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Personal Finances / Credit Cards and Consumer Debt


Subject:  Re: Secure Credit Card and APR Date:  1/15/2013  8:46 PM
Author:  aj485 Number:  306718 of 312185

You are borrowing your own money. There is zero risk to the bank, and I suspect the administration of having to collect on a bad debt isn't anywhere near 9.9%, not to mention they are still making money off of your CD deposit.

How are 'they making money off your CD deposit' if you are really 'borrowing your own money'?

If you are really 'borrowing your own money' then they can't lend it to anyone but you, because even if you have a current balance of $0, you might go and max out your credit limit tomorrow. In order to pay the merchant for the purchase that you made, they would have to keep your money separate from everyone else's so that they could send almost all of your money (minus any merchant fees) to the merchant when you did that. In that case, they can't 'make money off your CD' if you aren't paying any interest to them.

And if you say, 'but they are lending your money out to other people', then you aren't really 'borrowing your own money', are you?

As far as administration costs to seize that money if you default - yes, there is a lot of administrative costs. First, the bank has to write off the debt, which means 6 months with no payments made to the bank, but they still have to send out statements and probably are making calls to try to collect on the debt. Then, depending on the laws where you are, they may have to get a judgement against you to seize the money, meaning lawyers and court fees. And if you declare BK during the time before they collect, there will be BK court costs to prove that they really have the right to the money, and it shouldn't be divided among all the creditors.

So, that doesn't sound like 'zero risk' to me.

I am currently looking for a post-military-retirement job, and I think I'm looking at the wrong kinds of jobs. How do I get into the secured credit card business?

If you are going to limit yourself to actually lending people their own money and not charge them any interest if they carry a balance, then you won't be in business for long.

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