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Here's a handy hint: If you don't have the cash to pay fot it, don't buy it.
http://blog.washingtonpost.com/thecheckout/
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Posted at 09:50 AM ET, 07/10/2006
Faulting Universal Default
For consumers, "universal default" has to be one of the most aggravating policies practiced by credit-card issuers. Now, New York may become the first state in the country to do something about it--at least if Gov. George Pataki signs a bill passed by the state legislature last month.
What is universal default? If you don't know, consider yourself lucky because it probably means you've not been affected. Under universal default, a credit-card company monitors the credit histories of its customers, even those who are current in their monthly payments. If a customer is late paying another creditor (such as another credit card company or utility)-- or has taken on so much debt that his or her credit score drops -- the credit card company automatically raises that customer's interest rate on existing and future balances. Default interest rates can be as high as 35 percent; most are around 30 percent.
Customers have complained that they have little choice once the higher rate is imposed; if they want to continue using the card, they have to accept the higher rate. If they refuse, the account is closed, with the cardholder liable for the existing balance at the old rate.
Credit card issuers say rates need to reflect their risks and the overall creditworthiness of the borrower. But consumer advocates have called the practices unjust and unfair, noting that in some cases the interest rates are double or even triple the rates under which cards were issued.
In June, the New York State legislature completed a measure barring credit card companies from raising interest rates because a consumer missed or made a late payment to another creditor. "This legislation sends a clear message that this type of anti-consumer behavior will not be allowed in our state anymore," said Assemblyman Peter M. Rivera (D-Bronx), chairman of the Assembly Puerto Rican/Hispanic Task Force, and the author of the measure.
Consumer groups have been trying--so far unsuccessfully--to get this same kind of law passed in the U.S. Congress. "I love it," said Linda Sherry of Consumer Action, a nonprofit organization that conducts an annual survey on fees and rates. "Credit card companies are the only industry in the world to re-price something you already paid for," Sherry said. "I just hope New York will be able to impose" the new law (assuming Pataki signs it) on the national banks that aren't chartered in New York, Sherry added, noting concern that the law may be challenged in court or by federal regulators.
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Expect the Repug administration to come down on the side of the financial community on this, like they did on personal bankruptcy legal reforms.
Here's a handy hint: If you don't have the cash to pay fot it, don't buy it.
Why not? Then what's the point in having good credit?
If I have good credit, and I want to buy a 1300.00 tv, but I don't have the cash in hand, why can't I use my credit? I make more than enough to make the monthly payments.
There is a difference between having credit and using it wisely and living within your means and not living within your means...
So I shouldn't buy a house or a car either huh?
If you want to throw your money away, then so be it. But why not wait until you have saved the $1300 for the TV instead of paying the card fees on top of the principal you borrowed. The store will still have TV's by the time you have saved enough.
I don't mind, it's not like I'm paying 20% or more, why not have my TV today for less than 6% per year?
I'm with 1369, we HAD $8000 worth of credit debt, I will never laet that happen again. I will only finance 1 thing a Car or Truck But I will save my money to have a big down payment.
Credit will bite you in the ass in the long run.
Like I said above, that's your choice. I'd rather have my money in my pocket.
I think there should be a medium between having 10s of thousands in credit debt and buying nothing on credit. I personally would not want to finance something like a TV, but I've learned the hard way what abusing credit can do.
I think PM5K is correct, though. People just need to be responsible with it. Because of that, I don't mind credit card companies being able to do this.
Ain't that the truth. No sense in just giving your hard earned money to creditors. The only acceptable interest payments are for cars, houses, and business loans. Oh yeah, I forgot about student loans.
I didn't mean to imply that everyone should burn their credit cards, rather if you buy something on credit (i.e. the TV), have enough in the bank to pay the total amount when the card statement comes in so you don't have to pay the loan shark fees. And certain things (like Zombie said, cars and houses and such) do require financing.
Why wouldn't you finance a tv?
And what would you finance?
Maybe a washer and dryer?
Fridge?
thats why you buy a tv on a however many months same as cash type deal.
Loan shark? 80.00 a year isn't anywhere near loan shark fees...
Maybe if you have poor credit and have a high interest, say high twenties, then what you are saying would make more sense...
If you are too poor to pay for the television when your credit card statement comes, then don't buy it. If you think that it is a coincidence that people who finance small items never seem to get out of the hole, think again. Financing little items like televisions is bad money management.
I do that when I can, works out well...
Uhhh, no, they haven't paid for the item, the card company paid for it. You still owe the card company for the item.
Do you mean pay it in full or pay a monthly payment?
We aren't talking about people who can't afford what they buy, 1369 is saying I shouldn't buy anything if I don't have the cash, which negates the purpose of credit and it's usefulness.
Pay in full, you should be able to pay in full every credit card statement, or at least damn close to full payment. Credit shouldn't be used for small items like TVs or appliances, you build up credit for big items to get favorable rates on houses and cars.
people take the two extremes on credit way too often.
debt isnt necessarily a bad thing.
How is debt a good thing when it comes to small items? Please explain, because I don't see at as anything but people living outside their means.
i'm just saying debt in and of itself isnt necessarily a bad thing.
and if one has a favorable credit rating and would rather not pay for everything all at once, then who cares?
sometimes people like to divert their funds to other means, where the return is higher than if you were to pay that tv all at once instead of over 6 months or so.
not really a difficult concept.
Yup, my debit to income ratio is exactly where I want it to be, and debt within reason isn't a bad thing.
Divert their funds to other means where the return is higher!!!!!!!! Wow, a lot of investment gurus put their televisions on payment plans don't they!!!!!!!!!!!! If it isn't such a difficult concept, then please explain it to us, because now I'm really intrigued.
Ac ulating debt with the purchase of small items is what people do that are living beyond their means, either that or they are rich and irresponsible, either way it is irresponsible money management, period.
I just like using my CCs because they are shiny ...
I wouldn't finance anything I could save up for. If I needed a fridge right away, or a washer/dryer then I'd probably finance one. But I don't see a situation arising where I need a TV ASAP.
Wants i can save for.
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