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Tuesday, March 11, 2008

"Aspire" For Good Credit, Not Fast Cash

The credit card industry has some of the most effective marketing I have ever seen. Albeit sleazy most of the time and misleading at best, people actually apply for the cards that are advertised with little to no caution or due diligence. The marketing messages grab them and compel them to act – that’s what “good” marketing does.

One of the best examples of this that I have ever seen was the Aspire VISA card. I even remember the first time I saw the commercial. The spokesperson is an average looking woman with a child in an urban area. She calmly describes how hard she works and what not, letting the viewer know that she is a salt-of-the-earth, working class American, just like them. After she convinces you that she is non-threatening and sympathetic to you, she begins to convey the heart of the marketing message – she tells you how you “deserve” to have a credit card.

I was instantly turned off and angered.

I know that I said this was “good” marketing, and technically, it is. It achieves all of the goals of a “good” marketing campaign. My problem with it was that it was an absolute lie.

Most people with bad credit have it because they were (and oftentimes still are) irresponsible and or ignorant concerning proper credit usage and the importance of creditworthiness. If you spend more than you make and you do not absolutely have to (some individuals do have extenuating circumstances), you don’t “deserve” a credit card until you clean up the mess you’ve made, period. If someone gives you a second chance, then it’s a blessing, not something you’re entitled to. Unfortunately, however, most people are so self absorbed that they don’t stop to think about the predatory nature of advertisers who appeal to their vanity instead of their rationale. As I watched the commercial, unable myself to get a credit card at that time because my credit was bad, I was still offended at how this company was obviously trying to take advantage of me and my situation.

Soon after I first saw this commercial, I got into a conversation about credit with a good friend of mine. We usually call each other to rant and rave, so I was sure that I would get a chance to tell her about this horrible commercial I had seen so that we could laugh at how obvious their ploy was. She, however, got the head start, going on about how she had just gotten the screws put to her with a credit card she had. She was on the phone with customer service all day for the second day in a row, trying to resolve issues concerning her credit limit. She was promised a limit of about $500, and when she tried to make a purchase over $300, her card was declined. It turned out that because the card she had acquired was a “bad credit” credit card, there were fees tacked on right at the very beginning, totaling about $250. She owed them $250 before she had spent a dime! What a rip-off! She had gotten the card because she wanted to rebuild her credit, and she was prepared to pay more than the minimum balance each month and everything, but now she was steamed and ready to pop. I was appalled. Because I had recently seen the horrible Aspire commercial, I asked, with more than a hint of sarcasm, “It isn’t that Aspire card, is it?”

She gasped and replied, “How did you know?”

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Thursday, March 06, 2008

Why I Tend To Overspend

I am currently in credit card rehab – my loving husband, who admitted me, is also the chief of staff. We are in the process of getting out of debt for good, so there has been absolutely no credit card usage allowed, period. It’s been like this for quite some time now, and I have to say, I didn’t think that I would make it this long. Paying off debt while ceasing from creating new debt seems like an obvious solution, but putting such theory into practice is harder than it seems. When we abruptly stopped charging purchases, I began to show withdrawal symptoms, which is why I am here, cleaning up my act.

Although I went down kicking and screaming, I always understood that my husband was right for putting a halt to all credit card spending until we were ready to be responsible users. We did what many newlyweds do – we got a joint card almost as soon as we got married and bought things that we thought we needed for our new life together. The problem was that we didn’t have the money to get those things outright; thus, the use of credit. This kind of spending put us in a vice that really began to squeeze when unexpected situations arose, pinching our finances so hard that accounts became delinquent.

How did that happen?

I believe that, at least for me, the problem began when the foundation was laid for my conceptual understanding of credit. Besides the fact that my teacher was an eighteen year old girlfriend, there were negative influences and temptations on every side. College campuses are now lairs for predatory lenders with magic plastic cards, giving you a free t-shirt or tote bag for books in exchange for your credit application. Hip, trendy boutiques make it all too easy for young people to obtain store credit. So, my belief system concerning the purpose for and availability of consumer credit was corrupted from the very start.

I bought into the idea that credit was a pipeline as opposed to a lifeline. From what I had gathered from my friends and the credit card companies, consumer credit was there so that I could purchase things I couldn’t afford and simply pay for them later. As long as I made small monthly payments, I could buy whatever I wanted, up to my credit limit. Credit was a money pipeline, creating cash flow in the present based upon resources from the future. I could keep the pipeline going, so long as I put a little cash into it on a regular basis.

While that sounds good, it’s a shame that it’s completely untrue!

Consumer credit was originally developed as a lifeline, primarily for the well-to-do and business owners in order to purchase necessary equipment or other assets that would either appreciate in value or help them turn a profit. That’s a far cry from getting some new clothes (that I really can’t afford) this week, even though I don’t get paid until two weeks from now.

Well, after living a while with this “pipeline mentality”, I soon came face to face with the realities involved with racking up debts that I couldn’t pay, and then being denied the help I really did need in the future because of past indiscretions. Then, I turned around and started fresh again when I got married. Apparently, I hadn’t learned my lesson in college.

I sure did learn it during my stay in credit card rehab, though. It’s actually been a couple of years now. I honestly believe that I have been rehabilitated. But, just to be sure, we don’t plan on getting another credit card until we know exactly what we will use it for and that we will pay the balance off every month that we use it.

The pipeline is officially closed.

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Sunday, January 20, 2008

Alternative Lending Sources

What is the proper measure for creditworthiness in this day and age?

Apparently, it is no longer simply the credit report or the verdict of one's local banking institution. There are so many individuals who fall short of traditional standards of creditworthiness that the marketplace has naturally made room for non-traditional lenders. Besides the controversial subprime mortgage lending industry that most people are by now familiar with, there is a increasung trend in person-to-person lending organizations. Websites like Prosper.com facilitate lending transactions between individuals and other single or small group benefactors. Using such a service empowers people who may not otherwise receive loan funding to finance their dreams and goals.

I am still not sure how I feel about the rise in alternative lending resources. At first glance it looks great; power to the people, right? There is no reason why deserving people should have to remain at the mercy of the big bad traditional financial institutions, right? I'm not so sure that pumping more loans into the pipeline is the answer. Then again, I am one of the few who believes that people should begin to move away from financing instead of toward it. If enough people renounced the borrowing lifestyle and stopped applying for loans, the market would respond with more competetive rates and terms. Then we wouldn't need many of these alternative lending options.

Wouldn't that be something?

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