you accidentally miss a payment when you have $495 used on a $500 limit card? Well you being late changes your card balance to $754. How does that happen? 495+35=530 for the late. +50=580 for the over limit even though they put you over in the first place and then you apply your 30% interest rate. 580*.30=174. 174+580=754. Congratulations! Missing a single payment when you are close to the limit just charged you $259.
I hope you have a zero balance on every card and don’t need credit ever again because that is the only way to “opt out” of this type of program.
