One of her credit cards started out charging 7 percent or 8 percent interest. It has now skyrocketed to 24 percent. Another card with a 2-3 percent rate is now charging her almost 18 percent.
The minimum monthly payments on all of her credit cards total about… one-third of [Carol] Hodges’ total monthly income. Even paying more than her minimums has had bad consequences.
“As I’ve chipped away and brought it down, they take away the credit [limit]. So as it went down, I had less credit available,” she says.
[blockquote]First, she needed some more education. Then she needed some startup money. Hodges decided she’d use her credit cards to cover those things, thinking it would become “good debt.”
“Good debt is your assets. Good debt can be your training. Good debt makes you money,” Hodges says.[/blockquote]
No debt that goes on a credit card and stays there for over a month is “good debt.”
Credit cards are for “emergencies” or convenience – debt you plan to pay off each month.
YBIC,
Phil Snyder
It has been OK for the government to crack down on drug trafficking (which consumes and destroys lives) but they allow credit card companies to traffic in loan sharking. What is the health risks from being consumed with the worry of an impossibly manageable debt? This woman should have gone to a bank and opened a line of credit without overreaching her ability to pay it back in case her business didn’t really take off. People assume that if a credit line is given to them, they are secure as to what will happen financially in the future. The banks think they are secure by all the interest they rake in from the total card holders they do business with. Let the banks charge only what is fair. Force them to make decisions based on the merits of the venture and soundness of the borrower. Don’t let Congress force the banks to provide large credit lines to unestablished borrowers. Isn’t this what caused the housing melt down?
I agree with #1. It doesn’t matter what the interest rate is if you pay it off every month.
> It doesn’t matter what the interest rate is if you pay it off every month.
In fact, if you are going to pay it off every month, the higher the interest rate the better! Generally cards with very high rates also have better benefits in terms of more airline miles or more cash back…
oh yes, the industry hates “one month wonders” – i.e. those who pay it off each month. I plan to educate my kids that such is the only way to have a credit card.
(revolving balance free since 1995)
Chris, #5…correct me if I’m wrong, but don’t the credit card companies make money off the transaction fees, while the interest belongs to the issuing entity (e.g. banks?).
yes #6 the credit card companies, and perhaps the banks do as well, but they make MUCH more off the interest.
(and I still want to know who you ran against in the STL congressional contest).
Yes, but the fees are guaranteed whereas the interest isn’t.
Dick Gephardt.