Drowning in credit card debt?
September 11, 2008
A P30,000 (US$652) credit card debt that ballooned to almost P1 million (US$21,740)? Crazy, isn’t it?
Apparently not for the debt collection agency pestering PMT member cheesycake who shared that a legal office sent her a letter demanding that she pay almost a million pesos for a P30,000 credit card debt she incurred four years ago.
At that rate, cheesycake is being asked to shoulder a compounded, monthly interest rate of around 7.50%! That’s being compounded every month! To think that banks right now offer only 0.50% to 1.00% interest rate per year!
A lawyer-friend of mine who used to work for a debt collecting agency told me that this really is a way for these agencies to earn money. Credit card companies who fail to get payments from customers pass these uncollectible debts to a collecting agency normally staffed by lawyers and paralegals.
Armed with legalese, the agency sends demand letters and threatens customers with legal action if they won’t pay their debts. They do this because they usually work on a “No collection, no pay” structure. If ever the customer pays, the credit card company gets a fixed share from the payment and the rest is pocketed by the collecting agency. Now you can imagine why a lot has been added to the original debt amount the agency wants to collect.
But still, although not illegal, a demand to pay P1 million for a P30,000 original debt is usurious. That can certainly drown a person in debt.
So how not to be drowned by credit card debt? We go back to the basics.
1. Don’t get a credit card if you can’t make payment; and
2. If you use one, don’t run from the obligation to pay.
PMT member jigger also shared a friend who cannot get a bank loan because she got blacklisted because she has a record of non-payment of credit card debt.
Don’t think that a credit card debt that you won’t pay will not come back to haunt you. They usually will.
Related discussion threads:
Image Source: Getty Images
May 14th, 2009 at %I:%M %p
what if the consumer cannot pay due to unemployment.. can these collection
agencies confiscate personal belonings/properties?
December 10th, 2009 at %I:%M %p
I came across this blog which can serve as “credit card debt for dummies.” For me, it was able to answer what would happen if the credit card owner dies—should the family shoulder his debts? Warning though, the article is in taglish so I guess the author did that for most Pinoys to understand. In case anyone’s interested, here’s the link: http://panyero.wordpress.com/2009/12/03/namatay-ang-credit-card-holder/