Everything in today’s column ticks me off.
I’m writing about the little tricks some businesses use to lure people into debt. It all sounds so cheerful, so innocent, so good. But buyer–and consumer–beware.
Let’s start at a pet shop, where Georgina and I wandered in while waiting for the Saturday 10:30 a.m. movie to start. (Prices are lower at 10:30, nobody ever sits in front of us, and it’s a very nice way to start the weekend.)
We saw Dalmatians, cocker spaniels, ferrets, goldfish, yellow-crested cockatoos. And then taped to the wall we saw this big sign: “If you can’t afford it, finance it!”
If you can’t afford it, I always thought, don’t buy it! We’re not talking about an emergency to justify going into hock. We are talking about a living animal you will have to feed and care for long after your credit card bill arrives.
What are you going to do later, put all the dog food on your MasterCard? Are you going to eventually get rid of your pet because you truly couldn’t afford it, end up taking that adorable puppy to the dog pound to be put to sleep?
Next, let’s look at the mail.
“Extra cash for tax season, Waiting for your refund? Taxes to pay? Get a check in the mail now!”
The letter from one of my credit card companies told me to relax. “With a cash advance by mail from your MasterCard, you can have the cash you need right away, without waiting for your tax refund.
“Or, if you have taxes to pay, do not deplete your savings account. Instead, pay with a cash advance by mail. That way, you can pay your taxes over time if you wish.”
In much smaller letters: “Your check will be mailed within 10 days of receipt of this request. Your card account will be charged on the date the check is issued. See your agreement for all terms concerning the cost and repayment of a cash advance.”
See your agreement? How many people do you know who read all the tiny-print legalese in those agreements they send you when they first mail you the card?
I looked mine up and saw that requesting and cashing a check was the same as taking a cash advance. And cash advances get charged a transaction fee as high as $20, plus 19.8 percent interest. There is no grace period on cash advances, so you can’t escape paying the interest, even if you pay your bill on time. And the interest is charged from the day the check is issued, not even the day you cash it.
“That’s why cash advances are the worst way to borrow money,” said Ruth Susswein, executive director of Bankcard Holders of America, a non-profit consumer advocacy group.
Next day, another letter came, from another credit card:
“Please read carefully. Important account information enclosed.” (That’s supposed to get your attention). “It is recommended that all card members consider this offer.
“Our records show that as of 3/1/96 your account may be unprotected. This optional protection will be available to you until 4/30/96. If you have a covered claim, your minimum monthly payments will be credited to your account. This will help keep your account in good standing.”
Keep your account in good standing? As a responsible card holder, you want to do that, right?
Except this “protection” costs you 75 cents for every $100 of your outstanding balance. (That’s $15 a month, or $180 a year, or another 9 percent interest if you carry a balance of $2,000 every month.) And all this “protection” does is make your minimum payment, usually just 2 to 3 percent of your balance, and only if you lose your job through no fault of your own, or get sick or injured and your doctor says you cannot work. Otherwise, there is no protection. You pay.
How about using this self-protection instead: Use your card only for convenience, and charge only those things you could buy for cash. Then deduct the amount of the purchase from the checking account you will use to pay the credit card bill when it comes. You will always have the money to pay your bill.
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Humberto Cruz welcomes questions and comments from readers. Although he cannot respond to each one individually, he will answer questions of general interest in his column. Write to him c/o Tribune Media Services, 435 N. Michigan Ave., Suite 1400, Chicago, Ill. 60611. Send e-mail messages to HCruz5040(at)aol.com.
