When a Predator’s a Predator

Posted by: Meredith K. | Dec 18,2007

I like Gene’s Baby Boomer post today.  It made me think, Right on!  I’ve also written about how credit card companies are called out for being predatory without mentioning how it’s also the borrower’s responsibility to know the terms of the deal before using a card.  I don’t want to sound like I’m too anti-consumer, though, because there are certainly predator-like practices by credit card companies that are mostly out of the borrower’s control.  

I say “mostly” because a credit card issuer can come back and say, “Hey, it’s all there in writing.”  It’s true, all of the fees attached to a credit card agreement are right there in the fine print.  What makes a credit card company appear like a predator is that the fine print is virtually unreadable.  Yes, it’s in writing, but that writing is so convoluted that you have to be an advanced CPA to understand it, if then.  So while it bugs me when a college student goes out and buys a $3000 dress on credit, just because she can, there are just as many credit card users who are getting into deep trouble even without overspending.

This can happen if the user goes over the limit of the credit card.  He or she may have thought that he had a fair amount left on the card, but do to the increased number of fees, there is actually a smaller balance left on the card.  The result: an over the limit fee that will be charged until the balance goes under the limit, which due to high rates may take months to happen.  The universal default clause is another: new cardholders may not realize that if they default on their student loan payments, the already-high APR on their credit card could go up.  

Again, such terms are written into the credit card contract, but credit card issuers bank (pun intended) on the fact that these terms are nearly-impossible to decipher.  So this, to me, is indeed predatory.  

I felt like I had to balance out my perspective, as recently I’ve been calling out young credit cardholders for spending so unwisely and then whining about their debt.  If you spend money on credit, you’re going to need some way to pay it off.  There are just as many cardholders who are perfectly responsible and get caught in a web of bad terms that can be very difficult to get from under.  Whatever you do, try to read that fine print.  If it’s unintelligible, do what you can to never default and to never go over the limit – those are the two main ways that card companies will tack on hefty fees.  

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