Maybe poor credit isn’t the word for it. Do they selectively or more aggressively target people who run up large bills and only make the minimum payments or do they just target everyone irrelevant of credit score or how they spend on credit? What would be the point of targeting those who pay off their bills in full each month (and make money off the credit card company instead of give money to them) or those who are likely to go bankrupt?
There was a story on Frontline on PBS last week about all the tactics the credit card companies use to make money. They are truly evil.
One company, Providian, targets poor credit risks for precisely the reason you mentioned - to get them to pay the 2% per month and make loads of dough.
Now things are getting worse. For example, the current language in credit card agreements is that if you are late on some other company’s card (having nothing whatsoever to do with the first company) they can jack your rates. For example, say you have $5000 on a Chase card at 9% and $5000 on an MBNA card at 9%. You make a late payment on the Chase card. MBNA gets to jack your rates up to 29% (or some other ungodly figure).
They can do this because they get the credit reports from the reporting companies. And according to the Frontline program, this is exactly what they do do. (Do do?)
I saw that one but I don’t remember them talking about that in particular, just Ben Stein saying he was the type of customer CC companies tried to avoid.
Link to PBS Frontline Show Online.
Actually, they said that Providian did it for the late fees. They also strongly implied that they had been involved in illegal business practices (charging fraudulent fees). Whether or not to take that as a standard CC company practice is, I suppose, dependent on how evil you think CC companies are.
That was certainly an eye-opening show, both about CC companies and the general foolishness of the population with respect to credit cards. The four man-on-the-street people were just clueless. Many of them had plenty of savings to pay off their accumulated credit, but persisted in making minimum payments each month because they were worried that if something happened, they’d be “dependent on the card.” So, to protect themselves from potentially being forced to carry a lot of debt on their credit cards, they carried a lot of debt on their credit cards.
They also were all blissfully ignorant of how long it would take to pay off their bills at the minimum payment. Several said that if that were written on the top of their bills, they might be inspired to pay more. Apparently they never learned about subtraction in school :rolleyes:.
Not really. If the minimum payment is 2% you’d assume it might take you 50 months to pay it off right? It actually takes 600 months to pay a bill off if you pay the minimum payment each month. So people can’t be faulted for not knowing that.
I used to carry a 2500 debt paying the minimum payment every month. I did it because I always felt like one day someone would die and I’d pay it all off painlessly or something. It was stupid of me. I wound up reading an article that used 2500 with $50 a month payments as an example, and it said it would take about 30 years or something to pay it off at that rate. After that I put every spare penny on it and paid it off over a few months. Around the same time I started to get calls from a collection ageny over a debt I had never heard of. I pulled my credit scores for the first time in my life, and challenged the collection agency debt and had it taken off my record. So my score went up dramatically, and that’s when I started to get a lot of credit card offers.
So there really is not conclusion I guess. I didn’t get credit offers when I was making the minimum payments, but that might have been because my credit rating was bad, and it was a coincidence that it improved so much at that time. However, I don’t think Canadian credit card companies are targeting deadbeats.
When I was a non-traditional student in college (I was in my late 20’s), I naturally qualified for DOZENS of credit cards, most of which I stupidly got. Fast forward seven years. I’m STILL paying on the credit cards, and working my tail off trying to get them paid off at incredibly high interest rates. I’m about half way through, and it’s incredibly tough. Every single one I’ve closed the acount, and I haven’t used any of them in years (it’s a VISA debit card or straight cash now). I’ve gotten about half of them paid off, but I’d estimate I’d have about $600 EXTRA “play money” each month if I didn’t have credit card payments.
However, that being said, when I got ALL of the credit cards, I was a full time college student, with three kids to support, making about $700 a month (with no extra income like child support or alimony), so there was technically no way I could afford to make minimum payments on all the cards given to me. Should I have been more financially prudent and not even applied for the cards? Absolutely, and I blame no one but myself. However, I know darn well that I had “SUCKER” written across my forehead each time the credit card companies got an application from me. And yes, the majority of those applications I picked up at my university–they are geared towards students.
I have excellent credit and pay the one credit card I have in full each month. I use it to buy gas, groceries and other stuff I need each month, then write one big check. Works for me cause I don’t over do it. I get on average I’d say, a half dozen credit card offers in the mail each week, which go right to the shredder. AMEX is the worst. Apparently they are going to just fold up and go belly up one of these days if I don’t sign up, according to some of the “really anxious to have me as a customer” letters I get from em. I always read em before I shred em because they’re funny.
Hell, Discover just keeps sending me cards even though I never applied. I shred the cards then send the little prepaid envelope back with a note saying I don’t want the card, but still I get cards in the mail two or three times a year. Discover has never shown up on my credit reports, which I check twice a year, and that’s good cause I’d go all ballistic on em if it did since I’ve never ever applied for a card.
Have you looked into consolodating your outstanding credit card debt so that you can pay it off at a lower interest rate? You probably have, but just a thought.