Not easy, true, but not impossible. Never had a credit card, never been offered one. My credit rating is “Shoot on sight”. Of course, I’m not normal.
But you probably already knew that…
Yep - a credit card secured against a term deposit is a great way to start, practises like the 80% APR with insane upfront fees are just predatory and feed into bigger problems - but they don’t care, they make their money up front from the fees
In the past, we did that with a secured credit card. Looks at works just like a regular credit card, but you have a $500 limit or something - and the equivalent amount of cash is kept by the credit card company to secure your card.
There was an annual fee, and the interest rate was high - but it wasn’t 80% and it protected both parties.
Sounds like a sensible plan. If this is available to persons with crappy credit ratings in that jurisdiction, then I’ll withdraw my objection.
I’ve never before heard of a secured card.
I was never of the opinion that anyone offers 80% interest cards out of the goodness of their hearts, artemis. I merely object to the notion that someone with crappy credit can never be trusted with credit again under any terms, which appears to be the opinion of some. Given a better vehicle exists to do just that, I see no reason to support the more abusive usury option.
Amusingly, I used First Premier to establish myself a credit rating ten or twelve years ago - I was around 30, substantial savings, but had no rating at all, never having had a credit card before (or any student loans). I couldn’t get a credit card from anyone, including the bank I had my savings account in.
Their secured credit card deal (at the time - no idea if they are still offering it) was a great solution for me - now I’ve got a credit history and could get cards left and right. All I did was cut them a check, that was my initial “credit limit” (plus some fees, but nothing like this article talks about). I repaid ontime every month, and that was that. Thank goodness that I didn’t have to go to take this kind of deal to build my credit.
One of the reasons you’ve never heard of a secured credit card, Malthus, is that they’re getting harder to find - precisely because the banks would rather push people into the ultra-high-abusive-APR cards, because in the long run they earn more money off of them. Banks today WANT to trap their customers into a never-ending cycle of debt. These days they make most of their profits off of the high interest rates and over-the-limit fees, rather than off the 1% merchant transaction fee which used to be the major source of profit for the card companies back in the days when credit cards were harder to get.
Access to credit is important, but we’ve got a problem when the industry’s deliberately structured to insure that its profitability depends on unwise use of credit. That’s the situation in the US right now, and it’s the major driver behind the global economic crash. You can’t borrow your way out of debt, no matter how much the credit card companies and payday loan places would like us to believe otherwise.
All of that won’t do any good unless we start teaching our kids finance. I always hear about people making fun of others who have made poor financial choices and I always wonder - where were they supposed to learn the right choices from? If you don’t learn it from your parents, who else do you learn it from?
I think we should have basic finance courses in high school. This is a credit card, this is interest, this is how you pay for it. This is a check. This is how you write one out! This is how you balance your checkings account. Here is a sample household budget. Here is a sample of overextended credit. You (generic you) probably think I am being overly anal; however, I know lots of people who just never did this stuff and have to learn it all on the fly.
And that doesn’t even begin to touch big purchases like cars or houses. I haven’t the remotest idea how to go about buying a house. Thankfully i see there are 'first time home buyer" courses which I will take when the time comes. But the market is not geared toward the buyer and one constantly has to watch out for pitfalls.
We have to educate before we can get down to yelling at people for poor choices. One more thing. I’d say at least a majority of the people I know with bad credit made poor choices when young - 18-23 YO I would say. Yet it chases them for years and years. Again, education needs to start early.
You won’t get any argument out of me, Anaamika! Offering a real basic finance course in high school, like the one you describe, would be a very smart move. A lot of people have the misfortune of growing up in households with parents who either don’t like to talk about money matters or who are themselves financially irresponsible. This isn’t something we should assume kids will pick up on their own. Banks have no incentive to do this - they WANT those 18 year olds to rack up large sums on credit cards.
I’ve always thought this was a great idea.
Don’t some employers check credit scores these days as a hiring factor?
I could not agree with this more.
When I worked in Securities, they did. My husband has classified clearance from the federal gov’t and they checked his credit and mine (as part of the most frighteningly detailed background check I’ve ever seen). I’ve not had it checked for any other jobs.
Oh, yeah? Well, you just tell those people at Securities that I’m having a Bar-B-Q come spring, and they are most definitely not invited! So there!
I could wholeheartedly support that. I was never taught – not the first thing, in fact. Balance a chequebook? Not only have I never done that and do not know how to do that, I don’t even know what purpose it serves. Mind you, I don’t go around making stupid financial decisions that damage my credit … anymore. I did have trouble with student loans dogging me after college, but that’s been taken care of, and now I have credit cards and pay them down responsibly (i.e. pay much more than minimum every other week unless I need some extra money, then I pay minimum). Still though I think I could probably have done better for myself financially over the years if I had been given some good instruction and advice when I was younger.
I support the idea, but i wonder just how much more time we should be taking away from academic subjects in school. I’m teaching university undergraduates right now who can’t even put together a coherent sentence.
Surely, if there’s one thing that parents should be teaching their children, it’s basic money management skills like this. Schools keep getting loaded with more and more parenting-type responsibilities, and i think it degrades the quality of education that children get.
I like that idea. In years past, I’ve had a credit card company to slip an interest rate increase past me, so I thought I was being vigilant; however CitiBank managed to do it again this past summer. They doubled the rate I was paying on a line of credit. I called to ask if there was some reason but the answer was, more or less, “we could so we did”.
Now I’m faced with another increase on the credit card I have with Citi (mentioned upthread). I am seriously considering withdrawing funds from my IRA - penalties, taxes and all - to pay these things off and be done with it.
Maybe the finance lessons could be integrated as practice work or projects into math classes when students are learning the mathematical concepts used?
The problem, Mhendo, is that you can’t teach your kids what you don’t know yourself - and there are a LOT of adults out there who have marginal to non-existent money management skills. And a plethora of financial companies positioned to take advantage of their offspring’s resulting financial ignorance. As Anaamika mentioned earlier in the thread, a sizable number of people with credit problems dug themselves into a deep hole in their young adulthood, courtesy of those easily-available cards with high limits the credit card companies are offering to college students. Perhaps some formal education in basic finance before the age of 18 would help reduce that problem.
I like Supergoose’s suggestion of incorporating some of of this into math classes. Another alternative would be to incorporate it, along with the stuff currently taught in health classes, into an “Independent Living” class.
Heck, my bank just gave me a line of credit one day. Now I can casually get up $10,000 at 6.5%.
Of course, I’m Canadian and our banks are not insane.