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Credit ripoff: How a $100 purchase turns into a $1,000 debt
Subprime credit cards might be the worst consumer credit product ever marketed.
Their high interest rates, costly penalties and high, hidden fees can eat up nearly all the credit available from the cards and, over time, turn a $100 purchase into more than a thousand dollars of debt.
Wendy Adams, of Las Vegas, is living that nightmare.
A former Navy hospital corpsman with disabilities, Adams received a popular subprime card — the Aspen MasterCard — in June 2006. She was approved for a $350 credit limit, but when the card arrived, Adams said, she'd already been billed for $285 in processing fees, leaving her only about $65 in available credit.
Adams said she promptly called and canceled the card.
"I never used it. I never bought anything," she said.
She assumed that the cancellation would rid her of the fees she'd been charged, but they remained on the account. When they weren't paid, that led to more charges, for late payment and exceeding the card's credit limit.
When Adams checked her credit more than a year later, she found that roughly $1,100 was owed on the card. She was shocked. Since then, interest has driven the total to $1,287.24.
"The typical result of taking out one of these cards (is that cardholders) further lock themselves out of mainstream credit products," said Mike Calhoun, the president of the Center for Responsible Lending in Durham, N.C. "The borrower gets the card, gets hit with enormous fees at the first of the month and then, even if they make no purchases or maybe one minor purchase, they're suddenly over the limit on the cards, which further damages their credit and gets them in this financial hole that they can't dig out of."
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Their high interest rates, costly penalties and high, hidden fees can eat up nearly all the credit available from the cards and, over time, turn a $100 purchase into more than a thousand dollars of debt.
Wendy Adams, of Las Vegas, is living that nightmare.
A former Navy hospital corpsman with disabilities, Adams received a popular subprime card — the Aspen MasterCard — in June 2006. She was approved for a $350 credit limit, but when the card arrived, Adams said, she'd already been billed for $285 in processing fees, leaving her only about $65 in available credit.
Adams said she promptly called and canceled the card.
"I never used it. I never bought anything," she said.
She assumed that the cancellation would rid her of the fees she'd been charged, but they remained on the account. When they weren't paid, that led to more charges, for late payment and exceeding the card's credit limit.
When Adams checked her credit more than a year later, she found that roughly $1,100 was owed on the card. She was shocked. Since then, interest has driven the total to $1,287.24.
"The typical result of taking out one of these cards (is that cardholders) further lock themselves out of mainstream credit products," said Mike Calhoun, the president of the Center for Responsible Lending in Durham, N.C. "The borrower gets the card, gets hit with enormous fees at the first of the month and then, even if they make no purchases or maybe one minor purchase, they're suddenly over the limit on the cards, which further damages their credit and gets them in this financial hole that they can't dig out of."
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.
.
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