Today, we received a letter for Amy who is 19 years old and has just moved out of home. The letter was from American Express, and is an invitation to apply for an American Express Gold credit card. Just what a 19 year old university student on working part time at K-mart, really needs!
The promise of up to $50,000 of credit is a big carrot to dangle in front of a young person, who may not know better. They may be desperate for credit or experiencing hard times, but I believe that our Amy would not fall for the lure of expensive credit in these troubled times.
Get this. The interest rate is advertised at 15.99% p.a. with up to 55 days interest free. How on hell would anyone on a casual wage be able to pay off any sum over $500 within the interest free period. Once past the interest free period, the interest rate would cripple a person, especially if they only paid off the minimum payment for the month. It would take many years to pay off the principle. Here is an example. Say you borrowed $500, and only paid off the minimum payment of $25 a month. It would take 20 months to pay off the principle. That is nearly two years folks! Then, of course you would still have to pay off the interest you have accumulated on top of that which is the kicker that people don’t take into account when they make a purchase on a card.
According to a simple credit card calculator I used, it would take 7 years and an extra $331 on top of the original $500 loan. That is bloody incredible. But who just purchases $500 on a credit card? According to Choice Magazine the average credit card debt for every man, woman and child in this country of $3,200. That is a record credit card debt of $44 billion outstanding as at 9 Oct 2008. That is a nice little earner for all financial institutions who issue these plastic perils!
Why would a young lady, just starting off in life be offered a scam like this? It makes me sick to think that a company, only after profits, would stoop that low. Shame on you Mr. American Express. No wonder the credit crunch started in North America if this is an example of how you market your product!
So, some friendly advice from one who knows. Don’t be sucked in by a credit card company offering cheap or easy credit. It will only end up in tears (yours of course), and they will take you to the cleaners without you even realising it!
How is one to live a simple life when bombarded with all this crap? Give me strength!
My MOTS was listening to a podcast interview of a woman who just lost her house in the subprime crisis in the US.
She claims that she was not told about the increase in payments after the low payment intro period, and when the payments increased (get this!) from $600 a month to $2000 a month she found she couldn’t pay, and lost the house.
She’s arguing that the mortgage broker should have explained this to her, and it isn’t her fault that she didn’t ‘read the fine print’.
*sigh*
Too many people do not understand credit, or the limits of their own income. For years my MOTS and I have lived well within our means and saved a good amount of our income (and had no credit use), and wondered why everyone around us on much smaller incomes seemed to be doing so much better.
Now the elephants are coming home to roost, and the THUNK is audible around the planet.
There’s no such thing as something for nothing. I think that’s what people are learning right about now. A pretty basic lesson, but it might be real hard to learn.
ive been retired for 3 years and ive been offered credit cards from banks etc that ive never dealt with, and the 2 cards ive got they are always trying to increase the limit
Gav, Amy is a smart cookie, you brought her up well, I don’t believe that beautiful girl would fall into credit trouble with you guiding her. Dad.. You were always a smart cookie with money, us kids NEVER went without
xoxooxx
Hi Gav,
We must be on some weird mind intercontecting space.
Read your post just after I wrote mine.
We are both thinking about the economy and how it affects our green journey today.
I have a story for you. My husband & I about 18 months ago changed banks for our mortgage to get an even better deal.
The bank said that they were happy to give us the loan if we closed one of our credit cards (there was nothing on it so we did).
Two weeks after the loan was approved we get a letter from that same bank offering us a credit card with $100 000.00 limit.
We of course riped up the letter but it gets up your nose doesn’t it!
Sarhn
Isn’t that crazy!I would be very upset. We really need to have legislative intervention.
It’s like smoking advertising – it took litigation to change companies from preying on helpless individuals who they knew their product was bad for.
We raise our children teaching them about ‘stranger danger’ for their own protection. We will also have to teach them about guarding themselves from the marketing devils – banks, advertisers and ‘buy now pay later’ scammers.
I agree with everyone wholeheartedly. I too receive up to 4 of these letters in the post each month, from companies I have never had an account with. About 2 years ago, I asked my credit card company to lower my card limit from $22,000 to $6,000! They tried to put me off going through with it of course, and I said I didn’t care, and went ahead anyway. We have never looked back!
It is a crime to tempt people who are not financially literate into signing up for credit, when they have no idea how it works and how much it will cost them.
Gav