The Learning Curve

New tricks for an old dog.

The horrible part of credit card debt

The worst part of credit card debt is not the debt itself, it’s what happens to the amount of the debt once a default in payment happens.  If the interest rate was not outrageous before, it will become outrageous. I have an opinion about those who charge more to those less able to pay.  See: New Devil’s Dictionary definitions for dolts and creditworthy.

A debt charging interest at 32% A.P.R., compounded daily, explodes.  A few thousand dollars owed turns into many thousand dollars owed in short order, but if you can’t pay it there’s not much to do about it, except be pushed along ever closer to bankruptcy.  Compound interest charges are a rocket on takeoff. A $2500 debt grows to a $3400 debt in 12 months and to a $4700 debt in 24 months, at that rate.

$2500 may seem to be a trifling amount to you, and I hope it is.  Can you imagine being in a situation where you could not scrape that sum together by hook or crook, fairly quickly?

The vast majority of debtors, more than you think, would like nothing better than to pay off their debts.  I have seen many who carry old time-barred debts in their hearts, who look for ways to made good on them.

The sad thing is revisiting old debts is commonly believed to have an adverse impact on a person’s  credit ratings, and it may re-animate defunct legal rights to sue.  This may be true overall, I simply don’t know.  It is probably true somewhere among the 50 sovereign states.

It shouldn’t be this way.

I guess the theory is those who cannot pay need to suffer for it, and make everyone else more happy by having suffered.  You’d think the world would be a better place if debtors were educated, encouraged, and empowered to repay.

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Written by Tom Fox

03/05/2009 at 9:47 am

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