My wife worked for a credit card company for a few years. Yes, she was a credit card debt collector. During those years, she discovered her clients had a few myths when it came to credit card debt collectors and the whole credit card debt collection process.
Myth #1: An interest rate hike is only the result of major delinquencies.
When you sign your name on a credit card application, the fine print does state that you are giving the creditors permission to run your credit at any time. If at any time you are delinquent with any of your creditors, you are running the risk of your creditors raising your interest rate.
Also, if you are applying for a lot of credit within a short amount of time, you’re running the risk of your creditors hiking up your interest rate. Applying for various credit all of a sudden gives your creditors a big red flag. Behaviorally speaking, someone who has gone from a normal pattern of credit usage to a surge in new applications is showing signs of financial trouble. This trouble usually results in the creditors not getting paid.
Basically, the fine print is stating that they can raise your interest rate on your credit card whenever they feel it is deemed necessary by your financial behavior.
Myth #2 Being 30 days late won’t hurt anything.
A lot of people think that an occasional “30 days past due” doesn’t matter. In reality, it matters a lot. More people than you could imagine use credit checks as a part of an overall background check. An insurance company does a credit check to rate your level of risk, which in turn determines your premium. Employers use your credit to determine how responsible of an employee your are. If an employee can’t be responsible with something that should of importance to him, then how will he show responsibility on the job?
Of all the factors that effect your credit score, payment history is the largest percentage. Payment history accounts for 35%, which may not seem like a large percentage, but if you factor in it beats the next largest by 5% and the remaining 3 are less then 18%, that’s a big number.
Myth #3 Larger payments are suitable substitutes for missed credit card payments.
That’s a big fallacy. Often, people think that if they made a double payment on their credit card last month, they can afford to make a double payment next month. They use that as a reason to skip this month’s payment.
Even if you make large payments typically, this does not excuse you from making at least the minimum payment on your credit card this month. Just like a car payment or house note, you need to make the payment on your credit card every single month.
Myth #4: So what if I don’t pay my credit card? It’s not like you can take my house.
Actually that couldn’t be further from the truth. Some people have $30,000 to $100,000 in credit card debt. If you have equity in your home and you’re skirting your financial obligation from the credit card collection companies, then you could find yourself arbitrated.
Myth #5: I can just declare bankruptcy and not worry about paying my credit cards.
Wrong. Perhaps prior to 2005, that was very possible. In fact, it was a rampant problem. People would ring up credit card debt and just would run to a bankruptcy lawyer when they were feeling the heat. Then they would wait a year or two and start the vicious cycle again. That’s called bankruptcy abuse. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 makes it possible for credit card collectors and other creditors to not get ripped off by irresponsible consumers.
Myth #6: Credit counseling is bad.
Wrong again. A lot of people are too embarrassed to go to credit counseling, thinking there is a bad social stigma associated with it. Yet, they laugh at the fact they got away with bankruptcy and don’t mind bragging about it. Other people think if they are using credit counseling, then it would hurt their credit. That’s a slight chance, but only if you’re not picking the correct credit counseling agency. Getting help from a credit counseling agency isn’t bad at all. In fact, credit counselors consolidate your consumer debt, particularly credit card debt, and you pay them until all your debt is eliminated. They can do this more effectively then you can, due to their credibility, experience and nature of business.
Myth #7: All credit card collectors are out to ruin your life.
Not true. First, you got yourself into this financial bind. Second, believe it or not, most of credit card debt collector are just doing the job you gave them to do. Finally, big myth. If consumers weren’t delinquent, then there wouldn’t be a need for credit card debt collectors. My wife was not allowed to be mean to customers – even when they swore at her, played the fax machine in her ear, or joked and lied about not being the actual customer. Her job was to collect the money, primarily by using collection payment plans that would help the customer get back on track in paying their credit cards. She had to be creative in utilizing her collection tools that made sense to the customer’s needs while at the same time meeting the business needs.
Of course, the best way to avoid credit card debt collectors is to control your spending and pay off your credit cards every month. It sounds difficult, but it can be done. Give yourself a gift arm yourself with knowledge about credit and how to use it responsibly not anger yourself with collectors who are only doing the job that you gave them to do in the first place.
