Credit Education for Consumers

As 2008 gets going and spring is in the air, continued financial market woes abound. Oil prices are at an all time high, the U.S. dollar is at an all time low and the Federal Reserve is moving and shaking the short term interest rates almost on a monthly basis to stabilize our economy. Initial affects of the mortgage and credit crisis impacted the real estate industry only, but the trickle down effect continues. Builders, residential home material suppliers, sub-contractors, inspectors, appraisers, title companies, insurance agents, and the list continues to feel the economic slow down.

An old saying says "when the old dog is down, kick em" Unfortunately this competitive warrior mantra is coming true for many Americans. When the foreclosures and short sales are at an all time high and with the RRRRRecessionary economic picture affecting jobs and income, along comes the brutal treatment of consumer debts by credit grantors! Many creditors are activating the "Universal Default" clauses in their credit card and other consumer credit agreements.

Under a typical Universal Default clause, a card issuer could increase your interest rate to 30 percent or more if you are late enough paying a bill to earn mention on your credit report, even if you are current on that credit card.

In addition to jacking up the interest rates, creditors may change the limits on the credit accounts, and even close the accounts if they choose.

"It's horrible," said Kristin Arnold, who writes about credit cards for Bankrate.com. "You can't win with this. It affects all consumers, not just the ones that pay the credit cards late. . . . They can sit there and monitor your credit like a junkyard dog and then turn around and say, "hey, you paid your . . . cable bill late, so we're upping your interest on your credit card.' To me, that's like getting punished for getting in past curfew seven months ago."

Bankers counter that the system has evolved to allow people who pay on time to pay less for credit. "The price of credit for individuals is based on the risk," as noted by the American Bankers Association. "The more risky you are as a borrower, the (more) you pay for credit. And when your credit profile changes and you become a higher risk than you were previously, then your interest rate may be adjusted for that increased risk."

Universal default has received increased attention in news reports as consumers borrow more and have increasing defaults on debt obligations.

Reforms are needed. The system has problems . . . on the front end. They give people way too much credit that do not have the capacity to pay. How many credit card offers do you get in the mail every day? So, the availability of credit is too loose.

The credit-card companies are making a lot of money. The banks make a lot of money. So they need to invest that back into consumer education to teach people how it really works.

These are more reasons to work with your strategic partner Uptown Financial Corporation for all of your credit and debt needs. We provide information/direction that will educate and prepare people to be a savvy credit consumer.