The Sacramento Bee is reporting on the feds examination of the subprime credit card industry. These credit cards are issued to people who usually cannot get a credit card from one of the “regular” credit card companies similar to the subprime mortgage industry that gave loans to people who could not qualify for regular mortgages.
In this story, a woman who served our country received a credit card with a $350 credit limit. When she received it, $285 was used up in fees leaving her $65 in available credit. The bill is now over $1,200 with interest and is being handled by a collection agency, Midland Credit Management. She says it is keeping her from getting a mortgage.
A few thoughts on this topic. First, if you are getting credit card offers, please read them carefully. The fine print is small, which is why it is called fine print, but you MUST read it. Second, if you are on a limited income or think you are getting a subprime offer, DO NOT TAKE THE CREDIT CARD! There is nothing good that will come from a subprime credit card.
On the other hand, there needs to be regulation of this industry. We know how the subprime mortgage industry turned out, and the subprime credit card industry could be worse. The subprime mortgages were at least backed by security, ie people’s homes. In the case of credit cards, there is no security attached to the credit and no basis to believe they will be paid back. Further, the people who are getting these offers are the people who are most vulnerable, similar to people who take out payday loans.
If you have one of these cards, cancel it now. Then pay it off ASAP. And cut it up. Then, do not take out any more subprime credit cards. Of course, if you have already been sent to a collection agency, contact an attorney to help you resolve this issue immediately.