|
Hi, everyone.
It's just been brought to my attention that I haven't written on this topic, yet, and I'm anxious to correct that. This is one of the most insidious hazards lurking in the fine print of your credit card agreements and is now being seen in mortgage agreements or trust deed notes.
Here's how it works. Somewhere in your eight-page, fine-print agreement with your credit card issuer (you know, the one you threw away?) or in one of the Change in Agreement inserts in your bill that you never read, someting like this language appears:
"...we may also consider your account to be in default at any time if...we receive information indicating that you...are unable to pay your debts as they become due or are otherwise not credit-worthy...in our discretion we may consider the amount of debt you are carrying compared to your resources or any other of your credit characteristics, regardless of your performance on this Account." (Emphasis mine.)
This or similar language now appears in virtually every credit card agreement, and if it wasn't there when you opened your account, because you continued to use your account after they notified you in one of those sneaky inserts in your bill, it is now.
What does this mean for you? If you don't carry credit cards or pay in full monthly, it means nothing. As long as you don't slip up!
But if you carry balances, watch out. Perhaps you are great at staying on top of your payments, so that you never actually have a late payment. But if one card happens to run an audit and decides you are carrying too many or too much outstanding debt, expect every one of them to go up to the default rate, now in the 29-33% range. Let's see how long you can juggle it if that happens.
Don't overlook paying your mortgage, utility bills, and other entities that may report to credit agencies, also. Any 30-day late report on your credit can trigger this clause, not just credit cards.
Now, in addition to this, remember that credit card minimum payments are going up, and that according to new bankruptcy laws effective last year most consumer debt can't be eliminated through that route. Now you have a recipe for real financial disaster with no way out.
What's the answer? Some say cut up your credit cards. If you don't have an effective way to track your spending and discipline to pay them off monthly I would agree. However, if you want to use them for convenience and sky miles or rebates, go ahead. Just make sure that when the payment comes due, you make it in full and on time. If you'd like to know all about the effective tool I use to do that, contact me through my website.
Cheri
|