2004 has come to an end as has the holiday buying season. The advertisers’ hard sell was a sight to behold. Financing plans, rebates, buy more flashier things. Make the retailers dreams come true. The holiday season is the basis for their annual sales figures. Was it a good season? Did more merchandise get out the door than will be returned? Were they able to hit their projected sales figures?
Of special concern to us here at Householdwatch, are the “special financing plans”. You know the ones; no interest/ no payments or no interest minimum payments until whenever . It seems like a dream come true. Take it home today, make no or minimum payments until the end of the interest free plan (IFP), then pay it off completely. However the old cliches come to mind. There is “no free lunch” and ”if it sounds too good to be true, it probably is”. The reports we get are reminiscent of a sadistic tango or the “slam dances” popular in the 80’s. If at any time you are not vigilant, your partner (the finance company) will lead you into an obstacle, step on your toes, then drop you. Vigilance is the major factor, otherwise you will be bruised and shattered, dancing backwards for years to come.
Don’t get me wrong, I’ve done the dance:
1. Buy with interest free credit. Know and remember the expiration date of the IFP. Can’t rely on the credit card company to keep me informed.
2. Make the minimum payments. Every payment must be made and must post to the account on time.
3. Call monthly for account updates. Verify when the last payment posted, and the account balance.
4. Track the billing cycle. Anticipate when the payment is updated to make the next payment, avoid making more than one payment in a billing cycle.
5. Keep duplicate statements to use with my payments. Many times I’ve mailed payments using statements I’ve scanned. By doing this I didn’t have to wait for a statement to be received from the finance company.
6. Paid by phone before the IFP expires and the interest can be posted. You have to add the Pay by phone charge to your payment. Otherwise the charge will be deducted and your payment will not be enough to pay the account off or make the minimum payment.
7. Mail payments with using the USPS delivery confirmation. I knew when the check was written and the payment mailed, but I wouldn’t know when the payment was “received” by the creditor. The payment is supposed to post within 24 hours, unless it is a non-working day for the bank (weekend or holiday).
8. Telephone calls will not protect your rights. Be prepared to write letters to the credit card company when disputing unauthorized fees and charges, and to cancel accounts. Request your credit report from all agencies to verify how the accounts are reported.
The merchant may not cooperate. Payments can not be received at the store, and all negotiations must be made with the finance company. The sale is financed immediately at a discount by the finance company, there is the issue of “on-going compensation”, in which a percentage of the interest, credit life, and fees generated by the account is paid to the merchant. Company pressure on the employees and quotas possibly encourage inaccurate information supplied with the application and purchase, sometimes to the point of forgery by the sales staff. The customer should receive a signed copy of their application. Check it thoroughly to ensure the accuracy of the information and that it matches your intent. Remember, the more they sell, the higher their profits, and the “more” I am talking about is above and beyond the actual merchandise purchased.
Dual credit applications, when an IFP is based on using or applying for private label credit, and an application for a major label credit is included, confirm the terms of the applications. Due to quotas imposed on the sales staff, they may deliberately misrepresent the cost and value of the application. The disclosures should definitely be more specific than “$0 to $99 annual fees.” Of course the application disclaimers are very vague to the point of deception. Depends on the borrowers’ credit history, blah, blah, blah. While you may not accuse it of being an outright lie, it sure does not tell the customer anything. We never had a report where the annual fee was less than $99. The annual fee is included on the first statement, usually the credit limit is very low and the interest very high or has been raised to the default rate. Frequently, by the time the applicant receives their card and first statement, late charges and over-limit fees are assessed against the account. Would anyone apply for a credit card if the conditions described above were the terms disclosed on the application?
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