Anyone who thinks even that usurious rate is bad need only look as far as payday loan companies like Money Mart to understand what real usury is – and those don’t even build a credit rating. I was stuck in one of those payday loan things for a while. (A while being 6 years. I’m not even kidding.) At what amounts to 500% interest p.a. (20% every two weeks) I got off by getting credit cards, whose interest rates are gifts by comparison. After getting out of that trap I was glad to pay 20% p.a. interest for cash advances, and had the added bonus of being able to carry a balance.
Darkhold, I was in the same situation as you as a returning expatriate (13 years overseas). Your credit history is reset.
I got a very basic bank account, paid a salary into it, and after six months applied for a credit card. It was approved with a £100 limit. Bought a few things, paid them off, and bada bing, my credit rating started to climb and within a year I was able to get a mortgage.
Now, things have changed a bit over here since the crunch, but I can’t see how your situation 3 years ago would have been that different to mine 4 years ago. Did you try HSBC? They are apparently more internationalist than the other high street banks.
You know, on one level this is all well and good. But i think it’s far too simplistic.
People who take payday loans don’t do so because they want to pay 500% interest. They take them because, even with the usurious interest rates, it’s often the only way they can put food on the table today. And they often can’t get ahead enough to avoid using the loan system because (a) they don’t make enough and are using every cent they earn for day-to-day expenses, and (b) they don’t know anyone wealthy enough to lend the few hundred bucks it would require to get ahead of the game.
As for credit cards, i agree with the caveat emptor thing about signing up for one in the first place. If there’s ever a time to read the fine print carefully, it’s before taking on something like this. The problem is that both of the companies with which i have a credit card send me at least five or six pieces of mail every month (not including my actual statement), and working out which one is just some stupid offer and which one is informing me of a rate increase takes time and effort. I think that part of their reason for sending so much mail is precisely to get people to ignore things like rate increases.
I think, at the very least, there should be laws that require any rate increase (or other adverse condition added to a credit agreement) to be announced in large, red type, in plain language, at the top of the correspondence.
Something like:
Yeah I know it’s because I moved. I was just trying to highlight how someone can get roped into a high interest credit card through no fault of their own. I’m stuck in the I can’t get a credit rating because I don’t have a credit rating cycle and I’m getting desperate to get out.
What you propose is nearly exactly my plan. I just need to get my foot in the door. Do you know how long a rejection mark stays on your credit rating? I know if you apply for a few at the same time it temporarily makes your rating look bad so I’m going to have to wait until that clears before I try again with HSBC.
When i first moved to the US, i kept my Australian credit card and had to rely on it for a good six months before i was able to get one in America. I used the card, my mother back in Australia would pay the monthly bill at our bank, and i would transfer money to her bank account to pay her back. I took a bit of a hit on the exchange rate, and the card had fees for international transactions so i used it only for large purchases, and for purchases that could not be made any other way, like buying plane tickets online.
The only way i was able to get a US credit card early on was to take advantage of a special offer that Bank of America had for college students. Essentially, they would approve any college student for a credit card (savvy marketing), and as a grad student i apparently qualified as a college student. I suspect that there were probably some rules about the offer not applying to international students, but they never asked, so i never told. That first card had an $800 limit, but it went up steadily over the next couple of years.
Of course, once i actually started putting together a credit history, i had thousands of offers to sign up for cards.
I guess I’m kinda scratching my head at why you and others are so angry at the company offering this usury credit card here. Presumably, the only people who would take such a card are those whose credit rating was so abysmally bad that they can’t get any other sort.
Is the solution, then, not to offer them credit? Or if that doesn’t appeal - isn’t the proper focus of anger at those who would not offer them better terms, in spite of the risk? But then, why would anyone aside from a social assistance program lend money to someone with a considerable risk they would not be paid back, for no profit corresponding to the risk?
Don’t know if this will help or not, but: In Ciao, America! (a hilarious read btw), Beppe Severgnini discussed having the same problem when he moved from Italy to Washington - until he hit on the idea of going into a bank and asking to have his European Visa card “converted” to an American one. There was no problem at all.
And to think I thought that the 30% APR that Citibank wants to start charging me on November 30th was outrageous! I feel sorry for anyone who’s trapped enough or foolish enough to have to pay 80%. We really do need to bring back usury laws that have some teeth. Far too often these “creative financial products” merely end up trapping people in a cycle of debt they’ll never be able to overcome.
(After 20 years with Citibank, I’m closing my account and taking out a card with a more reasonable APR elsewhere. Smart move for a troubled financial institution, running off their long-term, solvent customers. Oh well, I guess that just shows Citibank’s in trouble for a reason.)
Yes.
That seems overly harsh. There should be some method, once you have ruined your credit rating, to repair it.
If one has such poor spending habits/credit history that one can only qualify for a card with 80% APR, then one would be better off NOT getting said card.
“79.9% is one HELL of an incentive to pay your balance in full each month.” (from the article)
Heh, maybe First Premier Bank should market this as an “educational” card. In the habit of carrying a balance? THIS card will really show you why it’s not a good idea!
You are I think assuming any such person, having once ruined their credit rating, cannot learn to use credit responsibly in the future, and thus should be disentitled to having the use of credit at all.
I can think of several cases where that would not be true.
And you are assuming people NEED a credit score.
Yes, the solution is indeed NOT to offer those poor souls credit - because credit isn’t what they need at that point. What they need is either money with no strings attached (also known as charity), or help with getting their financial situation in order (learning how to curb impulsive spending, reduce household costs, etc.). Giving someone in dire financial straits a line of credit with a usurious interest rate is the equivalent of offering a stressed alcoholic a shot of vodka to help calm his nerves - it’s NOT helping!
The free market may allow financiers to prey upon the desperate with impunity, but there’s no reason we should sit back and applaud when they do so.
I am assuming that, at some point in their lives, these people - who presumably at one point or another fucked up their spending habits badly - would like to do stuff requiring credit, the same sort of stuff that the majority of the population does.
Seems a relatively reasonable assumption to make.
There are ways to repair credit ratings without borrowing more.
After reflection, though, I think I’ll change my answer to say that the solution is hardass, federal usury laws.
At what point are you willing to offer these “poor souls” an opportunity to borrow again, when they turn their chaotic spending habits around - and just how are they to demonstrate that they can be trusted to borrow money again?
Remember, all you know of them is that they have shitty credit ratings.
Seems to me that, for some of you at least, that’s a lifetime sentence.
Well, Malthus, when they’ve turned their financial situation around, they’ll be able to build up some savings. Once they have some money in a savings account, they’ll qualify for a secured card or line of credit. After a few months of using that secured credit line responsibly, the card can be converted into an unsecured one with a low credit limit. The limit can then be raised over time, as the person’s creditworthiness improves.
See? That wasn’t so hard.
The financial institutions offering these 80% APR credit cards aren’t doing so out of the sheer goodness of their hearts, Malthus. They’re doing it to make money off of others’ misery. They don’t care about the effect their business has on the larger society. The rest of us should, though. The country as a whole doesn’t benefit from legalized financial sharecropping, even if a small subset of the financial services industry does.
Credit is the reason we’re in this global financial disaster. Credit is like alcohol, some are extra careful with it, using it hardly at all, or only on special occasions. Some are reckless with it, use it all the time with no concern for the side effects. And some are right in the middle, using it a little here and there, and in great spurts from time to time, enough that they can’t be called conservative, but can still be called a low risk.
We need to do away with most lines of credit. Excepting homes, cars and other large purchases necessary or not, credit is a destructive force for most people who get hooked on its’ easy availability, this includes businesses. I mean who takes a loan to make payroll? Payroll on credit? That is not a situation that can sustain for long, it’s too fragile.
If you can’t pay for the stereo, put it on credit. If you can’t pay for the TV, credit. No, that’s been the problem all along. I grew up watching my father, grandfathers and others who had trusted in banks before and during the depression, handle money in a way that ensured they had it when they needed it, and never did they have a credit card. Not one. Now, checks are cumbersome and silly, of course, you can do everything you need to do with a debit card and cash. If you don’t have the money, don’t buy it. Easy to say, but in this gotta-have-it-and-gotta-have-it-now world, VERY hard to do.