Plastic In Three Flavors

February 13, 2008 9:42 am Published by

I was thinking the other day about credit cards, those familiar colorful plastic rectangles that have become such a part of our everyday lives.  And not just for shopping, either.  A tire blows, we’re stranded somewhere, we forgot something we need for a meeting or for a child’s school project and must buy a
replacement quickly… you know – life happens!

But did you know there are actually three different types of credit cards?  The ones we see most are unsecured cards, meaning no deposit of cash is required and there’s no collateral for any loans we take out by using the card.  Generally, these cards are offered to people (usually working people) who have fairly good credit histories. By and large, unsecured cards don’t have annual fees.

Then there are high risk cards, offered to folks with less than ideal credit history, perhaps folks with lower-paying or even no jobs.  High risk cards charge an activation fee in addition to annual fees ranging as high as $80-$100, and they have very high late payment penalties.

The third type is secured credit cards.  In this case money must be put into an account first, and that amount must be equal to, or at least a good part of, the credit available on the card, in effect making this a debit card.  Secured cards have high annual fees (some over $100) and, like high risk cards, very hefty late payment penalties.

I have to tell you that most, if not all of, the people who visit with me in my Indianapolis bankruptcy law office have at least one (some have many cards) traditional unsecured credit card.  In fact, one big problem that brings some of them to my office is that credit card companies are hounding them mercilessly with phone calls, and these people are desperate for relief!  Luckily, helping individual debtors and small business owner debtors is my field of expertise, so these people have come to the right place to make the hounding go away.  I can assure them that unsescured debt is exactly the sort of debt that bankruptcy law is best designed to address.

Not only do I deal with unsecured credit card problems just about every day of my life while counseling my bankruptcy clients, I get to deal with a positive aspect of cards, which is helping people rebuild their credit histories after a bankruptcy in Indiana. Here’s where secured credit cards can be a useful first step towards establishing a record of on-time payment of bills.

Ah, good old plastic – I admit we can hardly get along without it.  But sometimes, at six or seven of an evening, as I’m wending my way homeward through traffic after a long day working with debtors in bankruptcy court or in one of my four different bankruptcy law offices, I wish credit cards came with the same kind of alert we now see on cigarette boxes:  “Warning!”, it would read. “This card could be hazardous to your financial health!”

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This post was written by Mark Zuckerberg

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