Credit Card Companies Going All Minority Report On Us

DebtKid blogs about his journey to get out of debt.  He racked up nearly 100K in debt at one point. He got his first student credit card at the age of 18.

Most credit card users know that credit card companies can track your spending. What many people do not realize is the fact that they not only track your spending but use your purchases to determine if you are headed for financial trouble.

The new credit card reform was passed in the hopes that credit card companies would begin to “play nice” with account holders, but the reality is big banks will continue to look out for their best interests. While that in itself is not necessarily a bad thing, it is unfortunate that what you buy today can be used to determine your credit worthiness a year from now. It might make you think twice when asked “cash or charge?”. Here is what is happening and what you can do to protect yourself.

Minority Report?

Each and every time you use your credit card, the details of that transaction can be viewed by various credit card companies.  Just as they monitor your activity to ward off fraudulent use, they are also able to see where, when and what you are buying.  If you use your credit card for cash advances, to pay other bills and for day-to-day living expenses (while carrying a balance each month) your creditors will likely see this as a sign that you are overextended. In reality, most people that use their credit cards in this manner ARE overextended, however should they be penalized before they prove they are unable to pay their bill? For example, perhaps you are going through a tough financial period but manage to maintain at least your minimum payment and keep you account in good standing. A few months down the road your situation may improve but it may be too late as the credit card companies have already determined you are a risk and therefore the terms and conditions of your agreement have been changed. While it is understandable for a business to assess risk, is it ethical to take action against the consumer before they have actually defaulted on their agreement?

Protect Yourself and Your Credit

The only way to protect yourself and your credit has remained unchanged. Using credit cards to live beyond your means or as an extension of you income will always end badly for the consumer. If you are facing a financial hardship, as difficult as it may seem, you cannot rely on credit to finance your daily living. The only way to safely use credit is to charge only what you can afford to pay off each month. In doing so you do not have to worry (yet) about paying interest or running up a balance that you can never pay back. Whether or not you agree with the tactics used by credit card companies, the fact remains if you use “their” money to pay for your things, you will be held accountable at some point. It appears that point is just happening sooner rather than later.