WEDDING FINANCING
FINANCING YOUR WEDDING USING CREDIT CARDS
For just a moment, imagine this situation...
The wedding was unbelievable, the honeymoon was
unforgettable - you used just $4,000 of the $12,000 in available credit from Bank of
America to finance some of the wedding and honeymoon expenses. Then...you return home from
your honeymoon and find a notice from Bank
of America that says your interest
rate just doubled and your credit limit has been reduced by 50%.
Guess what? The honeymoon is over!
Your credit score has just been trashed by Bank of America!
In part, here is how credit scores work in this
situation...
A higher percentage of used available credit = a lower credit score.
A lower
credit score = more difficulty getting credit PLUS higher interest rates if you
are able to obtain credit.
Although a trashed credit rating (which will make
credit sources harder to find and more expensive if found) should be more than
enough damage, other areas of your life that
are affected by your credit score will likely be impacted as well. Your
homeowner's and car insurance will likely cost more, your chance for a new
job or a job promotion may disappear, and more...
Using the example above, if you have a $12,000 credit line and you have a $4,000
balance you are using only 33% of your available credit. However, if Bank
of America decides to reduce your credit line by 50% from $12,000 to $6,000 suddenly 66% of your available credit
has been used making it look like YOU are a higher credit risk! FICO
(Fair Isaac and Company who is selling a product that they claim will analyze
your spending and payment habits to predict how much of a credit risk you are)
is to blame as well since they have been selling a defective product which does
not recognize instances where your credit utilization is modified artificially
rather than by your actions.
That is exactly what
is happening to more and more credit card users every day! Additionally, there have been many reports
that Bank of America has unexpectedly increased interest rates (many times more
than doubled and up to 28%)
significantly reduced credit limits and closed accounts
without any
valid reason. These are not isolated incidents. The growing
problem is widespread and is damaging more consumers each day.
When interest rates are increased significantly, the required monthly minimum
payment also increases significantly. This type of action puts unnecessary
financial strain on the consumer. It also negatively impacts the
consumer's debt to
income ratio (how much money you pay out each month compared to how much money
you make each month) which is another factor that is considered when determining a credit
profile and credit score - which determines if you will be able to qualify for
credit and what interest rate you will be charged for credit.
Unfortunately, decreased credit limits or increased interest rates have a
cascading effect. Once just one credit provider reduces your credit limit or
increases your interest rate others will likely follow because the action taken
by the first creditor will change your credit profile and credit score for the
worse. If fact, Bank of America has reduced consumer's credit limits
without reason making it look like the consumer had used a higher percentage of
their available credit and then a month later either further reduced their
credit line or increased their interest rate because "the consumer had used too
much of their available credit". Talk about unethical behavior...
These types of actions can be devastating to
your credit score and your ability to obtain affordable credit in the future. In
fact, numerous publications are bringing attention to Bank of America's
(and now Chase's) questionable actions. Business Week recently brought attention to
the problem in an article entitled
"A Credit Card You Want To Toss" and MSN Money Central also
published an article
entitled
"Bank of America blindsiding cardholders".
If you value your
credit rating or your ability to obtain future credit, this is not a situation to ignore.
It is estimated that 1 in 5 credit cards
used are now controlled by Bank of America. Since Bank of America began
acquiring other major banks which also issue credit cards it is not uncommon for consumers
to now have more than one Bank of America Credit Card. This becomes very
problematic when Bank of America feels the need to compensate for losses they
have incurred in another financial market (like sub prime mortgages) or when they need to raise cash. It is estimated that over
40 million credit card accounts are controlled by Bank of America which
gives them a ton of leverage because they are able to dramatically change your
credit terms, increase your interest rate and reduce your credit limit at-will
and without reason or justification. Unfortunately, any of these
changes will likely have a negative impact on your finances and your financial
future.
There are many instances reported where,
once a balance is carried on a Bank of America account, the available
credit limit above the balance has been all but wiped out by an "adjustment" by
Bank of America. Although interest or credit limit adjustments could be
expected if a credit score changed significantly, we are not referencing
situations of problem
credit or declining credit scores. We are talking about people who have
never had a late payment and who maintained mid
700 credit scores.
As a real life example, a 52% usage of available credit (the
customer had taken advantage of Prime Rate for the life
of the balance transfer offers) suddenly became a 93% usage of available credit
after the credit limit was reduced by Bank of America. Although there was no credit problem previously, after Bank of America
reduced their credit limit it made it artificially appear that they do have major credit
problems and have used - or abused almost all of their available credit.
That drastic reduction in
available credit will make it appear that the consumer has maxed out their
credit cards and is a credit risk. It will negatively affect their credit
profile, their credit score, and will ultimately hinder their ability to obtain
financing - or at least financing at a fair interest rate. With the
mortgage and finance industry now being overly cautious, this type of
unscrupulous activity by Bank of America could be financially disastrous to
anyone who is planning to finance a home or other major purchase because this
type of action could impact a credit profile and credit score for years to come
-
and can cost thousands of dollars extra each year due to increased interest rates.
NOTE: A damaged credit score will also
likely increase car and home insurance premiums since many insurance companies
now use credit scores when determining risk. Lower credit scores will also likely have a negative affect
on other areas where a credit score is used - including the ability to rent an
apartment as well as employment.
Unfortunately, Bank of America's sheer size and their
ability to unfairly manipulate factors that are used to determine credit risk
puts everyone at risk who has any type of financing through them.
J.P. Morgan Chase has come forth with equally sleazy and
questionable tactics.
Recently CHASE targeted customers who previously took advantage of 2.99%, 3.99% and
4.99% for the life of the balance offers and slapped them with a $10.00 A MONTH
SERVICE "FEE" and MORE THAN
DOUBLED the minimum
monthly payments from 2% of the outstanding balance to 5% of the balance.
That means that if you had budgeted a $200 a month payment you would then be
forced to pay $500 (FIVE HUNDRED DOLLARS) a month after Chase changed the rules. Additionally, Chase modified the account terms so that a
customer CAN'T OPT OUT or close their account to avoid the changes.
Along with Bank of America, Chase also has become a financial parasite that
can't be trusted!
Although low rate convenience checks and
intro offers from Bank of America or Chase may seem very tempting when it comes
to financing part of your wedding expenses, you would be very wise to avoid
financing anything with Bank of America or Chase. If they can't be
trusted to treat customers fairly when it comes to credit cards, why should they
be trusted with any aspect of your finances like your savings or your mortgage? Considering the apparent
predatory nature of Bank of America and Chase, if you currently carry a balance on one of their credit cards
or have any type of credit line with them,
it would be wise to move that balance and your other accounts elsewhere before Bank of America
or Chase puts
you in a position that could be damaging to you for years to come.
The sad truth is that some financial institutions cannot be trusted to treat
customers fairly which means that great caution should be taken when borrowing
money.
Although it is best not to take on additional debt, if you really need to finance part
of your wedding expenses, a much better - and much safer - alternative to financing
your wedding or honeymoon by using credit card debt is to obtain a personal
fixed interest, fixed payment installment loan from the bank that you normally do your banking with. The
installment loan will have a fixed interest rate and fixed monthly payments
that will never change. Also, installment loans are viewed much differently than
credit cards when your credit score is calculated. Best of all, you will
have peace of mind. YOU WILL NOT HAVE TO WORRY ABOUT INCREASED INTEREST
RATES OR REDUCED CREDIT LIMITS that may damage your credit score.
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