Credit Card Bill debate

[Ksandra]

got in a tangent in this thread:

http://www.bluegartr.com/forum/77136...ue-lost-7.html

so wanted to bring it up in a separate one to see people's thoughts on it. Honestly, until today never heard a complaint so interested if there are others that thing it's a bad thing.

summary:


http://www.boston.com/business/perso...he_credit.html

• Creditors cannot increase the annual percentage rate (APR) during the first 12 months of opening up an account.
• Creditors are required to provide consumers with a 45-day advance notice of changes in rates and significant contract changes. Rates that change due to a change in the index that the rate is based on are excluded from this 45-day notice requirement.
• Promotional rates need to be in effect for at least six months from the beginning date of that promotion.
• Creditors need to provide a 30-day advance notice of an account closure.
• With certain exceptions, credit card issuers are prohibited from charging a finance charge based on the double billing cycle method.
• Creditors are prohibited from charging a fee on an outstanding credit card balance at the end of the billing period if the fee is attributed to the interest accrued on an outstanding balance that was fully repaid during that preceding billing period.
• Consumers have the right to reject a new credit card after the creditor notifies a consumer reporting agency of its corresponding account.
• Creditors are required to remove information provided to a consumer reporting agency about newly established credit card accounts if the consumer has not used or activated the account and and if the consumer contacts the creditor within 45 days of its establishment to close it.
• If two or more different APRs apply to different portions of an outstanding balance, the amount of any payment above the required minimum payment needs to be applied to the balance with the highest APR first and then to lower APR balances.
• Creditors are required to provide a grace period for payments even if the cardholder takes advantage of a promotional rate balance or deferred interest rate balance.
• Creditors are required to send credit card statements at least 21 days before the due date of the outstanding balance.
• Creditors are prohibited from providing credit to consumers under age 18 (unless they are emancipated under state law, or the consumer's parent or legal guardian is designated as the primary account holder).
• For college students who do not have a co-signer, the maximum amount of credit extended will be limited to the greater of 20 percent of the student's annual gross income or $500 dollars. The aggregate amount of credit extended from all of their credit cards will be limited to 30 percent of the student's annual gross income (for the recently completed calendar year).
• Creditors are prohibited from opening a credit card account for any college student who does not have any verifiable annual gross income or already maintains a credit card account with that creditor, or any of its affiliates.
• Creditors are prohibited from charging a fee to make telephone and web-based payments. However, a fee may be charged for expedited telephone payments made on the due date or the day before the due date.
• Creditors are required to post their written credit card agreements on the internet.

continuing convo:

No credit means you can't do anything. I find the bill deprives a lot of young responsible people from obtaining a credit card and thus impeding them later in life.

'm 20 (21 this year) and my credit score ranges from 690-720 based on the credit reporting agency. My parents have really bad credit due to one getting injured in the line of duty and the other losing a job after company folded and sent work overseas, and then the whole post 9/11 economy downturn making it hard to find a job in his industry. Bills piled up and etc...

I got my first credit card while I was in school (17, a month before I turned 1 and worked a Work Study job (minimum wage) for only 15 hours a week. Maximum work study amount you could make at the time was around $2000. I charged things and I would pay it off once I got the bill. Some things it took me 2 or 3 months to pay off, but I did it. I ended up getting around 5 other credit cards to stores. I also had(have) student loans. I pay off cards I charge any amounts on the next month or two.

On campus housing is expensive as hell where I go to school, it's at least double the amount it costs to live in an apartment 1 block off campus. I needed a good credit score to rent an apartment without a co-signer, since my parents would never have been approved as co-signers. If I didn't get to build my credit at such a young age, I wouldn't have been able to get an apartment. I also wouldn't have been able to afford school, because all of the loans for school I have taken out are in my own name, without any co-signers.

If I had to wait until I was at least 21 to start my credit score, I would be fucked. Graduating from college with no credit is very dangerous unless you have parents who have stellar credit history. How are you going to get your own apartment when the landlord finds out you have no credit score? I wouldn't rent to someone who had no credit (inb4 discrimination).

I just think that portion of the law is going to make it much harder for college students to make due during college and post-graduation. They already have it hard enough with student loans.

I also think it's going to make the banks up the rates on credit cards and start handing out much less credit than they did before.

my response:

It sounds like you've never heard of secured credit cards before... aside from the fact those are easy as fuck to get there is such things as student CC that most banks give to students with no credit history (and no co-signers) that have a very low balance (about 500$) which this bill is pretty much just enforcing. (except now they'll be getting it at 21 instead of 18 )


FYI Secured credit cards are often given to people will no credit and bad credit. It's basically a prepaid CC that you use for about a year (depending on deal/bank) and if you managed to not overdraw/pay appropriately after that year, it gets turned into a regular credit card.

As to the banks raising their interest rates I doubt that. For one, they CAN'T raise the interest rates on current credit cards because of this bill. And considering all the banks are in trouble they won't risk raising new ones too high because people will just go to their competitors.

Even if they did, raising rates is actually a good thing. What happened with so many people that got into CC debt is they got a CC with a really low rate. Then charged a bunch of stuff. It only takes one month to miss a payment even by a day, and BAM the bank would make the interest rate triple because of it. Now the person can't barely afford to pay the minimum on the card, let alone pay it off. Raising rates from the start might make people a little bit smarter on charging too much.


Will it fix all the problems? no, there will still be idiots all over the place that will spend more than they can afford, but it's definitely a step in the right direction to get people out of debt (and prevent future people from falling into the same hole).

[Cheerios]

I use a debit card so my credit is about as good as a bum's

[Kiro]

Debit and cash.

[Melchiah]

I'm going to say this about credit:

It's all a crock of shit; lock, stock and barrel.

Over the past year, I have purchased one new vehicle and one laptop on credit. Now, I understand that my credit scores will take a hit upon applying for a new line of credit, which I did twice in the last 12 months. Once in July for my laptop, and again in October for my car. However, I have made all my payments over the last 12 months on time, and I paid my laptop off in 11 months, and yet, every quarter in the last 12 months my credit scores have continued to drop.

Also, I have the misfortune of having a collection on my Transunion score. The sordid tale behind this little gem only furthers my disdain for credit reporting agencies. When I was 20, I contracted Toxoplasmosis, evidenced by some swollen lymph nodes on the sides of my neck. During the multitudes of referrals I went through getting this condition diagnosed, one particular doctor's office failed to file a claim with the insurance that was covering me at the time. I know this because my health insurance never sent a statement detailing the claim, and the doctor never sent me a bill for the 5 minutes he took to refer me elsewhere. Now, at this point in my life, my parents had overlapping BC/BS health insurance, and as a full-time student I was entitled to full coverage. Now, if I am covered as a dependent under another person's insurance, I'm not responsible for my medical bills. However, as I was never billed for this visit, nor a claim ever filed with my insurance, this doctor visit went unpaid, and eventually to collections. This was in 2002. I never found about this going to collection until two years later when I tried to buy a car. Never got a bill from the collection agency, the doctor, no phone call, nothing. But it showed up on my credit report, and is still there to this day.

tl;dr version: Credit reporting agencies are full of shit, and infested with inaccuracies. Fuck them.

[archibaldcrane]

It sounds like you've never heard of secured credit cards before... aside from the fact those are easy as fuck to get there is such things as student CC that most banks give to students with no credit history (and no co-signers) that have a very low balance (about 500$) which this bill is pretty much just enforcing. (except now they'll be getting it at 21 instead of 18 )

I'm not seeing where there is a 21-year-old age requirement for this stuff - did I miss something?

[kyod]

(except now they'll be getting it at 21 instead of 18 )

Maybe it's just me, but 21 is way too late to just start your credit history. A credit score and good credit history is required for so much today, I think if you get your first card at 21 it puts you at a disadvantage. My friends who are 20, 21, 22 and have zero credit need co-signers for literally everything. For people who might not have the advantage of being able to have a capable co-signer it severely limits their ability, even if they are responsible with money.

Even if they did, raising rates is actually a good thing. What happened with so many people that got into CC debt is they got a CC with a really low rate. Then charged a bunch of stuff. It only takes one month to miss a payment even by a day, and BAM the bank would make the interest rate triple because of it. Now the person can't barely afford to pay the minimum on the card, let alone pay it off. Raising rates from the start might make people a little bit smarter on charging too much.

If the rates were raised it would cause more people to get rid of credit cards. For most people, what's the point of keeping a card with a very high interest rate? They might close it, which damages the credit score. I also think that people who were responsible with money shouldn't suffer high interest rates because others bought things they blatantly could not afford. It's like the housing crisis, people bought homes they could not afford, those homes were foreclosed on and now responsible homeowners are in neighborhoods with foreclosed homes which in turn affects their own home's value.

This comment is just speculation, but I don't think it would be too far-fetched to see banks and other groups tacking on more fees, such as annual costs, to their cards. If you're low income and have a credit card that you rarely use, but have it to up your score, you might not be able to afford that and have to get rid of it.

A lot of the credit card bill is good, such as the 21 day requirement for statements to come, but some of it just doesn't sit well with me.

[Senoska]

Debit and cash yo

[Darus Grey]

Needs to happen.

Banks have been completely irresponsible and predatory with consumer financing. My only regret about this bill is I feel it doesn't go far enough.

Especially in the college sector...how many suicides are we up to now?

A large segement of card-holders have proven they cannot responsibly use their cards, which only encourages banks to target these people. I don't think people like Kyod truly understand how people's brain works with these...CCs dehumanize the consumer process, ask anyone, look at studies, etc...Former CC users who are forced to use only cash magically become much more discerning consumers, much more reluctant to spend money, and much more informed about what they do buy.

It's like actively abusing and preying on people with a mental disorder. I know we like to think we have personal choice and free thought...but in "reality" people are easily manipulated and exploited, and yes, sometimes need to be protected from themselves.

That said...I'm very sad AMEX recently closed a loop-hole I was using for almost a decade in their billing process that basically gave me free money every month.

[archibaldcrane]

Again, where are people getting this 21-year-old thing from? I don't see it in the summary.

If you want to argue that there should be more basic finance taught in schools or something, I'll be right there with ya - but I'm just a bit too libertarian to buy into "we're restricting everybody's rights because too many people are stupid and irresponsible." My dad taught me how to not be a retard with money, so I'm not a retard with money. It wasn't the most complicated lesson in the world, really.

[kyod]

Obama signs into law credit card reform - USATODAY.com

"Banks can't extend credit cards to people under 21 without verifying their ability to pay or getting their parents' permission."

Getting a credit card if you're under 21 will be much more difficult, basically unless your parents have good credit to co-sign/give permission or are working essentially full time (while doing a full course load and exhausting financial aid options i.e. minimum wage work study), you probably won't get a credit card until 21.

[Warudo Ecksu]

I think it's a terrible idea to make getting a credit history harder for younger people. Cash and debit cards are fine and dandy when you still live with your parents, but once you get out in the real world, you can't do shit without a good credit score.

I'm 25 and still trying to establish my credit b/c I didn't get a credit card until I was 24. I thought I was making a good choice by paying for everything in cash all these years. Boy was I wrong.

Not everyone has the luxury of having parents who are capable of co-signing for them either. =/

[Baolin]

Obama signs into law credit card reform - USATODAY.com

"Banks can't extend credit cards to people under 21 without verifying their ability to pay or getting their parents' permission."

Getting a credit card if you're under 21 will be much more difficult, basically unless your parents have good credit to co-sign/give permission or are working essentially full time (while doing a full course load and exhausting financial aid options i.e. minimum wage work study), you probably won't get a credit card until 21.

I see this as being a potentially good thing. The way that reads to me doesn't mean you can't get a credit card when you turn 18 on your own, it just means you have to have some form of income to back it up that can be verified. (Or of course your parents' permission saying they'll back you up on it)

What this seems to do to me is keep credit card companies from sending out all these introductory offers to people that just turned 18 that feel like they own the world. Pop a couple credit cards in their lap with $200-$500 limits and they can quickly build up a couple thousand dollars in debt. Couple that with the fact that they give them low interest rates that balloon to 21-23% after they miss a payment and now the kid is stuck in a hole with no easy way out and their credit score going to crap.

The bill seems to be trying to protect against this on all aspects. This situation might not have happened to you or a lot of other responsible people, but I had several friends from back in high school that were just excited to get their own credit cards and ended up falling into this trap.

[archibaldcrane]

It kind of seems to me like lenders shouldn't be lending money to people without verifying their ability to make good on the loan period - regardless of age, no?

I mean, credit card applications always ask for yearly income, don't they?

I suppose with the changes in bankruptcy law a few years ago, lenders are even more balls-out with their bags of easy credit, considering it's way harder to wipe your debts via personal bankruptcy nowadays.

[Aerides]

Short version: This will protect some people from themselves, and it will make credit more expensive, and less beneficial, for the top tier folks as well.

Long Version:

It will reduce the extension of credit to the riskier population (hi 18-21 year olds and <650 fico score ppl). At very least, knowing how hard it is to raise rates, the credit card companies will offer starter rates to this population that are higher to begin with.

It will limit the bonus floater offers that a smart/good credit person (>750 established history) can leverage.

It will make the cost of doing business for banks and credit card companies higher, meaning they will lose profit, lose market value, and find other ways to cut.

First their employees: more layoffs? another no-raises year? less benefits.
Then the customers: Less rewards, cut that cash back shit, no more airline miles for you, etc.

QQ for the credit companies? Sure, but it will impact many normal peoples' paychecks and/or benefits one way or the other.

[Nystul]

Hi there. I had a checking account when I was little. When I was in college, I didn't even have an ATM card- if I wanted to have cash, the easiest way was to walk a few blocks to the local grocery store and write a check for cash, but they'd only do it for like 50 bucks at a time. When I moved from Illinois to Maryland I got an apartment (without a cosign) without a credit card.

In fact, I got my first credit card at age...oh 26 or so. The only roadblock I had in terms of not having a credit history was...irony...getting a credit card in the first place. When I got the card I was so used to never buying things that I didn't have the money for already that all I used it for was automatic bill payment. I think it worked out pretty well. I still only have one credit card and can't think of any reason at all to open another. My wife, on the other hand, has like 7 open credit accounts. She had a balance and she'd open another and transfer the balance to one with zero interest etc. Fortunately both of us have scores above 720 (I think I'm like 730 and she's 750).

You guys can come up with all the special circumstances all you want, but the reality is that for every one responsible 19 year old who is estranged from his parents and has massive medical bills and *needs* credit there are many many people who are 19 with 6 credit cards paying each other off and who will have ruined their credit for life before they graduate college.


Edit: Pay attention to the wording people- Can't give credit cards to people under 21 **unless** they can verify that you can pay it back. If you read between the lines, this means you can't give credit cards to broke ass college kids. If you're 18 and you have a good job and you're making money you won't have a problem getting a credit card.

[Khamsin]

It kind of seems to me like lenders shouldn't be lending money to people without verifying their ability to make good on the loan period - regardless of age, no?

I mean, credit card applications always ask for yearly income, don't they?

They should, but I think they discovered that some lenders were actually counting on people not making payments on time or making minimum payments forever. As in, it was actually part of their business plan that people would rack up fees and interest and therefore become a planned source of revenue.

That's not the purpose of credit, when its working the way it should. Penalties, fees, and people who just pay interest forever without paying off the loan shouldn't be part of the business model. It should be accounted for, but not a main part of the revenue such that they count on it for profits. They shouldn't build the business around the idea that people won't be able to pay their bills so you can milk money from them forever.

Instead, they should be making their revenue on legitimate interest payments from people that are paying their loans off in a timely manner, and only loan to people who can do that. If that means they need to re-evaluate their business model and increase interest rates, fine. Most people I know pay their credit card bills off every month, anyway.

In fact, generic credit card expenditures such as gas/groceries/clothes/electronics/books/etc. that you could have put on your debit card but instead put on your credit card should always be paid off in full every month. If you're making payments on credit debt that includes those sorts of things, you're doing it wrong.

The only things you should be making payments on are things that probably already have payment plans offered by the retailer, such as cars or furniture. Or stuff like real estate, business startup loans, student loans, and the sort.

[SephYuyX]

I didnt get a CC till I was 24, and even then ive only used it like 5 times or so for gas, just so it looked like I was using it to build up credit. I got their best Platinum CC too, with no credit, the guy was like since you have a lot of $ in your savings acct, I dont think youll have a problem if I give you this card, even though you have no credit. Gave me a 10k limit and 0% for 2 years.

Edit: Since then I was asked if I wanted an additional 1k for my limit, so I guess im doing something right?

[Dimmauk]

I'm glad it will be more difficult for people under 21 to get credit card. There are other ways of establishing credit.

[Maguspk]

I don't have a credit card and the one time I got my score accidentally it was 590 iirc, which I assume is terrible. I had literally done nothing wrong, I only own a debit card and checking account, at that point I hadn't even lived in an apartment (I was in a dorm) so the electric bill wouldn't have even counted. Paying the electric bill on time does affect my credit score, right?

Anyway, the point is credit scores are bullshit. I should have a spotless one but I probably still don't.

[deshende]

I'll just be bummed if all of the new credit card legislation causes CC companies to start adding annual fees to cards (which a lot of people predict). (Reasoning being that they'll have to make up the loss in revenue some how).

I use my credit cards for pretty much all of my purchases for convenience sake and have everything payed off each month, so annual fees would be like being penalized for being responsible with my money.