Some Credit Card Issuers Working With Consumers
After reading a lot of bad news about credit cards lately, there’s finally a little bit of good news.
In a story that comes from the Washington Post (which I can’t link to because you have to be a subscriber to read it, which I am), it stated that more and more banks are reaching out to customers who they determine are in some kind of financial difficulty and offering them deals in helping them reduce their debt. In some cases, they’re drastically reducing interest rates so the payments are lower, but more of the payment is going to the principle than interest. In others, they’re working out payment plans with people who they determine might be on the edge of bankruptcy.
To me, this is good news just for the fact that some companies are reaching out and trying to do something, finally. I think I’ve argued on this blog that it’s better for some of these folks to get something rather than nothing, and if the financial condition of a person improves then they can go back to the original terms and move on from there. True, I’ve said it more about mortgage holders so people don’t have to decide whether to head towards foreclosure or short selling their homes, but in a way I’ve also railed against credit card companies.
All of this doesn’t come without issues, however. In many instances, people have to cancel their credit cards, which isn’t such a bad thing, as I’ve advocated people should do that. But that also puts a negative hit on their credit reports, which reduces their credit scores, something else I’ve railed against. You know, I’m really of the opinion that either credit card scores should be thrown out or overhauled, because if someone is paying back debt or makes an agreement to pay off debt, even if it’s not the full amount, it shouldn’t drastically alter their credit score because those people are acting in good faith.
And, if you cancel a credit card for any reason, it’s not fair that you take a negative hit for being fiscally responsible. Why should I keep a credit card for three years that has no balance and that I never plan on using again just so my credit score survives? That’s idiocy; keeping credit I can’t or won’t use so that I can potentially borrow lots of money later on. The president of consumer education at Credit.com, John Ulzheimer, said “It’s really something the individual will have to weigh. “Is the damage worth it because the funds are less expensive?”
It shouldn’t be a yes or no choice; that’s the problem. Unfortunately, once again, the only thing people can do is to not get credit cards to begin with. And you can’t do that, otherwise forget about flying on an airplane or renting a car or many other things where you have to verify who you are via a credit card.
They really do have us all over a barrel. Still, this was a bit of good news for once.