The Credit Reaper

Life, Money and Gratitude #12 The Credit Reaper

They take it from you

First they come after you nicely then not so nicely. The Credit Collection people are tasked with collecting money for banks and other lending institutions. If you borrow money, and don't pay it back they (the collection people) will come after you.

Here are some things they can do.

Garnish wages - Take money directly from your paycheck.

Repossess stuff - Any physical item like a car, boat, motorcycle, etc. can be taken back.

Lien - A claim against your property, if you sell, they get there money first.

Foreclose - If you don't pay they will take your property from you.

Worst case is Bankruptcy - They take it all.

Did I put a little fear into you? Not my intent, but you should know who you're dealing with when you borrow money. They (the collection people) are not nice.

It's interesting that the word mortgage comes from the prefix "morta", which means till death. Pay until your dead. But, if you don't pay, the Credit Reaper will come after you and they don't care if your dead or alive.

To avoid this fate simply pay your bills or better yet don't get into debt.

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Yay! Free money

Let's do some time traveling and go back to 1995-96. A friend of mine was telling me her credit card story and it's a bit scary. Not like boo scary, more like credit collections scary.

She must have been on a special list, she never applied for a credit card she just got one in the mail. No users manual, no advice on how to use a credit card, just a credit limit of $5,000. Yay! Free money she thought. Her credit card was maxed out in a few months.

Did the bank send a training packet to teach responsible borrowing? Maybe suggest that she stop spending. No! My friend was able to pay the minimum for awhile so you know what the bank did? You're right. They extended her credit limit to $7,000 then $10,000. Keep in mind my friend was eighteen years old at the time, in school, with no money.

When she couldn't keep up with the minimum payments they (the collections people) came after her. Non stop phone calls, harsh letters with a threatening tone all to a college student who shouldn't have gotten a credit card in the first place. It got to the point where she was scared to answer the phone or get her mail and she even thought that they might come after her physically. Not good.

By the time she left school in 1993 she had amassed over $11,000 of credit card debt. Should she have gotten some basic training about money along the way? Probably, but it's common for a person to go through grade school, high school and college and not get any. It took over a decade to pay her credit card off and get the collection people off her back. That's scary.

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How Credit Cards Work

Enough about the scary part of credit. Credit is a tool, understand what it is and how it works and use it in your favor.

Onward.

Here is a great article titled, How Credit Cards Work written by Melanie Radzicki McManus presented by howstuffworks.com. Something else to add to your knowledge toolbox.

How Credit Cards Work

Until next time, God Bless and be well.

M. Joseph Benric is the author of Graduation Gift , A Step-By-Step Guide to Financial Literacy for Young Adults