Credit card companies send out billions of offers every year, and as the economy has been improving they have returned to blanketing mailboxes and airwaves with their message. That message is: get more plastic.
Credit card companies go to great lengths to gain new consumers, and their advertising budgets are colossal. Whether it’s a catchy slogan from Capital One, or the nails-on-a-chalkboard Discover commercial that mentions every possible product you could buy with a Discover card in the most nasally voice imaginable, credit card companies are trying everything from annoying advertisements that get stuck in your head to 50,000 bonus miles of airline travel, to 0% introductory rates; all to get consumers to sign on the dotted line. And indeed, credit card originations have increased recently as consumers cautiously grow more confident in the recovering economy.
Credit card companies such as Chase and Bank of America send out so many offers because whether they get someone who pays their balance each month, keeps a revolving balance and pays the minimum, or establishes a balance and then goes late and then is unable to pay; the banks and credit card companies profit from each group. They make far less off of the individual who pays their card each month than they do from one who keeps a revolving balance and only pays the minimum.
Credit card debt can be an unnecessary risk for people who have relatively inflexible monthly budgets and a steady and consistent income. Credit cards can also become a problem for people who have a steady monthly income and then lose that income, resulting in using the cards more for emergency purposes which in turn runs up the balance and sometimes the interest. The tipping point when credit card debt becomes unmanageable often occurs when the consumer has a revolving balance and is paying the minimum or a little bit more than the minimum payment each month. This creates a scenario where one wrong move or missed payment can result in a drastically higher interest rate and monthly payment that almost doubles, and a financial situation that can spiral out of control.
Due to new Card Act regulations including the requirement of banks and credit card companies to tell consumers how long it would take to pay off each account if they only pay the minimum, consumers are more informed about the effects of their debt and more likely to double down on their minimum payment. However, if a consumer is unable to make the payments and are taken to court, the resulting judgment can cause garnishment of wages or levying a bank account. At one point in 2011, Chase was making nearly $100 million per month from credit card lawsuits. Industry experts agree that there would be far less lawsuits that resulted in the favor of the banks if consumers were able to afford attorney representation. This is because many of the credit card lawsuits are often poorly executed, and have been in the news for tactics such as robo-signing, a tactic which plagued the sub-prime mortgage industry before the collapse. There is no reason to think that the banks won’t be playing by the same rules when it comes to credit cards. For this reason it’s very important to take credit card litigation seriously and to speak to a professional debt relief organization about personal attorney representation and other options; because the debt spiral only gets worse as the accounts get older and the late charges pile up.
For debts that are not taken to court, there is a negotiation process that can yield great results by cutting a percentage of the debt that someone owes in a compromise with the debt collector. Consumer financial attorneys are the best equipped to negotiate debts in and out of court, because they know the industry even better than debt collectors do, and they possess the legal ability to make them pay for their mistakes.