How to Make a Fortune with Credit Cards!
(If You're a Bank)
Here is a selection from the many e-mails I have received from people telling how they have had "issues" with their banks regarding Credit Card debt. I thought you might find them of interest. Certainly you could be forewarned of the sort of things to expect before you encounter these problems yourself. (I have changed names to protect the innocent)
I should say that banks, like anyone else selling a product, are free to use whatever marketing methods are appropriate just like anyone else. However there are some times when people operate within the rules but outside what most people would consider "fair play". I'll let you be the judge in the following cases.
1. Closing Accounts
David,
We tried to consolidate a personal loan, 2 credit cards, and another debt onto our home loan. It would have saved us $350 a month. We were absolutely astounded when they knocked us back, because they said we couldn't afford it. When we asked how that could be, their answer was they couldn't understand how we afforded to live now. I must tell you that we have never missed a payment on anything. Surprisingly we continued to receive offers to increase our card credit limits.
We then finally had the money to close our Mastercard and our Visacard. That was a month ago and I am still trying to close both of these. I have done the same thing with both. I rang up and got pay out figures for that day and went in on the day and tried to pay them off. Both banks told me that the day time counter staff could not do this and it would be put aside for the night time staff who could access some computer screen that they could not. It sounded like complete rubbish at the first bank.
I nearly fell over when they told me almost exactly the same thing at the next one. When the end of the month came I got my statements and suprise, suprise both accounts still had 2 or 3 dollars in each one. Since then I have found it impossible to close either account and am slowly accruing interest. I don't know what to do next. Help Me Please!And this one...
Hi DavidIn an effort to reduce my workload I recognised that I had to get out from under credit card debt. I had three:- Mastercard, Amex and Coles/Myer. The total debt was $16000 all at high interest of course. I decided to consolidate all under my house mortgage with the intent of paying off in lump sums whenever I could. So the credit cards were paid off and closed - ostensibly. The Coles/Myer card people thanked me for my custom and closed the card - no problem. Amex kept sending me bills for $2.00 and $3.00 despite giving my final balance to be paid off. They finally, when I rang and complained, offered me a lower limit on my card which I declined (while I had the strength of purpose - I am hopeless with credit). They still ring me from time to time and offer me specials despite my continuing to tell them I have no American Express card.However Mastercard takes the cake. They refused to close my card, claiming they did not understand the instructions in the letter my credit union had sent (the same instructions that the other two had). They sent me another letter which I had to send back saying that I wanted the card closed. I did so. They still kept my card open saying they couldn't close it without specific instructions. I rang again really angry this time. After a real altercation I finally, I thought, had it closed. Yesterday - four months after the original letter and payout of what they said was the final balance I got another account, claiming that they couldn't close the account because I owed $2.88. I don't know what I have to do to get out of their clutches.........
And one more for good measure...
David,
......we did have 2 x credit cards from the xxxxx Bank, we got a personal loan through another bank to pay off these cards but now the bank will not close the account. We even took in the cards cut up when we made the first loan payment. They continue to say that we owe interest, we paid that, then we had a purchase on it that came after we paid the interest, we paid that. They promised that the accounts would be closed then. Then we had a direct debit on it after the accounts were supposedly closed, we paid that but it is not registering on the account.
HOW DO WE GET THESE PEOPLE TO CLOSE THE ACCOUNT??????
We have even contacted the Bank Ombudsman about this, they just referred us to the Melbourne branch that they deal with, so we contacted them and they said the accounts were closed. So please help us. We thought we were doing the right thing by getting rid of the cards but they seem to be getting us with this charge and that charge and it keeps on happening. So now we haven't only got the credit cards we also have personal loan repayments!!!!!Please help us.
Comment:- It would appear the final result was that the Card accounts were finally closed, but I have heard from many people who experience similar frustration due to lack of co-operation.
2. Marketing Tactics
A few weeks ago I was in a major shopping centre and was approached by someone offering me an application for a Credit Card. I was appalled at the marketing, about the fact that credit was being marketed at all, and about doing the marketing in a shopping centre! Of course, the person who was trying to convince me to take the application was a
young international traveller, recruited from an agency no doubt, and was unable to enter into any kind of acceptable explanation for the marketing campaign.
I would like to see this kind of marketing prohibited. As we can see, the banks are doing a good enough job of getting people into unmanageable debt with absolutely no care or responsibility for the end result. Credit card debt shouldn't be marketed as some kind of fashionable accessory!
Keep up the good work, and thanks for the emails, I love getting them because it keeps me focused on sensible and realistic budgeting.
Comment:- The sentiment is that nobody should be selling Credit besides a qualified person in a suitable environment. What do you think?3. Refinancing to Consolidate Multiple Debts
Hi David,
We have just gone through refinancing our house and to consolidate Credit Card debt. It is amazing to think that after all that they still want to give us a card with a $20000.00 limit on it. We have declined as we want to be completely debt free within a year.
Comment:- 10 points for trying I guess. Similarly, I had a lady tell me over the phone recently that she took a personal loan for something, and when the final confirmation paperwork came in the mail, included was a complimentary Credit Card with $1,000 extra credit already approved.
David,
My wife and I allowed ourselves to get sucked into a credit card debt trap while we were still working on obtaining college degrees. We have two cards that are maxed out at close to $20,000 each. Our monthly payments on these two cards are almost as much as the payment on our small $85,000 house. We'll pay the house off in another 29 years. At our current pace it will take us over 70 years to pay off the two credit card debts.
Our poor choices put us in our current situation and we are working to correct our mistakes. However, I can't help but feel like I was sucked into the situation we are in. We, like many other people, kept receiving pre-approved credit card offers with low rates that offered to let us consolidate our existing cards to their low rate card. It sounded good until the introductory rates jumped to 18 or 19%. Now we have two nice little cards that are costing us over $200 a month in interest each. We are working to find a way out but it isn't easy.
Comment:- Be careful moving your debt from one card to another that offers a lower "Honeymoon" rate. If you make a purchase on the new card while your old debt is on the low rate, the new purchase will often not be included in the low interest offer and will therefore attract interest at the higher rate from day one! Also, If you make a repayment to try to overcome this after you find out what has happened, the repayment will be credited against the low interest part of the credit, and not the new high interest part! Not always the case but check it out FIRST!4. Declining Low Interest Loan Applications But Offering More Credit
Hi David,
I have had the experience of having letters sent to me by the xxxxx Bank asking me if I would like to increase my Credit Card limit. When I tried to apply for a personal loan at a lower interest rate to pay off the card, I was refused and yet we have been with the bank for over 25 years!
David,
I have two credit cards with a large banking group. I wished to apply for a personal loan to pay out the credit card debts but was declined as I was paying out too many other debts. But within two weeks they sent out a form that I had to tick the box and place back in the reply paid envelope, to increase both my credit cards limits.
Hi David,
I am constantly running my credit card at it's limit and when I rang to cancel my card last year the bank kindly offered to reduce the interest rate from 15.95% to 7.95% for 6 months. I agreed to this and my card is still hovering around $5,000 and now back at around 15.95%. Funny how they only offer these low interest rates to get you suckered in or when you threaten to cancel your card.
Comment:- I don't know about you, but these three stories make my blood boil!
5. Difficulty Lowering Credit Limits
I have recently had difficulty with ABC in decreasing my credit card limit. Originally I applied for a $3500 credit limit as I was purchasing two pieces of furniture from a store offering 12 months interest free via ABC. Due to poor customer service from the store I decided to purchase one piece of furniture instead. On contacting ABC to decrease my limit to cater for only one piece they advised me that I could not request it over the phone, but had to write to them. I then faxed a copy of my requested decrease. When I received my next bill and there was no change to my limit, I contacted them and they advised again to send it in writing as they had not received it. I sent a letter to them advising them of the decrease in limit. Over a week later I received a letter saying that they could not close my account as there was a balance still owed. I rang them to clarify this, they advised they I had requested a closure of account, anyway I told them that was not what was written in my letter. I faxed again a copy of my letter requesting a drop in the amount of my credit limit. Lets hope they get it right this time.
This next one is almost humorous.....If I was not so motivated by your tip on decreasing credit card limits (Number 7) , I most likely would have given up by now.
Another case is with XYZ bank, I rang them to advise I would like a drop in my credit card. They asked me a number of questions, which I answered as I bank with them also. At the end they advised that they would increase my limit by another five thousand. I was in shock, I advised the operator that I wanted a DECREASE not an INCREASE. Anyway after all of that they then forwarded me to another department who took on my request via the phone.
Anyway, the whole experience really made me laugh. It's so easy to get extra credit, but OH so difficult to decrease. I just can't wait till I am able to cancel them, that should be fun.
Comment:- Someone is really not listening here. I'm sure it was accidental though.
One threat often used by the banks when you suggest you would like to reduce your Credit Limit or Close a Credit Card is this:- "You may not be able to get approval for Credit later on down the track when you find you really need it. Perhaps you should keep it just in case."
If you have some really good true stories of your experiences like the one's above I would love to hear from you. Send them to [email protected]. They could either be good or bad stories. In fact, if there is good stuff to tell, I want to publish that as well!
When a murderer points a gun at someone and pulls the trigger, is it the murderer or the gun that is to blame? When someone gets themself into trouble with Credit Card debt is it the bank's fault that they spent money they knew they didn't have, or is it their own fault? Is this not a fair comparison to make, or is it different because guns do not send letters offering more bullets?
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One strategy that might work for someone who is struggling with Credit Card debt is to place the card in a glass of water in the Freezer and then treat the debt as a personal loan that has to be paid off with regular monthly repayments. While the card is frozen, use real money to pay the bills and save the added interest.
Used properly, a Credit Card can be a real convenience while saving you potential EFTPOS fees, but used as a source of income a Credit Card can be more like the source of a lot of grief.
One reader wrote in recently with her solution to managing the Credit Card and avoiding EFTPOS fees that the bank would charge if she select the Savings button rather than the Credit button at the check-out. She actually transfers money onto her Credit Card so it is in a surplus rather than a deficit. She then uses the Card to spend that surplus and then when it's gone, she repeats the process the next month. I thought that was a good idea. I've accidentally done this a few times so I know it can be done. Done deliberately this strategy can help keep your finances convenient and under control as well!
David Wright
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